Abstract
<jats:p>Research on environmental, social and governance performance often asks whether ESG improves firm value and whether profitability or reporting quality transmits that effect. This study shows that the usual linear formulation can conceal the economically relevant pattern. We analyze 1,759 firm year observations for 358 companies listed on the Ho Chi Minh Stock Exchange from 2020 to 2024. The conventional linear model produces only a weak positive ESG coefficient for Tobin&#039;s Q and no significant ESG effect on return on assets or absolute discretionary accruals. Standard linear mediation therefore finds no profitability or earnings quality channel. Quadratic models tell a different story. Firm value follows a statistically validated U shape: the ESG coefficient is negative, the squared term is positive, the turning point is 0.335, and the Lind and Mehlum test rejects monotonicity. Profitability displays a closely aligned U shape with a turning point of 0.382. Earnings management exhibits a weaker inverse U, peaking near 0.385, which implies that reporting quality is lowest at intermediate ESG levels. The valuation threshold remains visible in both the 2020 to 2021 and 2022 to 2024 subsamples. Random effects estimates preserve the curvature, whereas firm fixed effects lose precision because most identifying variation is cross sectional. Dynamic system GMM retains the expected signs but does not identify the nonlinear terms precisely. The evidence supports a transition from symbolic to substantive ESG: early engagement may impose costs and invite skepticism, while stronger commitment is associated with higher profitability, better earnings quality and higher market value.</jats:p>