ESG Performance as a Strategic Governance Indicator in an Emerging Economy: Evidence from Romania

Abstract

Environmental, social, and governance (ESG) performance is increasingly viewed as a signal of how seriously companies approach sustainability and governance, rather than simply a tool for financial screening. This study explores how ESG performance relates to organisational capacity and market outcomes among companies listed on the Romanian stock exchange. Using a cross-sectional quantitative design, the analysis examines the associations between ESG scores and key firm-level indicators, including market capitalization, revenue, total shareholder return, and valuation measured by the price-to-earnings ratio. The empirical analysis combines descriptive statistics, correlation analysis, and ordinary least squares regression models. The results show that stronger ESG performance is moderately and positively associated with firm size and financial capacity, with higher ESG scores observed among larger firms and those generating higher revenues. These patterns support the view of ESG performance as a reflection of governance maturity and institutional capacity in an emerging-market context. In contrast, the link between ESG performance and short-term market outcomes appears weaker, with only a modest association identified for shareholder returns and no clear relationship with valuation. Overall, the findings suggest that ESG performance is more closely connected to firms' underlying organisational capacity than to short-term stock market performance, underscoring its relevance for long-term adaptation and social sustainability. Keywords: ESG performance; Corporate governance; Organisational capacity; Sustainability; Emerging markets