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The Impact of Environmental, Social and Governance Index on Firm Value: Evidence from Malaysia

Author

Listed:
  • Muhammad Sadiq

    (School of Accounting and Finance, Faculty of Business and Law, Taylor s University, Malaysia,)

  • Jaspal Singh

    (Sunway University Business School, Malaysia)

  • Muhammad Raza

    (Emaan Institute of Management and Sciences, Pakistan)

  • Shafi Mohamad

    (School of Accounting and Finance, Faculty of Business and Law, Taylor s University, Malaysia,)

Abstract

In this study we investigates the relationship of environmental, social and governance (ESG) practices and the consequences related to their disclosure on the firm's value. Our data is extracted from the final accounts of 122 firms listed on Bursa Malaysia over the period 2011 to 2019 with 1098 observations. We used three instrumental variables in this study in order to find the endogeneity of ESG performance namely, the existence of a CSR committee on the Board of directors, dispersion of forecasted earnings and finally the ownership concentration of the firm. We used three first stage regression models related to ESG disclosure and the interaction between the strength, concern, and disclosure of ESG. Besides that, we also use the second stage regression to investigate the insider effects of ESG activities and ESG disclosure. Our results are consistent with the approach that indicate that ESG strength increases firm value whereas ESG disclosure and ESG concern decreases the firm value. Most importantly, this study finds that ESG disclosures can play the role by which a firm can reduce the negative effect of weakness and improve the positive effect of strength.

Suggested Citation

  • Muhammad Sadiq & Jaspal Singh & Muhammad Raza & Shafi Mohamad, 2020. "The Impact of Environmental, Social and Governance Index on Firm Value: Evidence from Malaysia," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 555-562.
    • Handle: RePEc:eco:journ2:2020-05-65
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

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    6. Nguyen Minh Dat & Nguyen Quang Dai & Pham Bich Ngoc, 2022. "The Impact of Corporate Social Responsibilities (CSR), Entrepreneurship, and Financial Factors on the Financial Performance of the Banks in ASEAN Countries," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 16(2), June.
    7. Suki, Norazah Mohd & Suki, Norbayah Mohd & Afshan, Sahar & Sharif, Arshian & Meo, Muhammad Saeed, 2022. "The paradigms of technological innovation and renewables as a panacea for sustainable development: A pathway of going green," Renewable Energy, Elsevier, vol. 181(C), pages 1431-1439.
    8. Asif Saeed & Umara Noreen & Akbar Azam & Muhammad Sohail Tahir, 2021. "Does CSR Governance Improve Social Sustainability and Reduce the Carbon Footprint: International Evidence from the Energy Sector," Sustainability, MDPI, vol. 13(7), pages 1-16, March.
    9. Linhao Zhao & YunQian Zhang & Muhammad Sadiq & Vu Minh Hieu & Thanh Quang Ngo, 2023. "Testing green fiscal policies for green investment, innovation and green productivity amid the COVID-19 era," Economic Change and Restructuring, Springer, vol. 56(5), pages 2943-2964, October.
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    More about this item

    Keywords

    Environmental; Social Governance Practices; ESG Activities; ESG Performance;
    All these keywords.

    JEL classification:

    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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