ESG Performance and Its Effect on Company Valuation

Author(s)	Ms. Asha Kumari, Prof. Shweta Anand
Country	India
Abstract	Environmental, Social, and Governance (ESG) ratings have become influential indicators shaping how investors assess corporate value. This study examines the role of ESG rating quality and credibility in influencing Price-to-Book (P/B) ratio valuation, a widely used metric that reflects how strongly markets value firms relative to their underlying assets. Recent evidence suggests that credible ESG ratings enhance investor confidence by signalling transparency, responsible governance, and reduced non-financial risks. When ESG scores are reliable and supported by rigorous verification, firms tend to achieve higher P/B ratios because investors perceive stronger prospects for sustainable growth. In contrast, inconsistent or weakly validated ESG assessments limit this valuation effect, even when firms demonstrate strong sustainability performance. These findings highlight that the informational integrity of ESG ratings—rather than the ratings alone—is central to how capital markets interpret sustainability disclosures and incorporate them into valuation decisions
Keywords	ESG ratings, corporate valuation, price-to-book ratio, sustainability transparency
Published In	Volume 8, Issue 2, March-April 2026
Published On	2026-03-29

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International Journal For Multidisciplinary Research