Does ESG Create Financial Value? A Systematic Literature Review of Corporate Financial Performance and Firm Characteristics
Keywords:
ESG; Financial Performance; Financial Value; Firm Characteristics; Sustainability; Corporate Finance; Systematic Literature Review.
Abstract
This study examines whether Environmental, Social, and Governance (ESG) creates financial value for companies by reviewing the relationship between ESG and corporate financial performance through a Systematic Literature Review (SLR) approach. A total of 61 peer-reviewed journal articles published between 2021 and 2026 were analyzed based on PRISMA guidelines. The review focuses on the relationship between ESG and financial performance, firm characteristics, ESG measurement, and accounting-based and market-based measures of financial value. The findings indicate that the relationship between ESG and financial performance is not uniform, with studies reporting positive, negative, insignificant, and conditional relationships. The variation in findings is associated with differences in firm characteristics, including firm size, cash holdings, leverage, and industry sensitivity, as well as differences in ESG measurement and financial performance proxies. This study contributes to the ESG and corporate finance literature by synthesizing the existing evidence on ESG-related financial value and identifying research gaps for future studies.
References
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Ahmed, O., & Abu Khalaf, B. (2025). The impact of ESG on firm value: The moderating role of cash holdings. Heliyon, 11(2), e41868.
Al Amosh, H., & Khatib, S. F. A. (2022). ESG disclosure and corporate financial performance: Moderating role of corporate board characteristics. Heliyon, 8(8), e10467.
Al Azizah, U. S., & Haron, R. (2025). The sustainability imperative: Evaluating the effect of ESG on corporate financial performance before and after the pandemic. Discover Sustainability, 6(1), 529.
Alsayegh, M. F., Abdul Rahman, R., & Homayoun, S. (2021). Corporate economic, environmental, and social sustainability performance transformation through ESG disclosure. Sustainability, 12(9), 3910.
Atan, R., et al. (2021). The impacts of environmental, social, and governance factors on firm performance: Panel data analysis. Management & Accounting Review, 20(2), 45–68.
Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(2), S119–S127.
Azmi, W., et al. (2021). Environmental, social and governance (ESG) activities and firm performance: Moderating role of institutional ownership. Global Business Review, 22(4), 950–969.
Bae, S. M., et al. (2021). Does CSR/ESG reduce firm risk? Evidence from Korea. International Review of Finance, 21(3), 890–915.
Bashir, R., et al. (2025). The role of environmental, social and governance practices and green innovation in enhancing firm financial performance. Discover Sustainability, 6(1), 1445.
Beretta, V., Demartini, M. C., & Trucco, S. (2024). From sustainability to financial performance: The role of SDG disclosure. Measuring Business Excellence, 28(3), 312–330.
Bofinger, Y., Heyden, K. J., & Rock, B. (2022). Corporate sustainability and the cost of debt: Evidence from Europe. Journal of Banking & Finance, 134, 106322.
Broadstock, D. C., Chan, K., Cheng, L. T. W., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716.
Brogi, M., & Lagasio, V. (2021). Environmental, social, and governance and company profitability: Are financial intermediaries different? Corporate Social Responsibility and Environmental Management, 28(2), 576–587.
Buallay, A., et al. (2021). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. European Business Review, 33(3), 385–404.
Cek, K., & Eyupoglu, S. (2021). Does environmental, social and governance performance influence economic performance? Journal of Cleaner Production, 270, 122533.
Chen, L., et al. (2022). Does ESG performance improve corporate cash holdings? Journal of International Financial Markets, Institutions and Money, 80, 101642.
Chen, K.-H., et al. (2026). Environmental, social, and governance (ESG) initiative scores and firm performance: The importance and role of firm size. Small Business Economics, 66, 71–95.
Chiaramonte, L., et al. (2022). The ESG framework and bank resilience during systemic crises. Journal of Financial Stability, 60, 101010.
Chouaibi, S., Chouaibi, J., & Rossi, M. (2022). The effect of ESG performance on financial performance: Does green innovation matter? Environmental Science and Pollution Research, 29(41), 62774–62791.
Danisman, G. O. (2023). Corporate ESG performance and financial distress: The role of trade credit. International Review of Economics & Finance, 86, 215–230.
Di Tommaso, C., & Thornton, J. (2021). Do ESG scores affect bank risk and capital adequacy? Journal of Financial Stability, 52, 100810.
Duque-Grisales, E., & Aguilera-Caracuel, J. (2021). Environmental, social and governance (ESG) scores and financial performance of multilatinas: Moderating effects. Journal of Business Ethics, 168(2), 315–334.
El Khoury, R., et al. (2023). ESG performance and financial performance of banks in the MENA region: New insights. Research in International Business and Finance, 64, 101852.
Eliwa, Y., Aboud, A., & Saleh, A. (2021). ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting, 79, 102297.
Engelhardt, N., et al. (2021). ESG ratings and stock performance during the COVID-19 crisis. International Review of Financial Analysis, 74, 101676.
Fatemi, A., Glaum, M., & Kaiser, S. (2021). The role of ESG disclosure and performance in value creation and destruction. Strategic Management Journal, 42(6), 1160–1188.
Fathihani, et al. (2025). ESG disclosure and financial performance: The moderating role of firm size in Indonesian banking sector. Shirkah: Journal of Economics and Business, 10(3), 331–348.
Febriana, A. N. R., & Gantyowati, E. (2026). Does ESG performance reduce corporate cash holdings? Evidence from panel fixed effects models. 9th NCBMA 2026 Proceedings, 120–133.
Garcia, A. S., & Orsato, R. J. (2021). Testing the relationship between ESG performance and financial performance in sensitive industries. Journal of Cleaner Production, 284, 124707.
Giese, G., et al. (2021). Foundations of ESG investing: How ESG affects equity valuation, risk, and performance. The Journal of Portfolio Management, 47(5), 69–83.
Grewal, J., & Serafeim, G. (2021). Research on corporate sustainability: Review and directions for research on materiality. Journal of Financial and Quantitative Analysis, 56(2), 606–643.
Hwang, J., Kim, H., & Jung, D. (2021). The effect of ESG activities on financial performance during the COVID-19 pandemic—Evidence from Korea. Sustainability, 13(20), 11362.
Jiang, Z., & Vitenu-Sackey, P. A. (2025). Assessing the impact of environmental, social and governance indicators on corporate financial performance. SAGE Open, 15(3), 1–20.
Kim, S., & Li, Z. (F.). (2021). Understanding the impact of ESG practices in corporate finance. Sustainability, 13(7), 3746.
Li, J., et al. (2021). Does ESG performance affect financial performance? Evidence from Chinese listed companies. Sustainability, 13(1), 256.
Li, J., et al. (2022). Corporate ESG performance and financial fraud: Evidence from Chinese listed companies. Pacific-Basin Finance Journal, 71, 101680.
Lu, H., et al. (2022). ESG performance, digital transformation, and firm value: Empirical evidence from listed companies. Technological Forecasting and Social Change, 176, 121475.
Luthfi, A., & Atmini, S. (2025). The role of industry sensitivity in moderating the influence of environmental, social, and governance (ESG) on financial difficulties. E-Journal of Accounting, 35(6), 1603–1619.
Mohammad, W. M. W., & Wasiuzzaman, S. (2021). Environmental, social and governance (ESG) disclosure, competitive advantage and performance of firms in Malaysia. Cleaner Environmental Systems, 2, 100015.
Morea, D., et al. (2025). The role of digitalization and ESG on financial performance: An empirical analysis on the energy and utilities sectors. PLOS ONE, 20(2), e0314078.
Naeem, N., et al. (2022). The role of ESG performance in corporate financial performance: Moderating effect of corporate governance. Environmental Science and Pollution Research, 29(25), 37800–37815.
Nekhili, M., et al. (2021). The role of ESG disclosure in firm value: Does family ownership matter? Journal of Business Finance & Accounting, 48(7–8), 1335–1367.
Nirino, N., et al. (2021). The impact of corporate controversies on financial performance: The role of ESG activities. Corporate Social Responsibility and Environmental Management, 28(3), 1104–1114.
Oprean-Stan, C., et al. (2021). Impact of ESG factors on financial performance: Evidence from European listed companies. Sustainability, 12(24), 10512.
Pulino, S. C., et al. (2022). Does ESG disclosure influence firm performance? Sustainability, 14(13), 7595.
Puspitasari, P., & Wuryani, E. (2026). The effect of environmental, social, and governance on financial performance with firm size as a moderating variable. International Journal of Management and Business Intelligence, 4(3), 505–520.
Qureshi, M. A., et al. (2021). Sustainability disclosure and corporate financial performance: Moderating role of board diversity. Business Strategy and the Environment, 30(8), 4129–4145.
Raimo, N., et al. (2021). Does ESG disclosure influence the cost of equity? Corporate Social Responsibility and Environmental Management, 28(2), 856–864.
Ruan, L., & Liu, Y. (2021). Environmental, social, and governance activities and firm performance: Evidence from China. Sustainability, 13(14), 7678.
Sassen, R., Hinze, A.-K., & Hardeck, I. (2021). Impact of ESG performance on firm value in European firms. Journal of Sustainable Finance & Investment, 11(3), 209–224.
Saygili, E., Arslan, S., & Birkan, A. O. (2022). The effect of ESG performance on financial performance: An empirical study of Turkish listed firms. Journal of Cleaner Production, 333, 130138.
Shakil, M. H. (2021). Environmental, social, and governance performance and financial risk: Moderating role of ESG controversies. International Review of Financial Analysis, 72, 101586.
Sihotang, D. G., & Siregar, S. V. (2025). The effect of ESG performance on firm value and financial distress with ESG controversies as a moderating variable. Petra International Journal of Business Studies, 8(2), 257–270.
Tampakoudis, I., et al. (2021). The effect of ESG on M&A performance: Evidence from the US. Finance Research Letters, 38, 101850.
Tan, Y., & Zhu, Z. (2022). The effect of ESG rating events on corporate green innovation in China: The mediating role of financial constraints. Technological Forecasting and Social Change, 179, 121656.
Tripopsakul, S. (2025). ESG practices, green innovation, and financial performance: Panel evidence from ASEAN firms. Journal of Risk and Financial Management, 18(8), 467.
Velte, P. (2021). Archival research on ESG and corporate financial performance: Systematic review and research agenda. Management Review Quarterly, 71(4), 985–1019.
Wong, W. C., et al. (2021). Does ESG certification add firm value? Finance Research Letters, 39, 101593.
Yoon, B., Lee, J. H., & Byun, R. (2021). The effects of ESG activities on firm value: The role of corporate governance and ownership structure. Journal of Business Ethics, 170(3), 585–608.
Yuan, L., Nor, M. N. M., & Kadir, D. A. (2025). Green cash flow: How ESG performance shapes corporate cash holding strategies. Frontiers in Sustainability, 6, 1531206.
Zahid, R. M. A., et al. (2022). The role of audit quality in the ESG-corporate financial performance nexus: Empirical evidence from Western European companies. Borsa Istanbul Review, 22(S1), S92–S107.
Zengin, B. (2025). Does size matter? Exploring the moderating role of firm size in the ESG-profitability relationship. Gazi Journal of Economics & Business, 11(3), 268–283.
Zhang, D., et al. (2022). ESG performance and corporate capital allocation efficiency. Finance Research Letters, 47, 102690.
Zhao, J., et al. (2023). ESG performance and debt financing costs: A dynamic perspective based on corporate life cycle. Finance Research Letters, 58, 104321.
Ahmed, O., & Abu Khalaf, B. (2025). The impact of ESG on firm value: The moderating role of cash holdings. Heliyon, 11(2), e41868.
Al Amosh, H., & Khatib, S. F. A. (2022). ESG disclosure and corporate financial performance: Moderating role of corporate board characteristics. Heliyon, 8(8), e10467.
Al Azizah, U. S., & Haron, R. (2025). The sustainability imperative: Evaluating the effect of ESG on corporate financial performance before and after the pandemic. Discover Sustainability, 6(1), 529.
Alsayegh, M. F., Abdul Rahman, R., & Homayoun, S. (2021). Corporate economic, environmental, and social sustainability performance transformation through ESG disclosure. Sustainability, 12(9), 3910.
Atan, R., et al. (2021). The impacts of environmental, social, and governance factors on firm performance: Panel data analysis. Management & Accounting Review, 20(2), 45–68.
Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(2), S119–S127.
Azmi, W., et al. (2021). Environmental, social and governance (ESG) activities and firm performance: Moderating role of institutional ownership. Global Business Review, 22(4), 950–969.
Bae, S. M., et al. (2021). Does CSR/ESG reduce firm risk? Evidence from Korea. International Review of Finance, 21(3), 890–915.
Bashir, R., et al. (2025). The role of environmental, social and governance practices and green innovation in enhancing firm financial performance. Discover Sustainability, 6(1), 1445.
Beretta, V., Demartini, M. C., & Trucco, S. (2024). From sustainability to financial performance: The role of SDG disclosure. Measuring Business Excellence, 28(3), 312–330.
Bofinger, Y., Heyden, K. J., & Rock, B. (2022). Corporate sustainability and the cost of debt: Evidence from Europe. Journal of Banking & Finance, 134, 106322.
Broadstock, D. C., Chan, K., Cheng, L. T. W., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716.
Brogi, M., & Lagasio, V. (2021). Environmental, social, and governance and company profitability: Are financial intermediaries different? Corporate Social Responsibility and Environmental Management, 28(2), 576–587.
Buallay, A., et al. (2021). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. European Business Review, 33(3), 385–404.
Cek, K., & Eyupoglu, S. (2021). Does environmental, social and governance performance influence economic performance? Journal of Cleaner Production, 270, 122533.
Chen, L., et al. (2022). Does ESG performance improve corporate cash holdings? Journal of International Financial Markets, Institutions and Money, 80, 101642.
Chen, K.-H., et al. (2026). Environmental, social, and governance (ESG) initiative scores and firm performance: The importance and role of firm size. Small Business Economics, 66, 71–95.
Chiaramonte, L., et al. (2022). The ESG framework and bank resilience during systemic crises. Journal of Financial Stability, 60, 101010.
Chouaibi, S., Chouaibi, J., & Rossi, M. (2022). The effect of ESG performance on financial performance: Does green innovation matter? Environmental Science and Pollution Research, 29(41), 62774–62791.
Danisman, G. O. (2023). Corporate ESG performance and financial distress: The role of trade credit. International Review of Economics & Finance, 86, 215–230.
Di Tommaso, C., & Thornton, J. (2021). Do ESG scores affect bank risk and capital adequacy? Journal of Financial Stability, 52, 100810.
Duque-Grisales, E., & Aguilera-Caracuel, J. (2021). Environmental, social and governance (ESG) scores and financial performance of multilatinas: Moderating effects. Journal of Business Ethics, 168(2), 315–334.
El Khoury, R., et al. (2023). ESG performance and financial performance of banks in the MENA region: New insights. Research in International Business and Finance, 64, 101852.
Eliwa, Y., Aboud, A., & Saleh, A. (2021). ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting, 79, 102297.
Engelhardt, N., et al. (2021). ESG ratings and stock performance during the COVID-19 crisis. International Review of Financial Analysis, 74, 101676.
Fatemi, A., Glaum, M., & Kaiser, S. (2021). The role of ESG disclosure and performance in value creation and destruction. Strategic Management Journal, 42(6), 1160–1188.
Fathihani, et al. (2025). ESG disclosure and financial performance: The moderating role of firm size in Indonesian banking sector. Shirkah: Journal of Economics and Business, 10(3), 331–348.
Febriana, A. N. R., & Gantyowati, E. (2026). Does ESG performance reduce corporate cash holdings? Evidence from panel fixed effects models. 9th NCBMA 2026 Proceedings, 120–133.
Garcia, A. S., & Orsato, R. J. (2021). Testing the relationship between ESG performance and financial performance in sensitive industries. Journal of Cleaner Production, 284, 124707.
Giese, G., et al. (2021). Foundations of ESG investing: How ESG affects equity valuation, risk, and performance. The Journal of Portfolio Management, 47(5), 69–83.
Grewal, J., & Serafeim, G. (2021). Research on corporate sustainability: Review and directions for research on materiality. Journal of Financial and Quantitative Analysis, 56(2), 606–643.
Hwang, J., Kim, H., & Jung, D. (2021). The effect of ESG activities on financial performance during the COVID-19 pandemic—Evidence from Korea. Sustainability, 13(20), 11362.
Jiang, Z., & Vitenu-Sackey, P. A. (2025). Assessing the impact of environmental, social and governance indicators on corporate financial performance. SAGE Open, 15(3), 1–20.
Kim, S., & Li, Z. (F.). (2021). Understanding the impact of ESG practices in corporate finance. Sustainability, 13(7), 3746.
Li, J., et al. (2021). Does ESG performance affect financial performance? Evidence from Chinese listed companies. Sustainability, 13(1), 256.
Li, J., et al. (2022). Corporate ESG performance and financial fraud: Evidence from Chinese listed companies. Pacific-Basin Finance Journal, 71, 101680.
Lu, H., et al. (2022). ESG performance, digital transformation, and firm value: Empirical evidence from listed companies. Technological Forecasting and Social Change, 176, 121475.
Luthfi, A., & Atmini, S. (2025). The role of industry sensitivity in moderating the influence of environmental, social, and governance (ESG) on financial difficulties. E-Journal of Accounting, 35(6), 1603–1619.
Mohammad, W. M. W., & Wasiuzzaman, S. (2021). Environmental, social and governance (ESG) disclosure, competitive advantage and performance of firms in Malaysia. Cleaner Environmental Systems, 2, 100015.
Morea, D., et al. (2025). The role of digitalization and ESG on financial performance: An empirical analysis on the energy and utilities sectors. PLOS ONE, 20(2), e0314078.
Naeem, N., et al. (2022). The role of ESG performance in corporate financial performance: Moderating effect of corporate governance. Environmental Science and Pollution Research, 29(25), 37800–37815.
Nekhili, M., et al. (2021). The role of ESG disclosure in firm value: Does family ownership matter? Journal of Business Finance & Accounting, 48(7–8), 1335–1367.
Nirino, N., et al. (2021). The impact of corporate controversies on financial performance: The role of ESG activities. Corporate Social Responsibility and Environmental Management, 28(3), 1104–1114.
Oprean-Stan, C., et al. (2021). Impact of ESG factors on financial performance: Evidence from European listed companies. Sustainability, 12(24), 10512.
Pulino, S. C., et al. (2022). Does ESG disclosure influence firm performance? Sustainability, 14(13), 7595.
Puspitasari, P., & Wuryani, E. (2026). The effect of environmental, social, and governance on financial performance with firm size as a moderating variable. International Journal of Management and Business Intelligence, 4(3), 505–520.
Qureshi, M. A., et al. (2021). Sustainability disclosure and corporate financial performance: Moderating role of board diversity. Business Strategy and the Environment, 30(8), 4129–4145.
Raimo, N., et al. (2021). Does ESG disclosure influence the cost of equity? Corporate Social Responsibility and Environmental Management, 28(2), 856–864.
Ruan, L., & Liu, Y. (2021). Environmental, social, and governance activities and firm performance: Evidence from China. Sustainability, 13(14), 7678.
Sassen, R., Hinze, A.-K., & Hardeck, I. (2021). Impact of ESG performance on firm value in European firms. Journal of Sustainable Finance & Investment, 11(3), 209–224.
Saygili, E., Arslan, S., & Birkan, A. O. (2022). The effect of ESG performance on financial performance: An empirical study of Turkish listed firms. Journal of Cleaner Production, 333, 130138.
Shakil, M. H. (2021). Environmental, social, and governance performance and financial risk: Moderating role of ESG controversies. International Review of Financial Analysis, 72, 101586.
Sihotang, D. G., & Siregar, S. V. (2025). The effect of ESG performance on firm value and financial distress with ESG controversies as a moderating variable. Petra International Journal of Business Studies, 8(2), 257–270.
Tampakoudis, I., et al. (2021). The effect of ESG on M&A performance: Evidence from the US. Finance Research Letters, 38, 101850.
Tan, Y., & Zhu, Z. (2022). The effect of ESG rating events on corporate green innovation in China: The mediating role of financial constraints. Technological Forecasting and Social Change, 179, 121656.
Tripopsakul, S. (2025). ESG practices, green innovation, and financial performance: Panel evidence from ASEAN firms. Journal of Risk and Financial Management, 18(8), 467.
Velte, P. (2021). Archival research on ESG and corporate financial performance: Systematic review and research agenda. Management Review Quarterly, 71(4), 985–1019.
Wong, W. C., et al. (2021). Does ESG certification add firm value? Finance Research Letters, 39, 101593.
Yoon, B., Lee, J. H., & Byun, R. (2021). The effects of ESG activities on firm value: The role of corporate governance and ownership structure. Journal of Business Ethics, 170(3), 585–608.
Yuan, L., Nor, M. N. M., & Kadir, D. A. (2025). Green cash flow: How ESG performance shapes corporate cash holding strategies. Frontiers in Sustainability, 6, 1531206.
Zahid, R. M. A., et al. (2022). The role of audit quality in the ESG-corporate financial performance nexus: Empirical evidence from Western European companies. Borsa Istanbul Review, 22(S1), S92–S107.
Zengin, B. (2025). Does size matter? Exploring the moderating role of firm size in the ESG-profitability relationship. Gazi Journal of Economics & Business, 11(3), 268–283.
Zhang, D., et al. (2022). ESG performance and corporate capital allocation efficiency. Finance Research Letters, 47, 102690.
Zhao, J., et al. (2023). ESG performance and debt financing costs: A dynamic perspective based on corporate life cycle. Finance Research Letters, 58, 104321.
Published
2026-09-20
How to Cite
Mizvi, A., Yusnaini, & Kartasari, S. F. (2026). Does ESG Create Financial Value? A Systematic Literature Review of Corporate Financial Performance and Firm Characteristics. International Journal of Education, Vocational and Social Science , 5(04), 1551-1577. https://doi.org/10.63922/ijevss.v5i04.6650
Contact Person +6282139474255
Email : ijevss@citakonsultindo.or.id / editor.ijevss@gmail.com
