DO ESG SCORE MATTER FOR FIRM PERFORMANCE? EVIDENCE FROM MALAYSIAN ACE MARKET FIRMS
DOI:
https://doi.org/10.35631/AIJBES.829064Keywords:
ESG, Firm Performance, ACE marketAbstract
This study examines the extent to which Environmental, Social, and Governance performance shapes firm performance among companies listed on Malaysia’s ACE Market. The study is motivated by the growing role of ESG in corporate decision-making, investment evaluation and sustainable value creation. ROE is used to capture firm performance, while ESG performance is represented by Environmental Score, Social Score, Governance Score and Total ESG Score. The natural logarithm of total assets was included as measure for firm size and sales growth as controls variables. The analysis uses data from 122 Malaysian ACE Market firms covering 2018 to 2025, resulting in 976 firm-year observations. Data were collected from Refinitiv LSEG. The models are estimated using Panel Corrected Standard Errors to address heteroscedasticity and contemporaneous correlation. The descriptive findings indicated that ESG performance of Malaysian ACE Market companies is moderate, where the governance performance received the highest mean score and environmental performance the lowest score. Regression results indicate a negative significant impact son ROE of environmental performance. This could reflect a short-term increase in costs associated with the implementation of environmental activities before financial benefits is realized. The social and governance performance indicated positive and significant impact on ROE. This suggests that higher engagement with stakeholders, corporate reputation, corporate governance and managerial discipline increase performance for firms. There is also a positive influence of ESG performance on ROE. These findings add to the ESG literature and provide useful implications to managers, investor and policymaker, which enhance ESG and business performance.
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