IMPACT OF ESG ON CORPORATE PERFORMANCE: A MULTIDIMENSIONAL STUDY OF INDIAN LISTED COMPANIES

Abstract

In the evolving corporate governance landscape and sustainable business strategy, Environmental, Social, and Governance (ESG) frameworks have emerged as critical instruments for firms to signal responsibility, enhance transparency, mitigate risks, and foster long-term value creation. ESG disclosures are increasingly viewed not merely as compliance tools but as strategic levers that shape firm behaviour, influence stakeholder relationships, and contribute to financial outcomes. Despite growing scholarly and practitioner interest, the existing literature on the ESG–corporate performance nexus remains fragmented, characterised by a lack of consensus on theoretical foundations, limited contextual diversity, and minimal integration of firm level financial policy variables, such as dividend behaviour. This doctoral thesis addresses these research gaps through a structured, multi-method investigation that spans bibliometric analysis, advanced panel econometrics, meta analytic synthesis, and logistic regression modelling. The central aim is to examine how ESG disclosures influence corporate performance, measured across accounting, market, and financial dimensions, as well as from the dividend policy perspective, and how these effects are moderated by contextual factors such as industry classification, national economic development, and firm-specific attributes. The thesis also highlights the underexplored relationship between ESG engagement and dividend policy, thereby contributing novel insights to the literature on sustainable finance and corporate financial strategy. The thesis is organised into seven interrelated chapters, beginning with the identification of gaps in the literature through a comprehensive bibliometric and thematic literature review guided by the TCCM (Theory–Context–Characteristics Methodology) framework. This hybrid review of previous studies identifies three dominant research streams: (1) ESG's influence on firm value and ownership dynamics; (2) stakeholder engagement, regulation, and ESG strategy; and (3) ESG as a risk management and innovation tool. The review highlights critical gaps, including an overreliance on a single theoretical perspective (e.g., stakeholder theory), the underrepresentation of emerging markets (especially India), and a narrow focus on v conventional performance outcomes, with insufficient attention to dividend-related metrics. To address these gaps, the second phase of the research empirically explores the ESG–corporate performance nexus within the Indian context. As a large and rapidly growing emerging economy with rising sustainability obligations and evolving ESG disclosure mandates (e.g., SEBI‘s BRSR framework), India offers a ground for such analysis. The empirical analysis utilises data on 605 distinct corporations listed on the National Stock Exchange of India (NSE) over the period 2015–2023. ESG data are obtained from Refinitiv Eikon, while financial and corporate data are sourced from CMIE Prowess. The sample comprises firms satisfying the predefined listing and data-availability criteria required for the analysis. Utilising the Method of Moments Quantile Regression (MMQR), the study finds that ESG disclosure, both aggregated and disaggregated into E, S, and G dimensions, has a positive influence on corporate outcomes. Notably, the impact of environmental disclosures is stronger in higher performing quantiles. At the same time, the effects of social and governance dimensions vary, affirming the relevance of stakeholder and legitimacy theories in heterogeneous market settings. Extending this inquiry, the third empirical chapter incorporates industry-specific analysis by classifying 605 Indian-listed corporations observed over 2015–2023 into environmentally sensitive industries (SI) and non-sensitive industries (NSI) categories. The analysis is based on ESG information from Refinitiv Eikon and corporate financial data from CMIE Prowess, with the number of firm-year observations varying across years according to ESG data availability. Applying System-GMM estimation, the results reveal a divergent relationship between the two categories. While NSI firms benefit significantly from ESG disclosures, SI firms often encounter diminished or negative returns due to heightened compliance burdens and regulatory scrutiny. These findings challenge the validity of uniform ESG strategies and underscore the importance of sector-specific sustainability frameworks. The thesis then broadens its scope to the global context in the fourth empirical chapter, focusing on the cement industry, an archetype of environmentally intensive sectors facing urgent sustainability imperatives. Using an international sample of 70 publicly listed cement companies across 29 countries and 770 firm-year observations over the period 2013–2023, this chapter examines the moderating role of National Economic Development (NED) in the ESG–performance relationship. The initial dataset comprised 301 listed cement companies, from which firms with incomplete information were excluded based on the study's predefined data-availability criteria. vi ESG and financial information were obtained from Refinitiv Eikon, while country level GDP per capita was obtained primarily from the World Bank, with IMF data used where required. The analysis reveals that corporations in developed economies are better positioned to convert ESG engagement into superior financial outcomes due to stronger institutional support, regulatory infrastructure, and market maturity. Conversely, companies in developing economies face structural constraints that limit the strategic and economic benefits of ESG adoption. These results reinforce the Institutional Difference Hypothesis (IDH) and emphasize the contextual sensitivity of ESG–performance linkages. While prior chapters of this thesis establish the relevance of ESG disclosures in shaping accounting-based, financial, and market performance outcomes, profitability alone does not fully capture how sustainability strategies translate into shareholder value. ESG initiatives often require substantial long-term investments, potentially altering firms‘ internal cash allocation decisions and creating trade-offs between reinvesting in sustainability and distributing earnings to shareholders. Dividend policy, therefore, emerges as a critical financial channel through which the economic consequences of ESG engagement can be assessed. As dividends remain a primary consideration for shareholders, integrating ESG into dividend decisions provides deeper insight into how firms balance stakeholder-oriented sustainability objectives with shareholder wealth maximisation. Recognising this linkage, the thesis extends the ESG-performance discourse by examining dividend policy as a complementary and policy-relevant outcome of ESG disclosure. Hence, the next chapter employs a meta-analytic approach to consolidate empirical evidence on the relationship between ESG disclosures and dividend policy, a relatively underexplored area in sustainability research. Synthesising previous peer reviewed studies, the analysis finds a statistically significant positive relationship between ESG and dividend payouts. Among the ESG pillars, governance disclosures have the greatest influence. Subgroup analyses reveal that firm size, profitability, and national economic development account for the observed heterogeneity in the literature. These findings empirically validate agency and signalling theories in the ESG–dividend domain, suggesting that transparent ESG practices enhance investor trust and shape dividend distribution policies. In the sixth empirical chapter, we focus on the global hospitality sector, a service oriented industry where sustainability and financial outcomes are closely interlinked. Using ESG and financial data for publicly listed hospitality firms across countries, the study covers the period 2004–2023. Firms were identified using the relevant North vii American Industry Classification System (NAICS) categories, following Hwang et al. (2024). The initial dataset comprised 1,401 corporations, which was reduced to 918 unique firms after applying the required ESG and financial data-availability criteria. Using logistic panel regression, the study investigates how ESG performance affects both the likelihood and stability of dividend payments. While higher ESG performance increases the probability of dividend issuance, it is negatively associated with dividend stability, indicating that firms engaged in sustainability initiatives may prioritise reinvestment over consistent shareholder payouts. This duality supports the pecking order theory and further illustrates the trade-offs between short-term financial policy and long-term sustainability goals in capital-intensive industries. The findings of this thesis carry significant implications for theory, practice, and policy. Theoretically, the research advances ESG literature by integrating diverse frameworks, including stakeholder theory, agency theory, signalling theory, pecking order theory, and institutional theory, offering a more comprehensive understanding of the ESG-performance nexus. By contextualising ESG impacts within emerging markets, such as India, and across environmentally sensitive and non-sensitive sectors, the study challenges the ―one-size-fits-all‖ paradigm. It underscores the role of national economic development and institutional maturity in moderating ESG outcomes. Practically, the findings provide actionable insights for corporate managers, investors, civil society, and regulators, underscoring the need to align ESG investments with sector-specific risk exposures, strategic priorities, and diverse stakeholder expectations. For managers, the results highlight ESG as a value enhancing strategic tool rather than a compliance obligation. For investors and civil society, ESG disclosures emerge as credible signals of transparency, governance quality, and long-term accountability. For policymakers and regulators, the thesis highlights the importance of developing nuanced, sector-specific, and context-aware ESG disclosure frameworks that enhance data comparability, reduce information asymmetry, and improve the real economic effectiveness of sustainability reporting across industries and institutional settings. Despite these contributions, several avenues remain open for future inquiry. Limitations related to data quality, ESG score standardization, and sectoral coverage suggest the need for more granular, text-based, or qualitative approaches to ESG assessment. Expanding the research to include additional sectors (e.g., healthcare, technology, retail) and broader geographic regions, particularly in underrepresented emerging and frontier economies, can offer richer cross-national comparisons. Future research can benefit from expanding sectoral and geographic scope, applying advanced causal inference techniques, and incorporating qualitative or text-based viii ESG metrics. Greater attention to underexplored financial outcomes, such as innovation efficiency, capital allocation, and risk management, can further enrich the field. A more interdisciplinary and context-sensitive research agenda will be crucial to capturing the evolving role of ESG in corporate strategy and sustainable value creation. A greater emphasis on interdisciplinary and behavioral perspectives will also enhance our understanding of managerial decision-making and investor responses to ESG, helping shape more resilient and sustainable business models in the future. This thesis makes a comprehensive and methodologically rigorous contribution to the ESG field by integrating bibliometric, panel-based, meta-analytic, and industry specific approaches. It captures the diversity of ESG outcomes across various contexts, from India to the global, and from sectoral to firm-level, encompassing performance to dividend policy, thus offering a holistic lens through which scholars, practitioners, and policymakers can better understand the evolving dynamics of corporate sustainability.