Positive Influence of ESG On Firm Value

Abstract

Firm value is an important measure of a company's long-term competitiveness. Environmental, Social, and Governance (ESG) have become a key factor influencing financial performance and market valuation. This study investigates how ESG enhances firm value through three mechanisms: risk reduction, production efficiency improvement, and expanded financing opportunities. The findings of the analysis demonstrate that ESG reduces corporate risks, including increased capacity for risk prevention and resilience. It also boosts efficiency by improving employee motivation, fostering innovation, and strengthening governance. The better ESG performance reduces financing costs and increases investor confidence, which will expand financing opportunities. The findings highlight ESG’s strategic importance in driving sustainable growth and long-term value creation. This research contributes to the academic discourse on ESG and provides practical insights for businesses, policymakers, and investors, enhancing the necessity to integrate ESG into company strategy. Future studies could examine industry-specific variations or the role of ESG during economic crises. This would further refine the impact assessment.