A Study on Influence of ESG Practices on Firm Valuation

Environmental, Social, and Governance (ESG) practices have emerged as critical determinants of corporate sustainability and firm valuation in the modern business environment. With increasing awareness among investors and stakeholders, ESG factors are now considered alongside traditional financial metrics in evaluating a firm's long-term performance and risk profile. This study examines the impact of ESG factors on firm valuation using primary data collected from 100 respondents through a structured questionnaire. The research employs descriptive statistics, correlation analysis, and regression techniques to assess the relationship between ESG practices and firm value. The findings reveal that ESG practices significantly influence firm valuation, with environmental factors demonstrating the strongest and statistically significant impact. This suggests that initiatives related to environmental sustainability, such as resource efficiency and pollution control, play a crucial role in enhancing firm value. While social and governance factors are recognized as important by respondents, they do not exhibit statistically significant effects in this study, indicating that their influence may be indirect or dependent on other variables. Furthermore, the study highlights the growing importance of ESG considerations in shaping investment decisions and corporate strategies, particularly in emerging markets like India where ESG adoption is still evolving. The results emphasize the need for companies to integrate ESG practices into their core operations to improve transparency, build investor confidence, and achieve sustainable growth. Overall, this research contributes to the existing body of literature by providing empirical evidence on the relationship between ESG practices and firm valuation. It also offers practical insights for managers, policymakers, and investors by underscoring the importance of environmental sustainability and responsible business practices in enhancing corporate value.