ESG (Environmental, Social, and Governance) and firm value: mediating effect of Profitability Performance of Indian-Listed Companies

We investigate the indirect relationship between ESG (environmental, social, and governance) and a firm’s Enterprise value, with profitability measures (Return on Assets (ROA), Return on Equity (ROE), and Return on Capital Employed (ROCE)) as mediating factors. The study utilizes the annual data of 124 firms of different sectors of publicly listed Indian enterprises spanning the years 2019-2023, utilizing the panel PMG-ARDL model, and for the mediation analysis, the Sobel test was conducted. We find the mediating relationship between ESGP and EV through ROA and ROCE. the result also shows the significant long-run effect of Explanatory variables on response variables. Based on the findings, this study offers insights tostakeholders, decision-makers, legislators, and researchers on the role of ESG in the Firm’s value.