Family Ownership, Environmental, Social and Governance (ESG) Performance and Firm Value: Empirical Evidence from Taiwan

This study uses panel data of 12,189 firm-year observations from 1,648 Taiwanese listed companies (2016–2023) to examine the interactions among family ownership, firm value (measured by Tobin’s Q) and environmental, social and governance (ESG) performance. Using ordinary least squares (OLS) and instrumental variable (IV) regressions, we find divergent results for the effect of ESG on firm value. The OLS estimates show a mildly positive relationship between ESG performance and Tobin’s Q. However, IV estimations—capturing the local average treatment effect for firms driven by exogenous pressures—reveal a negative valuation impact, indicating significant endogeneity in the naive estimates. In addition, we find that family firms exhibit systematically lower ESG scores than non-family firms, particularly in the governance dimension, likely due to preferences for opacity and restricted board independence. Overall, these findings challenge the prevailing narrative of a universal ESG premium. They suggest that in emerging markets like Taiwan, the substantial compliance costs associated with mandated ESG initiatives may lead to a conservative market reassessment of a firm’s long-term future cash flows. Theoretically, our work synthesizes agency and stewardship perspectives, offering regulators and executives nuanced guidance on how family control fundamentally shapes ESG adoption.