ESG and Performance: Effect of Government Ownership and Green Bond Issuer

Abstract

The environmental, social and governance (ESG) can contribute to an organization's economic performance. Using stakeholder theory as a framework, this study aims to find the impacts of ESG investments on organizational (financial and economic) performance. This study is the first empirical analysis that includes government ownership and green bond issues factors as variables that are interacted with ESG investments. Government ownership is perceived as having the commitment and issuance of green bonds can be seen as a proxy for companies to make environmental-friendly investments and change their ESG profile. Annual ESG index data of ASEAN-5 organisations are used which covers the period 2017 to 2019 and are tested using Ordinary Least Square (OLS). In accordance with the results of previous research, this study finds that ESG investment consistently improves both the financial (profitability) and economic (stock) performance of the company. However, studies cannot prove the effect of the level of government ownership and bond issuance on ESG investment associations with profitability, on the contrary, the stock returns decline when ESG investments from organizations that have greater government ownership.