IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v10y2026i3p4530-4542.html

ESG and Stock Performance: A Systematic Review of Heterogeneous Effects, Measurement Challenges, and Investment Implications

Author

Listed:
  • Enylina Nordin

    (Faculty of Accountancy, University Technology MARA, Melaka campus)

  • Wan Shafizah Hussain

    (Faculty of Accountancy, University Technology MARA, Melaka campus)

  • Mohd Tarmizi Ibrahim

    (Faculty of Accountancy, University Technology MARA, Melaka campus)

  • Mohd Hisham Johari

    (Faculty of Art & Design, Universiti Teknologi Mara, Puncak Alam campus)

  • Muhamad Reduan Abdul Malik

    (Lembaga Hasil Dalam Negeri (LHDN))

Abstract

Environmental, Social, and Governance (ESG) factors have become increasingly influential in investment decision-making and corporate strategy. However, empirical evidence regarding the relationship between ESG performance and stock returns remains mixed and sometimes contradictory. This study synthesizes findings from 234 empirical studies examining ESG–financial performance relationships, focusing on measurement approaches and contextual moderating factors. The findings indicate that ESG integration is generally associated with neutral to moderately positive financial outcomes, primarily through enhanced risk management, reputational advantages, and crisis resilience. However, substantial inconsistencies arise due to methodological differences among ESG rating agencies and contextual factors such as regional institutional environments, sectoral characteristics, and market conditions. Developed markets typically exhibit stronger ESG–financial performance relationships compared with emerging markets, while sector-specific ESG materiality determines which ESG pillars influence financial outcomes. Overall, the evidence suggests that ESG effects on stock performance are highly context-dependent rather than universally positive. The study highlights the importance of standardized ESG measurement frameworks and context-sensitive investment strategies for improving the reliability and practical relevance of ESG research.

Suggested Citation

  • Enylina Nordin & Wan Shafizah Hussain & Mohd Tarmizi Ibrahim & Mohd Hisham Johari & Muhamad Reduan Abdul Malik, 2026. "ESG and Stock Performance: A Systematic Review of Heterogeneous Effects, Measurement Challenges, and Investment Implications," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 10(3), pages 4530-4542, March.
    • Handle: RePEc:bcp:journl:v:10:y:2026:i:3:p:4530-4542
    as

    Download full text from publisher

    File URL: https://rsisinternational.org/journals/ijriss/uploads/vol10-iss3-pg4530-4542-202604_pdf.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/view/esg-and-stock-performance-a-systematic-review-of-heterogeneous-effects-measurement-challenges-and-investment-implications/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yavuz GÜL & Ceren ALTUNTAŞ, 2024. "Do ESG Ratings Affect Stock Prices? The Case of Developed and Emerging Stock Markets," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).
    2. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    3. Iulia Lupu & Adina Criste & Tudor Ciumara & Camelia Milea & Radu Lupu, 2024. "Addressing the Renewable Energy Challenges through the Lens of Monetary Policy—Insights from the Literature," Energies, MDPI, vol. 17(19), pages 1-31, September.
    4. Kihoon Hong & Jinhee Kim & So Yean Kwack, 2022. "External Monitoring, ESG, and Information Content of Discretionary Accruals," Sustainability, MDPI, vol. 14(13), pages 1-15, June.
    5. Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January.
    6. Qi Gong & Jiahui Gu & Zhaoyang Kong & Siyan Shen & Xiucheng Dong & Yang Li & Chade Li, 2025. "The Impact of ESG Ratings on Corporate Sustainability: Evidence from Chinese Listed Firms," Sustainability, MDPI, vol. 17(13), pages 1-25, June.
    7. Zhang, Qiyu & Ding, Rong & Chen, Ding & Zhang, Xiaoxiang, 2023. "The effects of mandatory ESG disclosure on price discovery efficiency around the world," International Review of Financial Analysis, Elsevier, vol. 89(C).
    8. Esparcia, Carlos & Gubareva, Mariya, 2024. "ESG rating changes and portfolio returns: A wavelet analysis across market caps," Finance Research Letters, Elsevier, vol. 63(C).
    9. Cao, Haoming & Wirjanto, Tony S., 2023. "ESG information integration into portfolio optimisation," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 16(2), pages 158-179, August.
    10. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    11. Tiago Cruz Gonçalves & Victor Barros & José Vicente Avelar, 2023. "Environmental, social and governance scores in Europe: what drives financial performance for larger firms?," Economics and Business Letters, Oviedo University Press, vol. 12(2), pages 121-131.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wan Shafizah Hussain & Enylina Nordin & Mohd Tarmizi Ibrahim & Mohd Hisham Johari & Muhamad Reduan Abdul Malik, 2026. "ESG Assessment and Stock Performance: A Systematic Literature Review and Research Agenda," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 10(3), pages 4543-4554, March.
    2. Parra-Domínguez, Javier & Dote-Pardo, Jairo, 2025. "Corporate sustainability and stock market dynamics: What challenges arise for future research?," Innovation and Green Development, Elsevier, vol. 4(5).
    3. Danny Zhao‐Xiang Huang, 2022. "An integrated theory of the firm approach to environmental, social and governance performance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1567-1598, April.
    4. Christopher P. Blocker & Joseph P. Cannon & Jonathan Z. Zhang, 2025. "Purpose orientation: An emerging theory transforming business for a better world," Journal of the Academy of Marketing Science, Springer, vol. 53(2), pages 367-393, March.
    5. Barman, Siddhartha & Mahakud, Jitendra, 2025. "Energy uncertainty and Firm Performance: Does ESG matter?," The Journal of Economic Asymmetries, Elsevier, vol. 31(C).
    6. Eugene Y. Chan, 2026. "Moral Signaling in Startups: How ESG Claims Shape Stakeholder Judgments and Ethical Legitimacy," Journal of Business Ethics, Springer, vol. 203(2), pages 297-311, January.
    7. Alfonso Flores-Lagunes & Audrey Light, "undated". "Interpreting Sheepskin Effects in the Returns to Education," Working Papers 22, Princeton University, School of Public and International Affairs, Education Research Section..
    8. Jin Yan & Talat Mehmood Khan & Naiping Zhu & Muhammad Awais Khan & Hazrat Hassan, 2024. "Does CEO’s initial tenure enhance CSR practices? Evaluating the consequences of CEO’s initial tenure CSR engagement in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 22839-22862, September.
    9. Tan, Weijie & Liu, Yiqian & Teng, Mingming, 2025. "When ESG news talks: How media sentiment shapes corporate financial behavior in China," Global Finance Journal, Elsevier, vol. 67(C).
    10. Yin, Li & Han, Yuanhang & Shao, Jinan & Dai, Jing & Shou, Yongyi, 2025. "Does ESG rating divergence depress trade credit? A signaling theory perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 203(C).
    11. Francesco Paolone & Fabrizio Granà & Laura Martiniello & Riccardo Tiscini, 2021. "Environmental risk indicators disclosure and value relevance: An empirical analysis of Italian listed companies after the implementation of the Legislative Decree 254/2016," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(5), pages 1471-1482, September.
    12. Alfonso Flores-Lagunes & Audrey Light, 2010. "Interpreting Degree Effects in the Returns to Education," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
    13. Hao, Ying & Hu, Dan & Huang, Lixin & Yin, Ziqi, 2025. "The impact of supply chain international embedment on ESG performance: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    14. Paul P. Momtaz & Isabel M. Parra, 2025. "Is sustainable entrepreneurship profitable? ESG disclosure and the financial performance of SMEs," Small Business Economics, Springer, vol. 64(4), pages 1535-1564, April.
    15. Polachek, Solomon W., 2008. "Earnings Over the Life Cycle: The Mincer Earnings Function and Its Applications," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(3), pages 165-272, April.
    16. Chen, Shaowei & Wu, Zhiliang, 2025. "Corporate ESG performance and stock pricing efficiency," The North American Journal of Economics and Finance, Elsevier, vol. 79(C).
    17. Sakhr Bani-Khaled & Graça Azevedo & Jonas Oliveira, 2025. "Environmental, social, and governance (ESG) factors and firm value: A systematic literature review of theories and empirical evidence," AMS Review, Springer;Academy of Marketing Science, vol. 15(1), pages 228-260, June.
    18. Shrestha, Chaman & Andrikopoulos, Panagiotis & Park, Jin Suk, 2025. "ESG rating and financial performance in the emerging markets: The moderating effects of cross-listing and industry type," Research in International Business and Finance, Elsevier, vol. 77(PA).
    19. Filgueira, Antônio & Norden, Lars, 2025. "It's only words? ESG disclosure and corporate sustainability in Brazil," International Review of Financial Analysis, Elsevier, vol. 108(PA).
    20. Naysary, Babak & Shrestha, Keshab, 2024. "Financial technology and ESG market: A wavelet-DCC GARCH approach," Research in International Business and Finance, Elsevier, vol. 71(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:10:y:2026:i:3:p:4530-4542. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.