Robert Gordon University, Department of Accounting and Finance, Aberdeen Business School

The research evaluates Environmental Social and Governance (ESG) practice impacts on corporate risk management and financial stability through debt risk and liquidity risk and on total financial outcomes across developed and developing economic areas. The researchers conducted panel regression analysis throughout ten years (2012–2022) using data from 49 countries and 34,953 firm observations to study the relationship between ESG adoption and firm sustainability. This research integrates Eikon’s ASSET4 ESG scores alongside financial performance metrics that include Tobin’s Q which incorporates the year’s sector and country fixed effects. Research evidence demonstrates that executed ESG practices lead to superior financial results and stability, especially among developed economies where environmental along social practice integrations show the strongest impact. CEO duality and gender diversity serve as ESG factors that shape debt and liquidity risk patterns, and these conditions have worsened corporate financial stability according to the research. The implementation of ESG criteria in risk management strategies proves vital because it strengthens both financial sustainability and stability long-term therefore offering key insights to various stakeholders. Firms that grasp ESG’s role in risk management and financial well-being attainment will obtain improved financial results that support global sustainability goals.