Abstract
Purposes: This study investigates the impact of Environmental (E), Social (S) and Governance (G) factors on accounting profitability and stock market performance of domestic vs foreign listed firms on the Johannesburg Stock Exchange (JSE). Methodology: The study applies the random effects panel data model using financial data from the Osiris database and ESG index obtained from Standard and Poor Dow Jones Indices. By examining both accounting-based and market-based measures, the study provides a comprehensive view of the relationship between ESG and the financial performance of JSE-listed firms. Findings: ESG integration by JSE-listed firms improves both return on equity (ROE), a measure of shareholder returns, and return on assets (ROA), a measure of operating profits. However, the positive effects of ESG integration are not evenly distributed across all firms. The results suggest that internationally domiciled JSE-listed firms are better able to convert ESG integration into increased shareholder value and operational profits. Furthermore, when using Tobin Q as a market-based performance metric, the overall relationship between ESG scores and stock market performance appears negative but less so for international compared to domestic firms. Contribution: This study contributes to the ESG–firm performance literature in three interrelated ways. First, it conditions the ESG–performance relationship on firm domicile within a single listing environment by comparing domestically domiciled and internationally domiciled firms that are all listed on the Johannesburg Stock Exchange. This design isolates differences in ESG value conversion that are not attributable to market structure, trading venue, or regulatory regime, thereby offering a cleaner assessment of how firm-level characteristics shape ESG outcomes. Second, by jointly analysing accounting-based and market-based performance measures within each domicile group, the study reveals an important asymmetry between internal value creation and external market valuation, showing that positive profitability effects of ESG integration do not necessarily translate into favourable stock market pricing, particularly for domestically domiciled firms. Third, the South African context provides a distinctive empirical setting, as the JSE hosts a relatively large share of internationally domiciled firms compared to other emerging markets, allowing for a within-market comparison that is rarely feasible elsewhere. Together, these contributions advance the ESG literature by shifting the focus from whether ESG integration matters to for whom, and through which organisational and institutional channels, ESG adoption translates into financial and market value. Policy Application: The policy implications of the findings is that policymakers should focus on strengthening the ability of domestically domiciled JSE-listed firms to convert ESG integration into both accounting and market value, through improved ESG disclosure standards, managerial capacity building, and clearer ESG-to-value signalling to investors, while encouraging the diffusion of international best practices from globally domiciled firms that appear more effective in monetising ESG initiatives. Such measures may promote a more balanced ESG-beneficiation across firms.