Nuraini Desty Nurmasari, Adin Gustina, Muhammad Fuad, Yi-Chang Chen, Su Chuan Liu
Environmental, Social, and Governance (ESG) performance has become a critical component of sustainable business strategy, yet its financial implications remain debated, particularly in emerging markets. While ESG engagement is often expected to enhance long-term resilience, evidence on its short-term market impact is inconclusive. The present study examines the dynamic relationship between ESG performance and firm market value across different economic conditions, focusing on the periods before and during the COVID-19 crisis. Using an unbalanced panel dataset of 411 firm-year observations from 2015 to 2023, the analysis employs fixed-effects, random-effects, and instrumental variable (IV) regression models to mitigate endogeneity. The results show that ESG performance negatively affects firm market value during stable periods but positively influences it during crises. These findings suggest that while ESG investments may impose short-term financial burdens, they serve as risk mitigation mechanisms that enhance resilience under uncertainty. The study contributes to the literature by providing context-specific evidence, highlighting the conditional nature of ESG’s financial effects across economic cycles. Practically, the results emphasise the need for investors to incorporate ESG into risk–return strategies, for managers to align ESG investments with financial stability goals, and for policymakers to design balanced regulations that promote sustainable growth without overburdening firms. © 2026, Bulgarska Akademiya na Naukite. All rights reserved.
Management Department, Faculty of Economics and Business, Universitas Brawijaya, Indonesia; Management Department, Faculty of Economics and Business, Universitas Negeri Yogyakarta, Indonesia; Management Department, Faculty of Economics and Business, Universitas Negeri Malang, Indonesia; Department of Business Administration, Chaoyang University of Technology, Indonesia; Marketing and Logistics Management, Chaoyang University of Technology, Indonesia
