ESG Score and Firm Value: The Role of the Institutional Context—A Comparative Analysis of the United States and the European Union

The relationship between ESG performance and firm value is contested and appears to depend on context. This study asks whether that relationship differs between the United States and the European Union, two mature markets that differ primarily in the extent to which sustainability disclosure is mandated. Firm fixed-effects panel regressions are estimated on LSEG (Refinitiv) data for 2016–2024, covering 874 firms and 5848 firm-year observations, with firm value measured by winsorized Tobin’s Q in levels. Among U.S. firms, the estimated association is indistinguishable from zero until 2022 and positive and significant in 2023; among EU firms, it is not significant in any year. The joint hypothesis that the regional differentials are zero in every year is rejected and remains rejected under every robustness check, including the logarithm of Enterprise Value, a lagged ESG score and alternative control sets; the test concerns the period as a whole and does not identify individual years. Functional-form criteria retain linearity, and the turning point implied by a quadratic specification cannot be located on the ESG scale. A direct test of equality across sectors is weak. Institutional context is proxied by region; regulatory stringency and market sentiment are not measured, so the mechanism is not tested.