Impact of ESG Performance on Firm Value: Evidence from NIFTY 50Companies

KUSUMA HIREMAT Y G

Abstract

The increasing significance of sustainable business practices has reinforced the relevance of Environmental, Social, and Governance (ESG) performance in assessing the corporate value. The extant study examines the relationship between ESG performance and firm value among NIFTY 50 companies in India. The study is based on theoretical foundations of Stakeholder Theory, Legitimacy Theory, and the Resource-Based View, examining whether superior ESG performance is associated with enhanced firm value. An explanatory research design was adopted using secondary data from sustainability reports and ESG databases. The sample comprises 119 firm-year observations covering the period 2020–2025. Firm value was measured using two market-based indicators: Ln Market Capitalization and Tobin’s Q. ESG score served as the primary independent variable, while firm size, return on assets (ROA), debt-equity ratio, sales growth, and liquidity were included as control variables. Multiple regression analysis was applied to investigate the effect of ESG performance on firm value. The results indicate that ESG performance has a positive and statistically significant impact on both measures namely Tobin's Q and Market Capitalization. Firms with higher ESG scores tend to exhibit greater market capitalization and stronger market valuation. The model fit statistics demonstrate satisfactory explanatory power, with adjusted R² values of 0.72 for the Ln Market Capitalization model and 0.31 for the Tobin’s Q model, both significant at the 1% level. These findings highlight the value- enhancing role of ESG practices and provide important implications for investors, managers, and policymakers seeking to promote sustainable corporate growth.

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