The impact of ESG performance on firm value in the energy and utilities sectors: the moderating roles of institutional ownership and GHG emissions

Abstract

This study investigates the impact of ESG performance on firm value among listed energy and utilities firms in emerging Asian markets (excluding China) over 2015–2024. Firm value is proxied by Tobin’s Q and ESG performance by the LSEG overall ESG score (0–100). The study tests whether institutional ownership and GHG emissions intensity moderate the ESG–firm value relationship, drawing on stakeholder theory, agency theory, legitimacy theory, and signaling theory. Using a balanced panel of 588 firm-year observations and fixed-effects regression with firm, country, and year fixed effects, the empirical results do not support any of the three hypotheses. ESG performance is not positively associated with Tobin’s Q. Institutional ownership does not significantly strengthen the ESG–firm value relationship. GHG emissions intensity does not consistently weaken the ESG–firm value relationship through interaction effects. However, GHG emissions intensity — particularly Scope 1 and combined Scope 1+2+3 — exerts a significant negative direct effect on Tobin’s Q, indicating that capital markets price carbon-transition risk more directly through quantifiable emissions indicators than through aggregate ESG ratings. Return on assets is the most consistent positive determinant of firm value across all specifications. The findings carry important implications for multiple stakeholders. For corporate managers, the results suggest that credibly reducing direct carbon intensity — particularly Scope 1 emissions — generates more reliable valuation benefits than improving an aggregate ESG score alone. For investors, incorporating firm-level GHG emissions exposure alongside traditional financial fundamentals improves valuation accuracy more than relying primarily on broad ESG ratings. For policymakers in emerging Asia, the findings highlight the need for more standardized, granular, and verifiable ESG and emissions disclosure frameworks to strengthen the credibility and valuation relevance of sustainability information. Overall, the study supports a conditional interpretation of ESG value relevance: in carbon-intensive sectors of emerging Asia, quantifiable carbon-risk indicators are more reliably priced by markets than broad ESG scores or institutional ownership moderation mechanisms.