ESG Scores and Shareholder Value: Exploring the Dichotomy between EVA and MVA in Emerging Markets Firms

This study examines the relationship between Environmental, Social, and Governance (ESG) scores and shareholder value creation measured through Economic Value Added (EVA) and Market Value Added (MVA). Using panel data from 220 Indian non-financial firms listed on the National Stock Exchange (NSE) 500 between 2015 and 2020, we explore whether ESG disclosures enhance or detract from shareholder value. The results reveal a negative relationship between ESG scores and EVA driven by high expenditures on ESG activities without immediate financial gains. Conversely, ESG scores were positively associated with MVA, suggesting long-term market benefits. The findings underscore the dichotomy between the short-term operational impact and the long-term market perception of ESG initiatives. This study has implications for managers and policymakers aiming to balance sustainability goals with shareholder expectations.