The Relationship Between Environmental, Social and Governance Practice and Corporate Financial Performance of Malaysian Public Listed Companies

Abstract

Environmental, Social, and Governance (ESG) practices have gained increasing attention among companies in Malaysia as they strive to meet the expectations of stakeholders, especially investors. This study aims to environmental, social and governance (ESG) practice reported in the public-listed companies and the similarities among the industry sectors and to investigate the relationship between environmental, social and governance (ESG) practices and corporate financial performance. Grounded in Stakeholder Theory, this study employs descriptive and correlation analysis to assess the correlation between independent and dependent variables. A comprehensive content review of secondary data from the annual reports of selected public-listed companies in Malaysia was conducted, with data thoroughly documented in a meticulously prepared checklist. The sample consists of 41 public-listed companies across 10 distinct industry sectors. Data analysis was performed using the Statistical Package for Social Sciences (SPSS) Version 29. The findings revealed that Malaysian public-listed companies typically implemented structured environmental, social and governance practice (ESG) practices in Malaysia which are perceived to influence corporate financial performance. The analysis demonstrates an insignificant weakly negative relationship between environmental, social and governance (ESG) practices and corporate financial performance. Despite several limitations, this study offers recommendations for future research and practice.