Abstract

Nowadays, the stakeholders placed greater emphasized towards how businesses impact the economy, environment and society as a whole. Hence, befits the foundation towards the creations of Environmental, Social and Governance (ESG) parameters factors. The evolution of this holistic approach to business management, focussing on the ESG might influence firm’s financial performance. In light of these issues, motivated current study to scrutinize the influence of the ESG practices towards firm’s financial performance. The static panel data regression analysis was utilized for an unbalanced panel data for 69 firms listed on Bursa Malaysia spanning from the year 2009 to 2018. The postulated hypothesis used ESG scores as the indicators for the ESG practice among the public listed firms. While, the financial performance is measured using Return on invested capital (ROIC). The results suggest statistically significant negative relations between the ESG score and firm’s financial performance. The relationship dimensions support the long standing debates on the trade-off between benefits and the costs of doing “good”.

Highlights

  • The era of doing “good” amidst the organisation portrayed through ‘ESG-aware’ is here to stay

  • The current results indicated the highest correlation coefficient regressors value reported is for EFC (0.4348) which was less than the threshold (

  • According to Gujarati (2014), larger value than 0.80 in their coefficients regressors signified multicollinearity problems that required for the omission of the variable Overall, the analysis revealed that the multicollinearity was not detrimental to the results of multiple regression estimations since both Variance Inflation Factor (VIF) value and the pairwise correlations coefficients support none existence of multicollinearity

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Summary

Introduction

The era of doing “good” amidst the organisation portrayed through ‘ESG-aware’ is here to stay. The ESG resembled the integration of three central factors of environmental, social and governance into firm’s decision-making and investment processes; and widely known as considerations for socially responsible investment (SRI) (Kell, 2018). The discussion of ESG was widely used in interchange with the corporate social responsibility (CSR) for sustainable and responsible investing and becoming part and parcels of the corporate decision. The report was materialized based on the joint initiative of the financial institutions in developing the guidelines and endorsements to incorporate issues related to environmental, social and corporate governance into the organizations. Become the mainstay for the inauguration of the Principles for Responsible Investment (PRI) at the New York Stock Exchange in 2006 and the takeoff Sustainable Stock Exchange Initiative (SSEI) in 2007 (Kell, 2018)

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