The Influence of ESG on Return on Asset ASEAN Companies 2013-2023
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Dec 29, 2024
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Abstract
In the last few decades, sustainability issues have received increasing attention among stakeholders in their business operations. Although many studies have examined the influence of ESG on the financial performance of companies in various regions, specific research that focuses on companies in ASEAN is still limited. Studies that directly link each Pillar Score and ESG Combine Score with ROA are still rare. This research offers a new contribution by providing a comprehensive analysis of the influence of each ESG pillar and ESG Combine Score on ROA in the ASEAN region. This research aims to analyze the influence of the Environmental Pillar Score, Social Pillar Score, Governance Pillar Score, and ESG Combined Score on ROA in ASEAN public companies 2013-2023. The research uses a quantitative approach with multiple linear regression analysis to evaluate the relationship between ESG scores and ROA. The research results show that each Pillar Score and ESG Combine Score have a significant positive effect on ROA. The research results provide the implication that companies need to increase their focus on sustainable practices to improve financial performance. Investors can use it as a reference for considering ESG scores in investment decisions. This research cannot be generalized to different regions or periods and is limited to several public companies and the research time range 2013-2023. External factors such as government policies and macroeconomic conditions can also influence research results.
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References
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Spence, M., (1973). Job Market Signaling. Quarterly Journal of Economics. Volume 87-3, Pages 355-374 https://doi.org/10.2307/1882010
Srivastava, A., and Anand, (2023). ESG Performance and Firm Value: The Moderating Role Of Ownerships Concentration, Corporate Ownership and Control. Spring. https://doi.org/10.22495/cocv20i3art11
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Al Amosh, H., Khatib, S.F.A., & Ananzeh, H. (2023). Environmental, social and govern-ance impact on financial performance: evidence from the Levant countries. Corporate Governance, Vol. 23 No. 3, pp. 493-513. DOI: 10.1108/CG-03-2022-0105. https://doi.org/10.1108/CG-03-2022-0105.
Atan, R., Alam, M.M., Said, J., & Zamri, M., (2021) The impacts of environmental, so-cial, and governance factors on firm performance: Panel study of Malaysian com-panies.Journal of Cleaner Production. DOI: 10.1016/j.jclepro.2020.120870. https://doi.org/10.1016/j.jclepro.2020.120870
Brigham, E., & Houston, J. (2019). Fundamentals of Financial Management.15e, Bos-ton: Cengage Learning. https://www.cengage.com/c/fundamentals-of-financial-management-15e-brigham
Buallay, A., (2019). Is sustainability reporting (ESG) associated with performance? Evi-dence from the European banking sector. Management of Environmental Quality: An International Journal. DOI: 10.1108/MEQ-12-2018-0202. https://doi.org/10.1108/MEQ-12-2018-0202
Cai, G., Li, W., & Tang, Z. (2023). Moderating Impact of Industry on Environmental Per-formance and Financial Outcomes. Journal of Business Ethics, 161(4), 567-584. DOI: 10.1007/s10551- 023-05023-4. https://link.springer.com/article/10.1007/s10551-023-05023-4
Creswell, J. W. (2014). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. SAGE Publications.. DOI: 10.5539/elt.v12n5p40. https://doi.org/10.5539/elt.v12n5p40
Eccles, R.G., Loannou, L., Serafeim, G., (2014). The Impact of Corporate Sustainabil-ity on Organizational Processes and Performance. Management Science. Volume 60, Issue 11. p2835-2857. DOI: 10.1287/mnsc.2014.1984. https://doi.org/10.1287/mnsc.2014.1984.
Freeman, R.E., (1984). Strategic Management, A Stakeholder Approach. Pitman Pub-lishing Inc, Massachusetts, pp. 397- 411. (https://www.cambridge.org/core/books/strategicmanagement/5762A78D9156DD75978E5F53C18D362B)
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233. DOI: 10.1080/20430795.2015.1118917. https://doi.org/10.1080/20430795.2015.1118917
Gavrilakis, N., and Floros, C., (2023). ESG performance, herding behavior, and stock market returns: evidence from Europe, Department of Accounting and Finance, Hellenic Mediterranean University, 71410 Heraklion, Greece , Springer. https://doi.org/10.1007/s12351-023-00745-1
Ghozali, I., dan Chariri A., (2007). Teori Akuntansi. 3rd Edition. Universitas Diponegoro Badan Penerbit Universitas Diponegoro. ISBN: 979-704-014-3. https://penerbit.undip.ac.id/index.php/penerbit/catalog/book/339
Gray, R., Kouhy, R. and Lavers, S. (1995) ‖Corporate social and environmental report-ing: a review of the literature and a longitudinal study of uk disclosure‖, Account-ing, Auditing & Accountability Journal, Vol. 8 No. 2, pp. 47-77. https://www.emerald.com/insight/content/doi/10.1108/09513579510146996
Griffiths, W.E., Hill, R.C., and Lim, G.C., (2019) Using EViews for Principles of Econo-metrics Wiley. 5th Edition. ISBN: 978-1119506942 DOI: 10.1002/9781119506973 https://www.wiley.com/en-us/Using+EViews+for+Principles+of+Econometrics%2C+5th+Edition-p-9781119506942
Halid, S., Rahman, R.A., Mahmud, R., Mansor, N., Wahab, R.A., (2023). A Literature Review on ESG Score and Its Impact on Firm Performance. International Journal of Academic Research in Accounting, Finance, and Management Science. http://dx.doi.org/10.6007/IJARAFMS/v13-i1/15101
Khan, M., Serafeim, G., & Yoon, A., (2016). Corporate sustainability: First evidence on materiality. The Accounting Review. DOI: 10.2308/accr-51740. https://doi.org/10.2308/accr-51740
Kim, S., (2020). Corporate Sustainability and Financial Performance: Collective Reputa-tion as Moderator of the Relationship between Environmental Performance and Firm Market Value. Researchgate, Article in Business Strategy and the Environ-ment. https://doi.org/10.1002/bse.2702
Kim, S., Li, Z., (2021). Understanding the Impact of ESG Practices in Corporate Fi-nance. MDPI. DOI: 10.3390/su13073746. https://doi.org/10.3390/su13073746.
Liu, et al. (2023). Impact of ESG performance on firm value and profitability. ScienceDirect. DOI: 10.1016/j.esg.2022.100138. https://doi.org/10.1016/j.esg.2022.100138
Makhdalena, Zulvina, D., Zulvina, Y., Amelia, R.W., Wicaksono, A.P., (2023). Environ-mental, Social, Governance and Firm Performance in Developing Countries: Evi-dence from Southeast. Asian Etikonomi. https://doi.org/10.15408/etk.v22i1.25271
Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. American Economic Review, 48(3), 261-297. DOI: 10.3386/w0090 https://www.aeaweb.org/articles?id=10.1257/aer.48.3.261
NYU Stern Center for Sustainable Business (2021). ESG and Financial Performance: Aggregated Evidence from More than 2000 Empirical Studies. NYU Stern Report. https://www.stern.nyu.edu/sites/default/files/assets/documents/NYU-RAM_ESG-Paper_2021%20Rev_0.pdf
Pangestuti, D.C., Muktiyanto, A., Geraldina, I., Darmawan, (2022). Role of Profitability, Business Risk, and Intellectual Capital in Increasing Firm Value. Journal of Indo-nesian Economy and Business Volume 37, Number 3, 2022, 311 – 338 ISSN 2085-8272 (print), ISSN 2338-5847 (online) https://journal.ugm.ac.id/v3/jieb
Ross, S.A., (1977), ―The determination of financial structure,The incentive signaling Approach‖. Bell Journal of Economics, Vol.8, No. 1, pp. 23-40. https://www.jstor.org/stable/3003317
Ross, S.A., (1979). ―The economics of information and the disclosure regulation de-bate, dalam Edwards, F.R. (ed.). Issues in Financial Regulation‖. McGraw-Hill, New York, hal. 177-202. https://www.mcgrawhill.com
Spence, M., (1973). Job Market Signaling. Quarterly Journal of Economics. Volume 87-3, Pages 355-374 https://doi.org/10.2307/1882010
Srivastava, A., and Anand, (2023). ESG Performance and Firm Value: The Moderating Role Of Ownerships Concentration, Corporate Ownership and Control. Spring. https://doi.org/10.22495/cocv20i3art11
Wooldridge, J.M., (2019). Introductory Econometrics: A Modern Approach. Cengage Learning. 7th Edition. ISBN 978-1337558860. https://www.cengage.com/c/introductory-econometrics-a-modern-approach-7e-wooldridge/