Does ESG performance enhance financial performance? Evidence from Morocco and the moderating role of corporate governance

Purpose This study addresses the ongoing debate on the environmental, social and governance (ESG)–financial performance nexus by examining whether ESG performance enhances firm profitability and whether corporate governance mechanisms condition this relationship in an emerging market context. Design/methodology/approach The empirical analysis relies on a panel of 32 firms listed on the Casablanca Stock Exchange over the period 2018–2023 (192 firm-year observations). Panel regressions are estimated using fixed effects models to control for unobserved time-invariant heterogeneity and mitigate omitted variable bias. The model incorporates key financial controls (leverage, asset tangibility and firm age) as well as a comprehensive set of governance mechanisms, including board size, gender diversity, ownership structure and ownership concentration. Findings The results reveal a positive and statistically significant association between ESG performance and accounting profitability (ROA), indicating that sustainability engagement is associated with tangible economic benefits in the Moroccan context. However, the moderating role of governance mechanisms appears limited, as most interaction effects are statistically insignificant. Governance variables mainly exert direct effects on financial performance, suggesting that governance functions primarily as a structural determinant of firm discipline rather than as a systematic amplifier of ESG-related returns. Practical implications The findings suggest that ESG integration may generate financial value even in institutional environments undergoing gradual development. For managers, investors, and policymakers, the results highlight the importance of substantive sustainability strategies that go beyond formal governance configurations. Originality/value By jointly examining ESG performance, financial outcomes and governance mechanisms in a North African emerging market, this study provides context-specific evidence and refines the understanding of how sustainability and governance interact in shaping firm performance.