ESG And Value Creation In Capital Markets: A Systematic Literature Review Of Investment Dynamics, Market Frictions, And Conflicting Evidence

Abstract

Environmental, Social, and Governance (ESG) has become an important factor in investment decision-making in capital markets, but empirical findings on its influence on value creation still show mixed results. This study aims to examine the relationship between ESG and value creation by emphasizing the role of investment dynamics, market frictions, and inconsistencies in empirical findings. Furthermore, the previous studies about ESG in Systematic Literature Review (SLR) approach still partially discussing ESG with other topics such as risk, disclosure, or sustainability. Therefore, this study is aimed to integrate the relationship between ESG, value creation, investment dynamics, and market frictions comprehensively. The study uses the Systematic Literature Review (SLR) method based on the PRISMA 2020 guidelines, applied to reputable scientific articles indexed in Scopus Q1 and Q2 for the 2022–2026 period. Data were analyzed using thematic analysis, comparative analysis, and conceptual synthesis. The results show that ESG generally contributes positively to value creation through improved corporate reputation, investor trust, and firm performance. However, this relationship is influenced by investment dynamics, investor behavior, and market frictions, such as information asymmetry, differences in ESG assessment, greenwashing, and regulatory differences