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Environmental, Social, and Governance (ESG) factors are increasingly shaping investment decisions in emerging markets like India. As global investors prioritize sustainability, companies with strong ESG practices attract more capital, enhancing stock market performance. In India, regulatory push (e.g., SEBI’s Business Responsibility and Sustainability Reporting) and rising investor awareness are accelerating ESG adoption. Firms with robust ESG frameworks mitigate risks, improve operational efficiency, and gain long-term competitiveness. Additionally, ESG-aligned stocks often exhibit lower volatility and higher liquidity, appealing to institutional investors. Thus, integrating ESG into investment strategies is vital for sustainable growth in India’s evolving stock market landscape. This book chapter examines the relationship between stock market liquidity and Environmental, Social, and Governance (ESG) performance among NIFTY50 companies in India. Using panel data analysis, we assess how ESG scores influence liquidity measures such as Amihud Illiquidity. The findings suggest that firms with higher ESG ratings exhibit improved liquidity due to enhanced investor confidence and reduced information asymmetry. Furthermore, ESG leaders attract more institutional investments, fostering deeper market participation. The research highlights the growing significance of ESG factors in shaping stock market dynamics in emerging economies, providing insights for policymakers, investors, and corporate managers aiming to align sustainability with financial performance.

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Empirical Investigation of ESG and Illiquidity Risk: Evidence from India

  • 章节

  • 发表日期：

    2026年

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  • Matwal Singh,
  • Gaurav Kumar,
  • Seyram Kawor

摘要

Environmental, Social, and Governance (ESG) factors are increasingly shaping investment decisions in emerging markets like India. As global investors prioritize sustainability, companies with strong ESG practices attract more capital, enhancing stock market performance. In India, regulatory push (e.g., SEBI’s Business Responsibility and Sustainability Reporting) and rising investor awareness are accelerating ESG adoption. Firms with robust ESG frameworks mitigate risks, improve operational efficiency, and gain long-term competitiveness. Additionally, ESG-aligned stocks often exhibit lower volatility and higher liquidity, appealing to institutional investors. Thus, integrating ESG into investment strategies is vital for sustainable growth in India’s evolving stock market landscape. This book chapter examines the relationship between stock market liquidity and Environmental, Social, and Governance (ESG) performance among NIFTY50 companies in India. Using panel data analysis, we assess how ESG scores influence liquidity measures such as Amihud Illiquidity. The findings suggest that firms with higher ESG ratings exhibit improved liquidity due to enhanced investor confidence and reduced information asymmetry. Furthermore, ESG leaders attract more institutional investments, fostering deeper market participation. The research highlights the growing significance of ESG factors in shaping stock market dynamics in emerging economies, providing insights for policymakers, investors, and corporate managers aiming to align sustainability with financial performance.