To preserve a competitive edge and protect proprietary information, companies may strategically design their ESG disclosures in line with product market competition (PMC). This study aims to examine how the moderating role of PMC influences the relationship between sustainable practices and 'firm financial performance' (FFP). Using regression techniques on a sample of 2801 firms from G-20 countries over a study period covering from 2011 to 2023, findings show that firms' sustainable practices positively impact FFP. PMC effectively acts as a disciplinary mechanism for firm's performance and aligns with the deterrence hypothesis. Due to competitive pressure, sustainable practices increase firm performance. Although in all cases, PMC does not portray moderating effect to establish relationship between sustainable practices and firm value, the individual parameters, such as environmental and social practices, are enhancing FFP under high PMC levels. While in low competition, environmental practices detriment FFP due to competitive disadvantages. Further, in developed countries, PMC is ineffective, whereas it effectively works for developing countries. Using alternative competition measures, sensitivity analysis, and propensity score matching, the present study provides robust empirical evidence to validate the moderating role of PMC in shaping ESG-FFP dynamics. Managers may leverage PMC strategically; investors and policymakers ought to keep on surveillance for greenwashing.
Bhue et al. (Sat,) studied this question.