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Impact of Sustainability on Firm Performance Under the Moderation of Competition: Considering Financial and Operational Performance Metrics

Author

Listed:
  • Bhakti Agarwal
  • Shailesh Rastogi

Abstract

This research proposes to probe the mutual association between environmental, social and governance (ESG) and social scores on the operational (inventory turnover ratio and sales) and financial (gross profit margin) performance of Indian firms. Moreover, the competition is used as a moderator to study the association between ESG and social scores on the Indian firm performance. This study measures linear and non-linear associations between the variables. Employing quantile regression for the 25th, 50th and 75th quantiles, it examines the association between a firm’s performance and its social and ESG score. For the study, data from 316 listed non-financial enterprises in India during 12 years (2011–2022) are combined. The study found that ESG and social score significantly affect inventory turnover, gross profit margin ratio and sales differently on different levels. Competition also significantly moderates the association of ESG, social score and a firm’s financial and operational performance in different quantiles. These research findings help managers consider competitive advantage as a factor in enhancing firm performance. According to the study’s findings, it guides managers, practitioners and authorities who are curious about firm performance, competitive advantage and ESG scores find interesting insights into the information. Managers can find the right amount of competitive advantage that enhances firm performance. The results also provide information on potential future growth for corporations to the board of directors and other authorities. We do not observe any paper reporting the non-linear and linear association where the connection of ESG and performance is assessed under the moderation of competition in Indian firms. The research’s conclusions can guide Indian businesses, outlining a workable structure for highlighting the value of ESG disclosure in performance evaluations. Therefore, the current article contributes substantially to the existing body of knowledge on sustainability and finance.

Suggested Citation

  • Bhakti Agarwal & Shailesh Rastogi, 2025. "Impact of Sustainability on Firm Performance Under the Moderation of Competition: Considering Financial and Operational Performance Metrics," Journal of South Asian Development, , vol. 20(3), pages 332-363, December.
    • Handle: RePEc:sae:soudev:v:20:y:2025:i:3:p:332-363
    DOI: 10.1177/09731741251400966
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    References listed on IDEAS

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