Environmental, Social, and Governance (ESG): Concepts and lessons from research on firm value
Keywords:
Environmental, Social, Governance, Conceptual Framework, Firm ValuationAbstract
The concept of Environmental, Social, and Governance (ESG) is gaining significant attention in both business organizations and academia due to its crucial role in sustainable business operations and its impact on decision-making. Numerous studies have examined the effects of ESG on financial performance, risk management, and firm value. Awareness of the impacts of environmental issues, social changes, and the demand for transparency directly influences investors and stakeholders. The findings from these studies remain diverse, with some supporting that ESG enhances firm value by reducing capital costs and boosting competitive ability, while others suggest that ESG may impose a cost burden that negatively affects financial performance.
This article aims to review the literature on ESG by synthesizing related concepts and theories, while analyzing the impacts of ESG as a key variable. A structured literature review was conducted, selecting articles from reliable databases and using comparative analysis to highlight the differing impacts depending on ESG integration and organizational strategies. It was found that the effects of ESG may vary depending on environmental factors such as industry characteristics, regulations, and the level of ESG disclosure. Although the research findings show both supportive and conflicting views, it is clear that ESG plays an important role in firm value in one way or another. Thus, this article provides a key direction for future studies to enhance understanding in the future.
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