THE INTERPLAY BETWEEN ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) PERFORMANCE AND CORPORATE FINANCIAL PERFORMANCE: AN EMPIRICAL ANALYSIS
DOI:
https://doi.org/10.29121/ijetmr.v12.i3.2025.1710Keywords:
ESG, Corporate Financial Performance, ROA, Tobin's Ǫ, Sustainability, Corporate Governance, Stakeholder Theory, SGP 500Abstract
In recent decades, the paradigm of corporate success has shifted from a singular focus on profit maximization to a more holistic model that integrates Environmental, Social, and Governance (ESG) criteria. This research paper empirically investigates the relationship between a firm's ESG performance and its Corporate Financial Performance (CFP). Utilizing a quantitative approach, data from 50 publicly listed companies in the SGP 500 index from 2018 to 2022 were analyzed. ESG scores were sourced from Refinitiv, while financial performance was measured using Return on Assets (ROA) and Tobin's Ǫ. The findings indicate a statistically significant, positive correlation between overall ESG scores and both accounting-based (ROA) and market-based (Tobin's Ǫ) metrics. The results suggest that robust ESG practices are not merely a cost center but a strategic investment that can enhance profitability and shareholder value by improving risk management, operational efficiency, and corporate reputation.
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Copyright (c) 2025 Devansh Roy, Dr. Reshma Nair, Dr. Bhawna Sharma
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