The Effects of IT Investment and ESG Integration on Firm Value: Evidence from an Emerging Economy

This study examines whether IT investment intensity and environmental, social, and governance (ESG) performance jointly affect firm value in a frontier-market setting. The analysis uses an unbalanced panel of 201 non-financial firms listed on the Dhaka Stock Exchange, comprising 875 firm-year observations from 2020 to 2024. Two-way firm and year fixed-effects models are estimated alongside pooled ordinary least squares specifications on identical data to distinguish within-firm dynamics from between-firm differences. In the pooled analysis, ESG performance is positively associated with firm value, with a one-standard-deviation increase corresponding to approximately 12.4 per cent of mean Tobin's Q. The interaction between IT investment intensity and ESG performance is also positive, increasing the implied ESG valuation premium by about 58 per cent for firms one standard deviation above mean IT intensity. Pillar-level results indicate that this complementarity is concentrated in the environmental and governance dimensions rather than the social dimension. The pooled interaction is more evident among large, mature, and low-leverage firms. Under firm fixed effects, the main IT, ESG, and interaction coefficients become statistically insignificant, except for a positive, marginally significant interaction in technology-intensive sectors. Robustness, endogeneity, placebo, and attrition checks support the distinction between pooled and within-firm results. Overall, the evidence indicates that IT–ESG complementarity is primarily a persistent between-firm valuation pattern rather than a short-run within-firm pricing effect.