Mandatory ESG Disclosure under BRSR Law and Firm Performance: Evidence from Governance and Sustainability Practices in Environmentally Sensitive Sectors

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🔬研究者:Offers empirical evidence on the relationship between mandatory ESG disclosure and firm performance, useful for scholars studying corporate governance and sustainability regulation.

🏢実務担当者:Corporate sustainability teams can learn how ESG factors affect performance, especially in environmentally sensitive sectors, guiding strategic integration.

🏛政策担当者:Regulators can assess the effectiveness of disclosure mandates like BRSR, with implications for designing or refining similar frameworks in other jurisdictions.

Abstract This study investigates the impact of mandatory ESG disclosure under the Business Responsibility and Sustainability Reporting (BRSR) framework, introduced by the Securities and Exchange Board of India (SEBI), on firm financial performance in environmentally sensitive sectors. Positioned within the domain of corporate law and governance, the study examines whether regulatory driven transparency enhances firm value and strengthens governance outcomes. Using an unbalanced panel dataset of NSE 500 firms comprising 33,082 observations over the period 2022–2025, the analysis focuses on firms operating in environmentally sensitive industries (subject to mandatory BRSR compliance. ESG dimensions are operationalized through specific disclosure-based indicators aligned with the BRSR framework. Environmental variables include water intensity, waste intensity, energy intensity, and greenhouse gas (GHG) intensity. Social indicators capture workforce diversity, community spending, employee participation in corporate social responsibility (CSR), and employee turnover. Governance variables include board size, board independence, gender diversity on boards, and executive composition.Firm performance is measured using both market-based and accounting-based indicators, including Tobin’s Q, Return on Assets (ROA), Return on Equity (ROE), and Earnings Before Interest and Taxes (EBIT). The empirical strategy employs pooled OLS, Fixed Effects (FE), and Random Effects (RE) models, with the Breusch–Pagan Lagrange Multiplier and Hausman tests guiding model selection. Year and sector fixed effects are incorporated to control for temporal and structural heterogeneity. The findings reveal heterogeneous effects of ESG factors on firm performance. Environmental intensity measures, particularly water and GHG intensity, are negatively associated with accounting performance, while energy efficiency demonstrates a positive relationship. Social factors, including gender diversity in the workforce and community engagement, exhibit a positive influence on firm outcomes, whereas employee turnover negatively affects performance. Governance variables show mixed effects: board size is positively associated with accounting returns, while female board representation enhances market valuation. Overall, the results suggest that mandatory ESG disclosure under BRSR functions as a governance mechanism that influences firm performance through both compliance and strategic integration channels. The study contributes to the literature on corporate reporting, board effectiveness, and regulatory governance by providing empirical evidence from an emerging economy context. The findings have implications for regulators in assessing the effectiveness of sustainability disclosure mandates and for corporate managers in aligning ESG practices with long-term value creation. JEL Codes: K22, K20, K32, M14,Q56

• openaire https://doi.org/10.21203/rs.3.rs-9552002/v1first seen 2026-06-11 05:15:11