The Impact of ESG Disclosures on Financial Performance: Evidence from ASEAN-Listed Companies

Abstract

With increasing global emphasis on sustainability, corporate transparency in ESG practices has become a critical factor for investors and stakeholders. This study investigates the impact of Environmental, Social, and Governance (ESG) disclosures on the financial performance of listed companies in ASEAN countries. This research employs a dynamic Generalized Method of Moments (GMM) approach to address endogeneity concerns and assess the relationship between ESG disclosure and financial performance indicators such as return on assets (ROA), return on equity (ROE), and market value. Using panel data from ASEAN-listed firms over the period 2013-2022, the findings show that firms with strong historical performance tend to maintain profitability, while ESG disclosures positively influence financial outcomes by enhancing investor confidence and risk management. Larger firms benefit from economies of scale, while excessive leverage reduces profitability. Favorable macroeconomic conditions, such as GDP growth, also play a crucial role in boosting firm profitability. Policymakers should mandate ESG disclosure frameworks, incentivize sustainable practices, and provide financial support to smaller firms. Promoting responsible debt management and ensuring macroeconomic stability through favorable trade policies will also enhance firm profitability and long-term economic growth.