Impact of ESG on firm value: a conceptual review of the literature

This study proposes a conceptual framework linking economic, social, and governance (ESG) practices to firm value creation by controlling for firm-specific and industry-specific factors. The novelty of this framework lies in connecting various channels of influence, namely (i) capital allocators, (i...

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Bibliographic Details
Published in:Journal of social and economic development 2023-12, Vol.25 (Suppl 1), p.162-179
Main Authors: Narula, Radhika, Rao, Purnima, Rao, Akshat Aditya
Format: Article
Language:English
Subjects:
Capital investments
Decision making
Economic Growth
Economic Policy
Economic Sociology
Economics
Economics and Finance
Environmental governance
Institutional investments
Investors
Literature reviews
Organizational Studies
Pandemics
R&D
Research & development
Research Paper
Social investing
Social Policy
Social responsibility
Stakeholders
Stockholders
Sustainability reporting
Tax rates
Valuation
Value creation
Wealth
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Summary:This study proposes a conceptual framework linking economic, social, and governance (ESG) practices to firm value creation by controlling for firm-specific and industry-specific factors. The novelty of this framework lies in connecting various channels of influence, namely (i) capital allocators, (ii) stakeholders, and (iii) corporate sustainability reporting tools (SRTs), which drive ESG practice, which, in turn, has a catalytic effect on firm value creation and wealth maximization. Extant literature has discussed various drivers of firm valuation. Our study is unique in that it provides a research and theoretical rationale for studying value maximization through the lens of ESG, a non-financial, firm micro-driver in a multi-actor environment. Sustainability has gained traction from investors, firms, and regulators worldwide, and especially after the pandemic, it has reignited interest to study sustainability as a key enabler for long-term value creation.
ISSN:0972-5792
2199-6873
DOI:10.1007/s40847-023-00267-8