A Study on Influence of ESG Practices on Firm Valuation

Abstract

Environmental, Social, and Governance (ESG) practices have emerged as critical determinants 
of corporate sustainability and firm valuation in the modern business environment. With 
increasing awareness among investors and stakeholders, ESG factors are now considered 
alongside traditional financial metrics in evaluating a firm's long-term performance and risk 
profile. This study examines the impact of ESG factors on firm valuation using primary data 
collected from 100 respondents through a structured questionnaire. 
The research employs descriptive statistics, correlation analysis, and regression techniques to 
assess the relationship between ESG practices and firm value. The findings reveal that ESG 
practices significantly influence firm valuation, with environmental factors demonstrating the 
strongest and statistically significant impact. This suggests that initiatives related to 
environmental sustainability, such as resource efficiency and pollution control, play a crucial 
role in enhancing firm value. While social and governance factors are recognized as important 
by respondents, they do not exhibit statistically significant effects in this study, indicating that 
their influence may be indirect or dependent on other variables. 
Furthermore, the study highlights the growing importance of ESG considerations in shaping 
investment decisions and corporate strategies, particularly in emerging markets like India 
where ESG adoption is still evolving. The results emphasize the need for companies to integrate 
ESG practices into their core operations to improve transparency, build investor confidence, 
and achieve sustainable growth. 
Overall, this research contributes to the existing body of literature by providing empirical 
evidence on the relationship between ESG practices and firm valuation. It also offers practical 
insights for managers, policymakers, and investors by underscoring the importance of 
environmental sustainability and responsible business practices in enhancing corporate value.