ESG pillars, firm value, and economic volatility in U.S. healthcare firms

Abstract This study examines how environmental, social, and governance (ESG) performance and economic volatility relate to firm value and operating performance in U.S. healthcare firms. Using firm and year fixed effects, we find that the annual change in the social pillar, rather than the composite score or the environmental and governance pillars, is positively associated with market value, consistent with social issues being financially material in healthcare. The estimate is imprecise when the sample is restricted to 2015 through 2024, and within the sector the association is not found among providers and services. ESG shows no contemporaneous accounting reward and a small negative association with return on assets, and economic volatility is not robustly related to firm value, although regional volatility is positively associated with return on assets. Overall, we provide associational evidence that materiality informed, pillar level analysis is more informative than aggregate ESG scores.