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Environmental, social and governance (ESG) practices and financial performance ofShariah-compliant companies in Malaysia

Author

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  • Siew-Peng Lee
  • Mansor Isa

Abstract

Purpose - This study aims to examine the impact of environmental, social and governance (ESG) practices on the financial performance of MalaysianShariah-compliant companies over the period 2010–2017. Design/methodology/approach - Panel regression models are used for this study to test the effect of ESG practices on the performance and the interaction variables to examine the impact of double ESG –Shariahscreening on firms’ performance. Findings - This study finds a positive relationship between ESG practices and financial performance, suggesting that ESG practices can enhance firm value. Additionally, the authors also find evidence that double ESG–Shariahscreening can enhance the ESG relationship with performance. These results are consistent and robust to three proxies for financial performance and different estimation techniques. Practical implications - The positive relationship between ESG practices and performance implies that firms should improve their ESG commitment as this is consistent with enhancing performance. Originality/value - This study presents evidence concerning the impact of ESG practices on the financial performance ofShariahcompanies, thereby paving the way for further studies in sustainability investments inShariahcompanies.

Suggested Citation

  • Siew-Peng Lee & Mansor Isa, 2022. "Environmental, social and governance (ESG) practices and financial performance ofShariah-compliant companies in Malaysia," Journal of Islamic Accounting and Business Research, Emerald Group Publishing Limited, vol. 14(2), pages 295-314, August.
    • Handle: RePEc:eme:jiabrp:jiabr-06-2020-0183
    DOI: 10.1108/JIABR-06-2020-0183
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    Cited by:

    1. Siew Peng Lee & Mansor Isa, 2024. "Corporate sustainability practices and financial performance: The moderating role of corporate controversies and Shariah screening," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3651-3667, July.
    2. Anrafel Souza Barbosa & Maria Cristina Basilio Crispim Silva & Luiz Bueno Silva & Sandra Naomi Morioka & Vinícius Fernandes Souza, 2023. "Integration of Environmental, Social, and Governance (ESG) criteria: their impacts on corporate sustainability performance," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-18, December.

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