Firms’ human rights practices: impacts on firms’ ESG and financial performance

Purpose This paper aims to examine the relationship between human rights practices and firm market and financial performance and the moderating role of Environmental, Social and Governance (ESG) practices. Design/methodology/approach The authors use ordinary least squares regression as a baseline methodology on US-listed firms from 2002 to 2023 and generalized method of moments estimation to account for endogeneity concerns. Findings The results indicate that firms’ human rights practices are significantly associated with market performance and return on assets. Additionally, ESG practices significantly moderate the relationship between human rights practices and firm performance. Human rights performance has a greater impact on market performance when moderated by ESG practices. Research limitations/implications This study contributes to the academic discourse by exploring the complex relationship between human rights and ESG performance. Identifying human rights practices as a social cost has intrinsic value for firms, driving toward desirable levels of human rights practices within corporate governance systems, consistent with stakeholder and social exchange theories. Originality/value This study provides novel insights into the interactive effects of human rights and ESG factors on firms’ market and financial performance, offering a deeper understanding of how these elements collectively shape corporate outcomes.