Himanshu Joshi

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.