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Financial determinants of environmental, social and governance performance: Empirical evidence from India

  • Received November 1, 2023;
    Accepted December 22, 2023;
    Published January 8, 2024
  • Author(s)
    Link to ORCID Index: https://orcid.org/0000-0001-9606-6925
    Bhavya Joshi
    ORCID ,
    Link to ORCID Index: https://orcid.org/0000-0002-9728-6302
    Himanshu Joshi
    ORCID
  • DOI
    http://dx.doi.org/10.21511/imfi.21(1).2024.02
  • Article Info
    Volume 21 2024, Issue #1, pp. 13-24
  • TO CITE АНОТАЦІЯ
  • Cited by
    3 articles
    Journal title: Journal of Risk and Financial Management
    Article title: The Impact of CEO and Firm Attributes on ESG Performance: Evidence from an Emerging Market
    DOI: 10.3390/jrfm18050268
    Volume: 18 / Issue: 5 / First page: 268 / Year: 2025
    Contributors: Fahad Alrobai, Maged M. Albaz
    Journal title: Investment Management and Financial Innovations
    Article title: ESG factors in M&A in India: Performance and market insights from 2010 to 2023
    DOI: 10.21511/imfi.21(2).2024.25
    Volume: 21 / Issue: 2 / First page: 310 / Year: 2024
    Contributors: Manoj Panda, Pankaj Sharma, Vasa László, Manohar Kapse, Vinod Sharma, Yogesh Mahajan
    Journal title: Investment Management and Financial Innovations
    Article title: Do sustainable business practices enhance firm profitability? An empirical study of Indian listed companies
    DOI: 10.21511/imfi.21(4).2024.15
    Volume: 21 / Issue: 4 / First page: 188 / Year: 2024
    Contributors: Manjiri Gadekar, Eliza Sharma, Ali Yavuz Polat
  • 789 Views
  • 217 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The present study aims to examine the firm-level financial determinants of ESG performance. It elucidates what financial resources it takes to enable the integration of ESG practices and improve a firm’s ESG scores, based on a sample of 94 Indian firms listed on the National Stock Exchange of India between 2015 and 2020. Econometrically, the study employs fixed effects and random effects panel data models as an appropriate methodology. The findings show that firm size, asset intangibility, analyst coverage, and operating cash flow influence firms’ ESG scores positively, whereas leveraging and strategic holding impact them negatively. In addition to the mentioned variables, cash holdings positively influence firms’ environmental, social, and governance scores. While dividend yield does not contribute to combined ESG and governance scores, it has a positive impact on a firm’s environmental and social scores. This is the first study examining the determinants of firm-level ESG performance in an emerging market. Results endorse the interaction of legitimacy theory and slack resource theory in determining a firm’s ESG performance.

Acknowledgement
The infrastructural support provided by FORE School of Management, New Delhi, India in completing this paper is gratefully acknowledged.

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  • PAPER PROFILE
  • AUTHORS CONTRIBUTIONS
  • FIGURES
  • TABLES
  • REFERENCES
  • Keywords
    analyst coverage, asset intangibility, cash flow, cash holdings, ESG, financial determinants, firm size
  • JEL Classification (Paper profile tab)
    G30, O16
  • References
    43
  • Tables
    8
  • Figures
    0
    • Table 1. Variables and their symbols and description
    • Table 2. Descriptive statistics
    • Table 3. Regression results for ESG combined scores on firm-level financial variables using pooled cross-section, fixed effect, and random effect
    • Table 4. Regression results for environmental scores on firm-level financial variables using pooled cross-section, fixed effect, and random effect
    • Table 5. Regression results for social scores on firm-level financial variables using pooled cross-section, fixed effect, and random effect
    • Table 6. Regression results for governance scores on firm-level financial variables using pooled cross-section, fixed effect, and random effect
    • Table 7. Hausman test for ESG, Environmental, Social, and Governance on firm-level financial variables
    • Table 8. Key findings of results
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    • Data curation
      Bhavya Joshi
    • Formal Analysis
      Bhavya Joshi
    • Methodology
      Bhavya Joshi
    • Validation
      Bhavya Joshi
    • Writing – original draft
      Bhavya Joshi
    • Conceptualization
      Himanshu Joshi
    • Investigation
      Himanshu Joshi
    • Supervision
      Himanshu Joshi
    • Writing – review & editing
      Himanshu Joshi
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