THE EFFECT OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) DISCLOSURE AND SHARIAH-COMPLIANCE ON FIRM PERFORMANCE AMONG LISTED FIRMS IN MALAYSIA

Abstract

This study aims to examine the effect of environmental, social, and governance (ESG) disclosure and Shariah-compliance status on firm performance and if the relationship between ESG disclosure and firm performance is moderated by Shariah-compliance status. Data were sourced from Eikon DataStream on ESG disclosure and firm performance from the period of 2020-2023. Shariah compliance status was hand-collected from the Securities Commission Malaysia’s website. This study employs a regression model to test the hypotheses. We identify a significant positive relationship between ESG disclosure and Shariah-compliance status on firm performance. Additionally, the results also found that Shariah-compliance status strengthens the positive relationship between ESG disclosure and firm performance. Our study contributes to the understanding of stakeholders, authorities, decision-makers, and academics regarding how ESG disclosure affects a firm's performance. These results also gave investors more insight into the importance of ESG considerations when making investment decisions for Shariah-compliance firms. The results, which corroborate the link between ESG disclosure and improved firm performance, ought to motivate managers to invest in ESG practices.