Impact of ESG Performance on Financial Performance : Evidence from 141 Indian Companies

Authors

  •   Bhumika Bhavnani Research Scholar (Corresponding Author), Sharda School of Business Studies, Sharda University, Knowledge Park III, Greater Noida - 201 310, Uttar Pradesh ORCID logo https://orcid.org/0009-0000-8587-7415
  •   K. R. Gola Associate Professor, Sharda School of Business Studies, Sharda University, Knowledge Park III, Greater Noida - 201 310, Uttar Pradesh ORCID logo https://orcid.org/0000-0002-3066-5295

Keywords:

ESG performance, financial performance, profitability, investor confidence, sustainability.
JEL Classification Codes :G30, G32, M14
Publication Chronology: Paper Submission Date : August 20, 2025 ; Paper sent back for Revision : April 28, 2026 ; Paper Acceptance Date : May 15, 2026 ; Paper Published Online : June 15, 2026.

Abstract

Purpose : This study analyzed the effect of environmental, social, and governance (ESG) performance and its individual components on the financial performance of Indian companies.

Methodology : A sample of 141 Indian companies across various sectors was analyzed for the time period 2019–2024. On the basis of the Hausman test, this study used fixed effects panel regression to test the stated relationships. The study estimated the effect of one-year lagged ESG scores (Environmental score, social score, and governance score) on financial outcomes: Return on assets (ROA) and market-to-book (MTB) value.

Findings : The results indicated that ESG performance negatively impacted short-term profitability and earnings, measured by ROA. However, it was positively correlated with market valuations, reflecting investor confidence in the long-term sustainability of these companies, measured by MTB.

Practical Implications : The study drew policy implications with special reference to Indian policy instruments such as the Securities and Exchange Board of India’s ESG mutual fund regulations and tax-free issuance of green bonds. It is also recommended that the Government provide grants, awards, subsidies, or tax incentives to companies to encourage business sustainability.

Originality : Most of the previous Indian studies focused on analyzing the effect of the overall ESG performance of the current period on financial performance. In contrast, this study investigated the effect of one-year lagged ESG performance and its individual components (E, S, and G) on financial outcomes.

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Published

2026-06-15

How to Cite

Bhavnani, B., & Gola, K. R. (2026). Impact of ESG Performance on Financial Performance : Evidence from 141 Indian Companies. Prabandhan: Indian Journal of Management, 19(6), 60–76. Retrieved from https://www.indianjournalofmanagement.com/index.php/pijom/article/view/174620

Issue

Volume 19, Issue 6, June 2026

Section

Articles

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