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Good for the planet, good for the wallet: The ESG impact on financial performance in India

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  • Rao, Amar
  • Dagar, Vishal
  • Sohag, Kazi
  • Dagher, Leila
  • Tanin, Tauhidul Islam

Abstract

We examine the impact of environmental, social, and governance (ESG) practices on financial performance among Nifty 50 companies in India from 2015 to 2022. Using fixed-effects panel quantile regression, we observe that the relationship between ESG practices and financial profitability varies across the return on equity (ROE) distribution. While the environmental pillar score and the governance pillar score consistently negatively impact ROE across almost all quantiles with high statistical significance, the social pillar score exhibits mostly an insignificant relationship. Its impact is negative but only mildly statistically significant in the lower end of the ROE distribution. The findings and their implications are important to investors, corporate executives, and policymakers.

Suggested Citation

  • Rao, Amar & Dagar, Vishal & Sohag, Kazi & Dagher, Leila & Tanin, Tauhidul Islam, 2023. "Good for the planet, good for the wallet: The ESG impact on financial performance in India," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004658
    DOI: 10.1016/j.frl.2023.104093
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    References listed on IDEAS

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    Cited by:

    1. Chen, Ning & Li, Shaofang & Lu, Shuai, 2023. "The extreme risk connectedness of the global financial system: G7 and BRICS evidence," Journal of Multinational Financial Management, Elsevier, vol. 69(C).
    2. Agarwal, Vernika & Malhotra, Snigdha & Dagar, Vishal & M. R, Pavithra, 2023. "Coping with public-private partnership issues: A path forward to sustainable agriculture," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Beta; ESG; Return on Equity; India.JEL Classification: G30; G32; G38; Q56;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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