An Analysis of the Relationship Between ESG Activities and the Financial Performance of Japanese Companies Toward Sustainable Development

Takafumi Ikuta and Hidemichi Fujii
Additional contact information
Takafumi Ikuta: Graduate School of Economics, Kyushu University, Fukuoka 819-0395, Japan

Sustainability, 2025, vol. 17, issue 15, 1-23

Abstract: Demands for companies to comply with environmental, social, and governance (ESG) requirements are growing, and companies are also expected to play a role in promoting sustainable development. For companies to achieve sustainable growth while addressing ESG, it must be understood whether ESG activities promote improved corporate financial performance. We conducted a five-year panel data analysis of 635 Japanese firms from FY 2019 to FY 2023, using the PBR, PER, and ROE financial indicators as the dependent variables and CSR ratings in the human resource utilization (HR), environment (E), governance (G), and social (S) categories as the independent variables. The results revealed that, depending on the combination of ESG field and financial indicators, companies with advanced ESG initiatives had greater financial performance, with some cases showing a nonlinear relationship; differences in the results between manufacturing and nonmanufacturing industries were also observed. For companies to effectively advance ESG activities, it is important to clarify the objectives and results for each ESG category. For policymakers to consider measures to encourage companies’ ESG activities, it is also important to design finely tuned regulations and incentives according to the ESG category and industry characteristics.

Keywords: ESG; sustainable development; Japanese companies; corporate financial performance; panel data analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/15/6790/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/15/6790/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:15:p:6790-:d:1710254

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().