Investigating the Impact of <scp>ESG</scp> Practices on Corporate Value Creation Pathways

ABSTRACT This study examines how ESG engagement influences corporate value using large firm‐level data through 2024. A framework integrates mediation by green innovation and financing frictions, moderation by governance quality and digital transformation, and heterogeneity from industry materiality and controversies. Panel estimations with fixed effects, mediation decomposition, interaction tests, and instrumental/dynamic corrections show ESG raises valuation partly via innovation and lower capital costs; stronger governance and digital capabilities amplify effects; alignment with industry materiality enhances returns, while ESG controversies attenuate them. Results guide managers to embed ESG in innovation and financing strategy and suggest investors assess contextual credibility effectively and sustainably.