ESG and Financial Performance in the Case of Malaysia

Environmental, social and governance (ESG) factors are an effective growth phenomenon for the achievement of a firm’s objectives. The main aim of this study is to determine the impact of ESG on financial performance. The study adopts the sample of available non-financial firms listed on the Kuala Lumpur Stock Exchange of Malaysia from 2010 to 2020. The study employs two methods for calculating the dependent variable. One is an accounting-based approach and the other is market-based. This study contributes to the literature by using country-level governance factors instead of firm-level. The data is collected from Refinitiv Data-stream and WGI. This study applied GMM for the analysis of panel data. The result depicts that social and governance influence the ROA. The environmental factors increase ROE while social and governance decrease. Social and governance influence long-term market performance.The outcome of the study provides policy directions and practical implications to better understand the ESG factors.