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Role of ESG dimensions in financial performance of Indian firms

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  • Tej Singh
  • Meera Bamba
  • Ishwar Sharma
  • Bharti Verma
  • Bhawana Verma

Abstract

This study examines how ESG dimensions and sub-dimensions affect the financial performance of Indian companies, aiming to highlight their role in driving profitability and guiding investment decisions. Data from Refinitiv and CMIE databases were collected for 99 Indian-listed firms from 2019 to 2023, covering 495 observations. The panel regression analysis found that the overall ESG significantly improves Tobin's Q (TQ). Specifically, the environmental dimension significantly enhances ROE but negatively affects TQ. The social dimension significantly improves both ROE and TQ. The governance dimension negatively and significantly affects ROE but significantly enhances TQ. Among sub-dimensions, the workforce dimension significantly enhances both ROE and TQ, while management score negatively impacts ROE and shareholders' score significantly improves TQ. Companies should prioritise social initiatives, manage environmental investments and adopt balanced governance and structure to enhance financial performance and build investor confidence.

Suggested Citation

  • Tej Singh & Meera Bamba & Ishwar Sharma & Bharti Verma & Bhawana Verma, 2026. "Role of ESG dimensions in financial performance of Indian firms," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 18(3), pages 323-342.
    • Handle: RePEc:ids:ijsuse:v:18:y:2026:i:3:p:323-342
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