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The Impact of ESG Performance on Financial Performance: Evidence from Listed Companies in Thailand

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  • Umawadee Detthamrong

    (College of Local Administration, Khon Kaen University, Khon Kaen 40002, Thailand)

  • Rapeepat Klangbunrueang

    (Department of Information Science, Faculty of Humanities and Social Sciences, Khon Kaen University, Khon Kaen 40002, Thailand)

  • Wirapong Chansanam

    (Department of Information Science, Faculty of Humanities and Social Sciences, Khon Kaen University, Khon Kaen 40002, Thailand)

  • Rasita Dasri

    (College of Local Administration, Khon Kaen University, Khon Kaen 40002, Thailand)

Abstract

Sustainable corporate governance plays an essential role in promoting responsible economic growth and enhancing social and environmental well-being in emerging economies. In this context, Environmental, Social, and Governance (ESG) performance has become an important indicator of a firm’s commitment to sustainable development and its alignment with the United Nations Sustainable Development Goals, particularly SDG 8 and SDG 12. This study investigates the impact of Environmental, Social, and Governance (ESG) performance on the financial sustainability of publicly listed companies in Thailand, a rapidly developing Southeast Asian economy where empirical evidence remains limited. Using an unbalanced panel dataset of 965 firm-year observations across multiple industries, multiple regression models were employed to assess the influence of ESG performance on two financial indicators: return on capital employed and return on assets. Granger causality tests were also conducted to explore directional relationships between sustainability performance and financial outcomes. The empirical results reveal a significant negative short-term association between ESG performance and return on assets (ROA), whereas the relationship with return on capital employed (ROCE) is statistically insignificant. The causality analysis indicates that ESG performance Granger-causes ROA, implying that sustainability-driven strategic decisions may precede and influence financial outcomes over time. Additionally, leverage emerges as a key constraint to financial sustainability, negatively affecting both ROCE and ROA. These findings underscore the challenge of striking a balance between sustainability investments and immediate profitability in emerging markets. Policymakers and business leaders are encouraged to promote supportive governance frameworks, reduce financial barriers, and foster ESG-driven practices that contribute to long-term sustainable competitiveness and inclusive development.

Suggested Citation

  • Umawadee Detthamrong & Rapeepat Klangbunrueang & Wirapong Chansanam & Rasita Dasri, 2026. "The Impact of ESG Performance on Financial Performance: Evidence from Listed Companies in Thailand," Forecasting, MDPI, vol. 8(1), pages 1-26, February.
    • Handle: RePEc:gam:jforec:v:8:y:2026:i:1:p:14-:d:1863092
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