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How does sustainability performance affect firms' market performance? An empirical investigation in the Indian context

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  • Gaurav Jyoti

    (Indian Institute of Technology)

  • Ashu Khanna

    (Indian Institute of Technology)

Abstract

This present study seeks to empirically examine the long-term impact and association between corporate sustainability performance by utilizing Environment, Social, and Governance (ESG) scores, and the stock market performance indicators of the firms listed on the National Stock Exchange (NSE) India. Panel data regression models have been developed to analyze time series and cross-sectional data for 169 mid- and large-cap firms having an average of 1500 firm-year observations across different industries. A separate examination of ESG scores reveals that the Environmental score is negatively associated with firms' market performance. The Social score is found statistically significant, having a positive association with the market performance indicators. The Governance score also has a negative relationship with the study sample's earnings per share and dividends per share. ESG combined score is positively associated with overall firms' market performance. The results of the study show both positive and negative effects of firms' sustainability on market performance. It will set the pace for academics and researchers in the field of corporate sustainability. The study will also help the business world and policymakers to figure out which components of sustainability offer businesses and stakeholders the most benefits and which elements need more attention.

Suggested Citation

  • Gaurav Jyoti & Ashu Khanna, 2024. "How does sustainability performance affect firms' market performance? An empirical investigation in the Indian context," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 20457-20483, August.
    • Handle: RePEc:spr:endesu:v:26:y:2024:i:8:d:10.1007_s10668-023-03482-9
    DOI: 10.1007/s10668-023-03482-9
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    More about this item

    Keywords

    Sustainability performance; ESG scores; Market performance; Corporate social responsibility; Stakeholders; Corporate sustainability assessment (CSA); Sustainable development goals (SDGs);
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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