The impact of ESG performance on financial performance: empirical evidence in emerging markets and policy implications

Abstract

This paper delves into the intersection of Environmental, Social, and Governance Performance (ESGP) and financial performance (FINP) in the context of emerging Asian markets. Using GLS regression on data from 311 listed companies in emerging Asian countries (2016-2022), the study reveals a positive correlation between high ESG scores and increased profitability and market valuation. Enhanced social performance primarily drives this impact. The relationship becomes more sensitive when companies utilize debt financing to aid ESG initiatives. Notably, companies in the brown industry show lower market valuation, signaling a significant shift in investor sentiment.