The Effect of Environmental, Social, and Governance Reporting on Corporate Financial Performance

Abstract

Environmental, Social, and Governance (ESG) reporting has become a central mechanism through which firms communicate sustainability performance, governance quality, risk exposure, and long-term value creation. This structured literature review examines how ESG reporting affects corporate financial performance by synthesizing evidence on ESG disclosure, sustainability performance, controversies, governance, audit quality, internal controls, artificial intelligence, accounting information systems, fintech, dividend policy, cash holdings, and banking performance. The review indicates that ESG reporting is generally associated with stronger profitability, market valuation, investor confidence, stakeholder trust, access to finance, and financial resilience when disclosure is material, credible, comparable, and supported by governance and assurance mechanisms. However, the relationship is conditional rather than automatic. Financial benefits depend on disclosure quality, ESG rating divergence, greenwashing risk, industry materiality, institutional enforcement, board oversight, internal controls, audit quality, digital reporting infrastructure, and managerial capacity. The study contributes by reframing ESG reporting as an integrated value-creation architecture rather than a narrow sustainability disclosure practice.