Effect of Environmental, Social and Governance Performance on Firm Valuation: A Study

The integration of ESG criteria into corporate strategy and investment frameworks has intensified global scrutiny over whether responsible business conduct genuinely enhances firm value or merely imposes cost without commensurate return. This study investigates that question within the Indian pharmaceutical sector an industry uniquely positioned at the crossroads of commercial enterprise and public health obligation, yet largely overlooked in sector-specific ESG scholarship. Using secondary data from listed Indian pharmaceutical companies and firm value proxies of Tobin’s Q and the market-to-book ratio, the study disaggregates composite ESG scores into their environmental, social, and governance components to examine each pillar’s independent effect, while controlling for firm size and leverage. The pharmaceutical industry’s exposure to chemical effluents, drug-safety obligations, clinical-trial governance, and multi-jurisdictional regulatory oversight makes it a setting where ESG shortfalls carry irreversible reputational and financial consequences, lending particular weight to this inquiry. India’s structural characteristics concentrated ownership, evolving regulatory enforcement, and an emerging capital market diverge sufficiently from developed-economy contexts to render existing findings non-transferable without empirical verification.