Environmental, social and governance (ESG) practices and financial performance ofShariah-compliant companies in Malaysia

Siew-Peng Lee and Mansor Isa

Journal of Islamic Accounting and Business Research, 2022, vol. 14, issue 2, 295-314

Abstract: Purpose - This study aims to examine the impact of environmental, social and governance (ESG) practices on the financial performance of MalaysianShariah-compliant companies over the period 2010–2017. Design/methodology/approach - Panel regression models are used for this study to test the effect of ESG practices on the performance and the interaction variables to examine the impact of double ESG –Shariahscreening on firms’ performance. Findings - This study finds a positive relationship between ESG practices and financial performance, suggesting that ESG practices can enhance firm value. Additionally, the authors also find evidence that double ESG–Shariahscreening can enhance the ESG relationship with performance. These results are consistent and robust to three proxies for financial performance and different estimation techniques. Practical implications - The positive relationship between ESG practices and performance implies that firms should improve their ESG commitment as this is consistent with enhancing performance. Originality/value - This study presents evidence concerning the impact of ESG practices on the financial performance ofShariahcompanies, thereby paving the way for further studies in sustainability investments inShariahcompanies.

Keywords: Environmental; Social and governance (ESG); Financial performance; Shariah-compliant; Malaysia (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-06-2020-0183

DOI: 10.1108/JIABR-06-2020-0183

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