Corporate Governance, ESG Performance and Firm Valuation in Indian Insurance Companies: A Panel ARDL/PMG Approach

Abstract

The present study aims to analyze the long-run and short-run relationship between corporate governance, ESG performance and firm valuation in the eight listed insurance companies in India for the time period FY2016 to FY2026 using the framework of Panel Autoregressive Distributed Lag (ARDL) model estimated using Pooled Mean Group (PMG) approach. Firm valuation is measured by Tobin's Q, and corporate governance and ESG performance are used as the main regressors while firm size, leverage and profitability are used as controls. We can conclude from the results of the Panel unit root and cointegration tests that the variables are in a stable long run equilibrium. The long-run estimates suggest that firm size plays the largest role in the valuation, and that governance and ESG do not have a statistically significant long run effect after controlling for firm fixed effects, with the error correction term being negative and highly significant, suggesting a quick adjustment to equilibrium after a shock. A Hausman test gives preference to the pooled specification of the model over the unrestricted Mean Group alternative. The results bring a new lens to the governance-ESG-valuation literature, as the insurance industry is not well covered in the literature.