ESG Practices and Firm Value: The Moderating Role of Corporate Governance

This study examines the relationship between Environmental, Social, and Governance (ESG) practices and firm value, focusing on the moderating role of corporate governance (CG). Despite growing global emphasis on sustainability disclosure, evidence on how ESG performance translates into firm value remains inconsistent, ranging from strongly positive to negative or insignificant associations across institutional settings. Drawing on stakeholder, agency, and signaling theories, this article synthesizes empirical literature published between 2021 and 2026 to develop an integrative conceptual framework in which CG attributes, including board independence, board size, ownership structure, audit committee characteristics, and institutional ownership, strengthen or weaken the ESG-firm value linkage. Employing a quantitative, explanatory design grounded in secondary panel data typical of listed-firm studies, and Moderated Regression Analysis as the underlying analytical logic, the study integrates findings from prior empirical works across developed and emerging markets, including Indonesia, China, Australia, and Sub-Saharan Africa. The synthesis indicates that ESG practices generally enhance firm value, primarily through reduced information asymmetry, lower cost of capital, and stronger stakeholder legitimacy, and that this positive relationship tends to be amplified when governance mechanisms are robust and properly structured, whereas weak or symbolic governance may dampen or even reverse the value-enhancing effect of ESG. Theoretical and managerial implications, along with directions for future empirical testing, are discussed.

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