Current - Issue
Year 2026 · Volume 6 · Issue 5
Review Article
Does ESG Create Firm Value? A Critical Review of Conflicting Empirical Evidence and Explanatory Mechanisms
Thasneem Shamsudeen1
Aza Azlina Md Kassim2
1 2 Postgraduate Centre, Management and Science University, Selangor, Malaysia. 1 Department of Accounting and Finance, University of Stirling, Ras Al Khaimah, United Arab Emirates.
Published Online: September-October 2026
Pages: 270-278
Cite this article
↗ https://www.doi.org/10.59256/ijrtmr.20260605030
References
1. Aboud, A., & Diab, A. (2018). The impact of social, environmental and corporate governance disclosures on firm value: Evidence from Egypt. Journal of Accounting in Emerging Economies, 8(4), 442–458. https://doi.org/10.1108/JAEE-08-2017-0079
2. Albuquerque, R., Koskinen, Y., & Zhang, C. (2019). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451–4469. https://doi.org/10.1287/mnsc.2018.3043
3. Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(Supplement 2), S119–S127. https://doi.org/10.1016/j.bir.2022.11.006
4. Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315–1344. https://doi.org/10.1093/rof/rfac033
5. Chau, L., Anh, L., & Duc, V. (2025). Valuing ESG: How financial markets respond to corporate sustainability. International Business Review, 34(3), 102418. https://doi.org/10.1016/j.ibusrev.2025.102418
6. Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), 1–23. https://doi.org/10.1002/smj.2131
7. Christensen, H. B., Hail, L., & Leuz, C. (2021). Mandatory CSR and sustainability reporting: Economic analysis and literature review. Review of Accounting Studies, 26, 1176–1248. https://doi.org/10.1007/s11142-021-09609-5
8. Duan, Y., Yang, F., & Xiong, L. (2023). Environmental, social, and governance (ESG) performance and firm value: Evidence from Chinese manufacturing firms. Sustainability, 15(17), 12858. https://doi.org/10.3390/su151712858
9. Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
10. Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45–64. https://doi.org/10.1016/j.gfj.2017.03.001
11. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.
12. Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
13. Gawęda, A. (2025). Does environmental, social, and governance performance elevate firm value? International evidence. Finance Research Letters, 73, 106639. https://doi.org/10.1016/j.frl.2024.106639
14. Gerged, A. M., Beddewela, E., & Cowton, C. J. (2021). Is corporate environmental disclosure associated with firm value? A multicountry study of Gulf Cooperation Council firms. Business Strategy and the Environment, 30(1), 185–203. https://doi.org/10.1002/bse.2616
15. Gregory, A., Tharyan, R., & Whittaker, J. (2014). Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics, 124(4), 633–657. https://doi.org/10.1007/s10551-013-1898-5
16. Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697–1724. https://doi.org/10.2308/accr-51383
17. Khan, M. A., Hassan, M. K., Maraghini, M. P., Biancone, P., & Valentinuz, G. (2024). Valuation effect of ESG and its impact on capital structure: Evidence from Europe. International Review of Economics & Finance, 91, 19–35. https://doi.org/10.1016/j.iref.2024.01.002
18. Li, X. (2024). Sustainable development and firm value: How ESG performance shapes corporate success—A systematic literature review. Business Strategy & Development. https://doi.org/10.1002/bsd2.70026
19. Nampoothiri, M. V., Entrop, O., & Annamalai, T. R. (2024). Effect of mandatory sustainability performance disclosures on firm value: Evidence from listed European firms. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.2860
20. Narula, R., Rao, P., Kumar, S., & Matta, R. (2024). ESG scores and firm performance—Evidence from emerging market. International Review of Economics & Finance, 89, 1170–1184. https://doi.org/10.1016/j.iref.2023.08.024
21. Postiglione, M. (2024). ESG and firm value: A hybrid literature review on cost of capital implications from Scopus database. Corporate Social Responsibility and Environmental Management, 31(6), 6457–6480. https://doi.org/10.1002/csr.2940
22. Rahat, B., & Nguyen, P. (2024). The impact of ESG profile on firm's valuation in emerging markets. International Review of Financial Analysis, 95, 103361. https://doi.org/10.1016/j.irfa.2024.103361
23. Seok, J., Kim, Y., & Oh, Y. K. (2024). How ESG shapes firm value: The mediating role of customer satisfaction. Technological Forecasting and Social Change, 208, 123714. https://doi.org/10.1016/j.techfore.2024.123714
2. Albuquerque, R., Koskinen, Y., & Zhang, C. (2019). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451–4469. https://doi.org/10.1287/mnsc.2018.3043
3. Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(Supplement 2), S119–S127. https://doi.org/10.1016/j.bir.2022.11.006
4. Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315–1344. https://doi.org/10.1093/rof/rfac033
5. Chau, L., Anh, L., & Duc, V. (2025). Valuing ESG: How financial markets respond to corporate sustainability. International Business Review, 34(3), 102418. https://doi.org/10.1016/j.ibusrev.2025.102418
6. Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), 1–23. https://doi.org/10.1002/smj.2131
7. Christensen, H. B., Hail, L., & Leuz, C. (2021). Mandatory CSR and sustainability reporting: Economic analysis and literature review. Review of Accounting Studies, 26, 1176–1248. https://doi.org/10.1007/s11142-021-09609-5
8. Duan, Y., Yang, F., & Xiong, L. (2023). Environmental, social, and governance (ESG) performance and firm value: Evidence from Chinese manufacturing firms. Sustainability, 15(17), 12858. https://doi.org/10.3390/su151712858
9. Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
10. Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45–64. https://doi.org/10.1016/j.gfj.2017.03.001
11. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.
12. Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
13. Gawęda, A. (2025). Does environmental, social, and governance performance elevate firm value? International evidence. Finance Research Letters, 73, 106639. https://doi.org/10.1016/j.frl.2024.106639
14. Gerged, A. M., Beddewela, E., & Cowton, C. J. (2021). Is corporate environmental disclosure associated with firm value? A multicountry study of Gulf Cooperation Council firms. Business Strategy and the Environment, 30(1), 185–203. https://doi.org/10.1002/bse.2616
15. Gregory, A., Tharyan, R., & Whittaker, J. (2014). Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics, 124(4), 633–657. https://doi.org/10.1007/s10551-013-1898-5
16. Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697–1724. https://doi.org/10.2308/accr-51383
17. Khan, M. A., Hassan, M. K., Maraghini, M. P., Biancone, P., & Valentinuz, G. (2024). Valuation effect of ESG and its impact on capital structure: Evidence from Europe. International Review of Economics & Finance, 91, 19–35. https://doi.org/10.1016/j.iref.2024.01.002
18. Li, X. (2024). Sustainable development and firm value: How ESG performance shapes corporate success—A systematic literature review. Business Strategy & Development. https://doi.org/10.1002/bsd2.70026
19. Nampoothiri, M. V., Entrop, O., & Annamalai, T. R. (2024). Effect of mandatory sustainability performance disclosures on firm value: Evidence from listed European firms. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.2860
20. Narula, R., Rao, P., Kumar, S., & Matta, R. (2024). ESG scores and firm performance—Evidence from emerging market. International Review of Economics & Finance, 89, 1170–1184. https://doi.org/10.1016/j.iref.2023.08.024
21. Postiglione, M. (2024). ESG and firm value: A hybrid literature review on cost of capital implications from Scopus database. Corporate Social Responsibility and Environmental Management, 31(6), 6457–6480. https://doi.org/10.1002/csr.2940
22. Rahat, B., & Nguyen, P. (2024). The impact of ESG profile on firm's valuation in emerging markets. International Review of Financial Analysis, 95, 103361. https://doi.org/10.1016/j.irfa.2024.103361
23. Seok, J., Kim, Y., & Oh, Y. K. (2024). How ESG shapes firm value: The mediating role of customer satisfaction. Technological Forecasting and Social Change, 208, 123714. https://doi.org/10.1016/j.techfore.2024.123714
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