Abstract

This study examines the impact between the Environmental, Social, and Governance (ESG) score and firm value described by market capitalization from the perspective of legitimacy theory. This study focuses on ESG disclosures from 608 companies in Southeast Asia for 5 years. This study tested three dimensions of the ESG Score (environmental, social, and governance pillar score) that most affect the value of the company. ESG Score is measured from the Thomson Reuters Eikon Refinitiv matrix and analyzed with multiple regression analysis. This research shows that ESG disclosure positively affects firm value. This finding shows that every ESG score increase affects the increase in market capitalization. Furthermore, the social score is the most affected by firm value. This study adds to ESG literature by examining three components of ESG score. Previous research focused on each component of ESG. This research uses three components of ESG and its relationship to firm value to examine which component has a strong effect on market capitalization.

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