ESG Practices and Firm Value: A Novel Perspective From Mediating and Moderating Components

Abstract

This paper investigates the complex interplay among environmental, social, and governance practices (ESGP), sustainable products (SPR), and firm market value (FMV) within leading economies (G7). Established by stakeholder and resource-based view theory, it examines how research and development investment (RDI) influences the ESGP–SPR relationship while exploring environmental uncertainty's (ENU) moderating effect on the ESGP–FMV link. Leveraging data from 617 companies (2019–2023), this research employs maximum likelihood structural equation modeling to disentangle the links between key variables. The results highlight that ESGP positively influences SPR; however, SPR unexpectedly negatively affects FMV. Further, SPR exhibits a competitive mediating role in the ESGP–FMV relationship, and ENU significantly moderates the ESGP–FMV nexus. The findings suggest that firms should focus on effectively communicating the value proposition of their sustainable offerings to consumers. Policymakers could consider incentives to bridge the potential price gap between sustainable and conventional products, encouraging wider adoption and aligning market value with environmental responsibility.