Impact of environmental, social and governance performance on the financial performance of Indian firms: the moderating role of audit committee independence

This study explored the effect of environmental, social and governance (ESG) performance on the financial performance of Indian firms, with audit committee independence serving as a moderating variable. Utilising quantitative methods and secondary data, the study analysed 91 Indian firms from 2018 to 2022. The research drew upon legitimacy, and agency theories, employing random and fixed effect panel data modelling for analysis. The findings indicate that ESG performance and its components have no impact on FP (measured by ROA), while ESG performance and individual performance of environmental and governance has a negative and significant impact on the financial performance (measured by Tobin's Q), whereas the social performance has no impact on TQ. Moreover, the independent audit committee does not moderate the relationship between ESGP and its components and firm performance. Overall, this study is novel within the Indian context. It enhances the understanding that ESG performance has a negative or negligible impact on financial performance. This relationship is so strong that even an independent audit committee cannot moderate it.