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ESG Integration and Financial Performance: Evidence from Malaysia’s Leading Companies

Author

Listed:
  • Kelvin Lee Yong Ming

    (School of Accounting and Finance, Taylor’s University, Subang Jaya, Malaysia)

  • Yamunah Vaicondam

    (School of Accounting and Finance, Taylor’s University, Subang Jaya, Malaysia)

  • Amira Mas Ayu Amir Mustafa

    (School of Accounting and Finance, Taylor’s University, Subang Jaya, Malaysia)

  • Siti Nurul Munawwarah Roslan

    (School of Accounting and Finance, Taylor’s University, Subang Jaya, Malaysia)

  • Shen Yi

    (School of Literature and Communication, Huainan Normal University, Huainan, China)

  • Komal Chopra

    (Symbiosis Institute of Management Studies, Symbiosis International (Deemed University), Pune, Maharashtra, India)

  • Pooja Khanna

    (Mittal School of Business, Lovely Professional University, Phagwara, Punjab, India)

Abstract

This study examines the impact of environmental, social, and governance (ESG) scores on the financial performance of the leading publicly listed companies in Malaysia. Using balanced panel data from Bloomberg spanning 2015-2022, the study employs multiple regression analysis (MRA) and the generalized method of moments (GMM) to explore these relationships. The findings reveal a significant positive effect of the overall ESG score on ROA, suggesting that comprehensive ESG practices can enhance financial performance. However, individual environmental (E) and social (S) scores negatively impact ROA at a 10% significance level, indicating potential short-term costs associated with these initiatives. Corporate governance (G) scores, total assets (TA), and total debt to total assets (TDTA) ratios demonstrate a significant adverse effect on ROA. The inclusion of the global reporting initiative (GRI) standard as a control variable also adds robustness to the analysis, highlighting the role of standardized sustainability reporting in evaluating corporate performance. These insights underscore the complex interplay between ESG and companies’ financial performance in Malaysia, emphasizing the importance of considering both the benefits and potential short-term costs associated with ESG initiatives. The findings of this study are crucial for policymakers, corporate managers, and investors, offering guidance on aligning sustainability goals with financial objectives to ensure long-term value creation and risk mitigation. This research contributes to the growing body of knowledge on ESG practices in emerging markets, highlighting the critical role of sustainability in today’s global business environment.

Suggested Citation

  • Kelvin Lee Yong Ming & Yamunah Vaicondam & Amira Mas Ayu Amir Mustafa & Siti Nurul Munawwarah Roslan & Shen Yi & Komal Chopra & Pooja Khanna, 2024. "ESG Integration and Financial Performance: Evidence from Malaysia’s Leading Companies," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 487-494, September.
    • Handle: RePEc:eco:journ2:2024-05-50
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Environmental; Social; and Governance; Financial Performance; Sustainability; Global Reporting Initiative Guideline;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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