The behavioural nexus of sustainable finance: how esg disclosures shape stakeholder perception and firm value in India

Abstract

Environmental, Social and Governance (ESG) disclosures have become central to corporate governance and sustainable finance, yet existing research on its relationship with firm value remains largely firm-centric and archival in nature. It typically treats disclosers  as an input whose financial effects are assumed to follow automatically, and stakeholders as a homogeneous audience whose responses are inferred from market indicators rather than being measured directly. This study reframes the relationship as a behavioural one, examining how the quality of ESG disclosures shapes stakeholder perception and through it, the behaviour that underpins indirect firm value. Taking insights from a cross-sectional survey of four stakeholder groups in India, namely, employees, consumers, portfolio managers and investment bankers, it test stakeholder-specific sequential pathways linking ESG disclosures, from quality to perception (authenticity, psychological proximity, trust and risk perception) and then to group-relevant behaviour, using reliability, descriptive, regression and correlation analysis. Across all four groups, ESG disclosures shaped behaviour indirectly, through perception rather than directly, and the credibility and authenticity of disclosures mattered more than its volume. Employee identification and citizenship, consumer loyalty and purchase intention, portfolio managers’ ESG integration and investment bankers financial and advisory decisions were each driven by how stakeholders interpreted disclosure with perceived ESG risk showing the strongest link to professional behaviour. A hypothesised moderating role for conscientiousness was not supported, implying that personality contributes to behaviour independently of perception. The findings support and integrative ESG stakeholder financial alignment framework and offer rare developing economy evidence which can be of substantial relevance to regulators, managers, and financial intermediaries operating under India’s evolving ESG regime.