Leverage analysis in asian markets: the relationship between the golden ratio and esg performance

Abstract

This study investigates the relationship between ESG performance and leverage targets based on the golden ratio for firms in five Asian regions (Southern Asia, Western Asia, Southeastern Asia, Eastern Asia, Central Asia). Data were collected from audited financial reports of companies with ESG scores ranging from 0 to 100 during the period 2014 - 2023, comprising 4,519 observations. A quantitative research method employing regression models based on the GMM technique , DVLS is applied. In this study, MLEV and BLEV are the dependent variables, while ESG score, GRL, PROF, TANG, MTB, and SIZE serve as the independent variables. The analysis results reveal that firms with superior ESG performance tend to adjust their leverage closer to golden ratio targets, indicating a more harmonious and balanced capital structure. These findings underscore the critical role of ESG in shaping capital structure decisions and suggest that golden ratio targets can act as a conceptual framework for achieving optimal leverage balance.