CORPORATE SOCIAL-RESPONSIBILITY AND ENVIRONMENTAL MANAGEMENT
Abstract
This research focuses on the connection between ESG (Environmental, Social, and Governance) factors and financial performance in the fashion industry, grounded on stakeholder theory and signaling theory as its theoretical foundations. By examining 1144 firm-year observations from 194 publicly listed companies in 24 countries (2013–2023), the study evaluates the impact of ESG on financial outcomes through market-based (Tobin's Q) and accounting-based (ROA, ROE) metrics. The findings reveal that ESG efforts positively influence financial performance, with social responsibility emerging as a key driver of profitability and market valuation. Additionally, while environmental and governance enhancements boost market performance, they show limited influence on accounting metrics. Moreover, the study reveals that this relationship is moderated by the country's financial system orientation: ESG efforts are more strongly rewarded in credit-oriented than in investor-oriented systems. For fashion firms, these insights highlight the strategic importance of social responsibility initiatives and transparent CSR reporting to enhance financial outcomes as well as the relevance of financial systems in shaping this linkage. This study bridges critical gaps in the ESG-financial performance debate, offering guidance for an industry increasingly influenced by social and environmental expectations.
