Corporate Governance and ESG Performance in Indian Manufacturing Firms: The Moderating Role of Firm Size and Profitability

Abstract

Purpose: This study investigates how corporate governance practices—board independence, board diversity, shareholder rights, and transparency—shape ESG performance in Indian manufacturing firms, and whether firm size and profitability strengthen these effects. Design/methodology/approach: Using secondary data for 120 NSE/BSE-listed manufacturers over 2016–2023, ESG scores were obtained from CRISIL, S&P Global, ESGRisk.ai/Refinitiv, and SES, while governance and financial variables were compiled from annual reports, BRSR filings, and SEBI disclosures; analyses comprised descriptive statistics, Pearson correlations, multiple regression for direct effects, and moderated regression to test interactions with firm size and profitability.
Findings: Transparency in reporting and board independence emerge as the strongest, statistically significant predictors of ESG performance; board diversity has a positive but comparatively smaller effect, and shareholder rights show a weaker yet positive association; moderation tests reveal that larger and more profitable firms convert governance strengths into superior ESG outcomes more effectively.
Originality/value: The paper provides sector-specific, India-focused evidence on the governance–ESG nexus across the BRR→BRSR transition, integrates agency, stakeholder, and resource-based perspectives, and jointly models two organizational moderators—size and profitability—offering nuanced insights beyond headline ESG scores.
Implications: Managers should prioritize credible, decision-useful transparency and reinforce independent, diverse boards to enhance ESG performance; policymakers can deepen BRSR guidance, assurance standards, and capacity-building incentives for mid-cap manufacturers; investors should weight transparency quality and board structure alongside ESG ratings to better assess sustainability credibility and risk.