ENVIRONMENTAL, SOCIAL & GOVERNANCE DISCLOSURES AND CORPORATE FINANCIAL PERFORMANCE: EVIDENCE FROM SELECTED ASIAN ECONOMIES

Abstract

This study empirically examines the impact of environmental, social, and governance disclosure requirements on corporate financial performance (return on assets and return on equity) in selected Asian economies, also referred to as emerging Asian markets. Utilizing a panel dataset of 190 firm-year observations across 15 cross-sections, employs descriptive statistics, correlation, and multiple regression techniques, while accounting for gross domestic product, firm size, and leverage. Results consistently show a positive association between ESG disclosure requirements and both return on assets and return on equity, indicating that enhanced transparency and sustainability contribute to improved profitability. Gross domestic product and firm size also emerge as significant positive predictors of corporate financial performance, highlighting the relevance of favorable macroeconomic conditions and scale advantages. Leverage, as measured by the ratio of total liabilities to total equity, demonstrates a divergent effect: it is negatively related to return on assets but positively related to return on equity, reflecting the nuanced role of financial structure in shaping profitability. While the regression model for return on equity explains nearly all observed variation, the model for return on assets exhibits limited explanatory power, indicating the need for further investigation into additional determinants of firm profitability. These findings contribute to the growing body of literature on sustainable finance by providing robust empirical evidence from Asian markets and offering practical insights for firms, investors, and policymakers seeking to promote financial performance through regulatory and firm-level initiatives.

Keywords

Environmental, Social & Governance Disclosures, Corporate Financial Performance