When Is ESG Performance Associated with Firm Value? The Moderating Role of Employee Turnover

This study examines the relationships among ESG performance, employee turnover, and firm value and investigates whether employee turnover conditions the valuation relevance of ESG performance firms of different sizes across Taiwanese firms using data from 2019 to 2024. The study uses 10,247 firm-year observations to classify firms into smaller and larger firm-size groups using K-means clustering based solely on firm size and estimates the relationships across the full sample and the two size-based groups. The findings show that ESG and environmental performance are positively linked to firm value, especially in the larger firm-size group. Corporate governance performance is positively associated with firm value only in the larger firm-size group, while social performance shows no significant direct effect. Employee turnover is negatively associated with firm value in the larger firm-size group and conditions the ESG–firm value relationship. Moderation effects are significant among smaller firms, whereas the moderating effect of employee turnover on social performance is significant among larger firms. The study contributes to the ESG–firm value literature by incorporating employee turnover as a human-capital condition and by demonstrating a firm-size effect on ESG valuation. The findings suggest that ESG performance and workforce stability should be considered jointly when assessing the potential value implications of corporate sustainability practices.