DefinePK

Abstract

The increasing global emphasis on sustainability has prompted firms to integrate ESG practices into their strategic agendas. This study investigates the impact of ESG disclosures on firm financial performance, focusing on firms operating within the European manufacturing sector. Using a fixed-effect panel regression model, the analysis incorporates firm-specific control variables such as firm size, capital structure and capital asset intensity to ensure robustness. The empirical findings reveal a statistically significant and positive relationship between ESG engagement and firm profitability, supporting the notion that sustainable practices enhance organizational resilience and stakeholder trust. The results are interpreted through the lens of Stakeholder Theory, the RBV, and the Trade-Off Theory, highlighting how ESG activities serve as both strategic resources and mechanisms for managing stakeholder expectations.
Keywords: Environmental, Social, Governance, ESG, Sustainability.