DefinePK

Abstract

This research investigates the relationship between Firm value and Environmental, Social, and Governance (ESG) performance, considering the conditioning influence of audit quality. Utilizing data from seven emerging economies over the period 2011-2022. We have conducted empirical analysis using two-stage least squares (2SLS) and fixed effect regression. According to our results, ESG performance has a significant and positive impact on corporate value in emerging economies. The Quartile analysis showed a stronger ESG performance-firm value relationship in higher ESG engagement quartiles. The positive effect of ESG performance on firm value is primarily mediated through two channels: mitigating financial constraints and enhancing analyst coverage. Additionally, we discovered that the relationship between ESG performance and firm value is significantly moderated by audit quality. The higher the audit quality, the stronger the positive effect of ESG on firm value.  These findings stand up well against a number of robustness tests and offer insightful policy recommendations for stakeholders in boosting company value through ESG involvement.This research investigates the relationship between Firm value and Environmental, Social, and Governance (ESG) performance, considering the conditioning influence of audit quality. Utilizing data from seven emerging economies over the period 2011-2022. We have conducted empirical analysis using two-stage least squares (2SLS) and fixed effect regression. According to our results, ESG performance has a significant and positive impact on corporate value in emerging economies. The Quartile analysis showed a stronger ESG performance-firm value relationship in higher ESG engagement quartiles. The positive effect of ESG performance on firm value is primarily mediated through two channels: mitigating financial constraints and enhancing analyst coverage. Additionally, we discovered that the relationship between ESG performance and firm value is significantly moderated by audit quality. The higher the audit quality, the stronger the positive effect of ESG on firm value.  These findings stand up well against a number of robustness tests and offer insightful policy recommendations for stakeholders in boosting company value through ESG involvement.