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This study assesses how efficiently Indian firms across nine industries utilize Environmental, Social, and Governance (ESG) practices to enhance market value and explores the determinants of ESG efficiency. Using Data Envelopment Analysis (DEA) under Variable Returns to Scale (VRS) for a sample of 495 listed firms, with bootstrap correction for bias, the findings reveal significant variation across sectors. Firms in Consumer Goods, Automobile, and Banking sectors exhibit relatively higher ESG efficiency, while Construction and Industrial Manufacturing lag. The consistently lower bias-corrected scores suggest that traditional DEA models may overstate ESG efficiency. Beta regression analysis identifies firm age, board size, and cash flow as positive influencers of ESG efficiency, whereas board independence and ROA show a negative relationship, indicating a possible trade-off between profitability and sustainability. The study also identifies best practices in circular economy and underutilized potential in green finance mechanisms such as green bonds and ESG-linked loans. These findings have practical implications for firms, investors, and policymakers, offering replicable insights for emerging markets aiming to balance growth with responsible governance and sustainability.

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Measuring ESG Efficiency and Its Drivers: Insights from Indian Firms with Implications for Circular Economy and Green Finance

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  • 发表日期：

    2026年

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  • Subrata Halder

摘要

This study assesses how efficiently Indian firms across nine industries utilize Environmental, Social, and Governance (ESG) practices to enhance market value and explores the determinants of ESG efficiency. Using Data Envelopment Analysis (DEA) under Variable Returns to Scale (VRS) for a sample of 495 listed firms, with bootstrap correction for bias, the findings reveal significant variation across sectors. Firms in Consumer Goods, Automobile, and Banking sectors exhibit relatively higher ESG efficiency, while Construction and Industrial Manufacturing lag. The consistently lower bias-corrected scores suggest that traditional DEA models may overstate ESG efficiency. Beta regression analysis identifies firm age, board size, and cash flow as positive influencers of ESG efficiency, whereas board independence and ROA show a negative relationship, indicating a possible trade-off between profitability and sustainability. The study also identifies best practices in circular economy and underutilized potential in green finance mechanisms such as green bonds and ESG-linked loans. These findings have practical implications for firms, investors, and policymakers, offering replicable insights for emerging markets aiming to balance growth with responsible governance and sustainability.