Effect of Environmental, Social, and Governance Factors on Stock Returns in ASEAN Firms

Denny Andriana (), Aristanti Widyaningsih, Budi S. Purnomo and Godwin Ahiase
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Denny Andriana: Universitas Pendidikan Indonesia
Aristanti Widyaningsih: Universitas Pendidikan Indonesia
Budi S. Purnomo: Universitas Pendidikan Indonesia
Godwin Ahiase: Universitas Pendidikan Indonesia

A chapter in Proceedings of the 9th Global Conference on Business, Management and Entrepreneurship (GCBME 2024), 2025, pp 927-932 from Springer

Abstract: Abstract This study examines the influence of Environmental, Social, and Governance (ESG) factors on the stock returns of listed firms in the ASEAN region. This study effectively addresses endogeneity concerns and improves the accuracy of estimations by utilizing the Generalized Method of Moments (GMM) on a dataset consisting of 412 firms across six ASEAN countries from 2012 to 2022. The findings reveal a statistically significant and favorable association between ESG ratings and stock returns. Environmental and social factors had the greatest impact. Companies with higher ESG ratings have better financial success, supporting the idea that including ESG aspects in their investment strategies may enhance returns. Robustness tests provide further evidence of the durability of these connections, indicating that variations in model assumptions do not substantially affect the influence of ESG on stock returns. This study provides comprehensive insights into the benefits of ESG practices in emerging economies and significantly contributes to the existing body of knowledge. Furthermore, it highlights the need to promote sustainable and responsible company practices to achieve exceptional financial success. The results of this study hold essential consequences for politicians, investors, and scholars who support the integration of ESG elements into company plans and investment choices.

Keywords: Environmental Pillar Score; ESG Score; Governance Pillar Score; Social Pillar Score; Stock Returns (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-817-2_108

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DOI: 10.2991/978-94-6463-817-2_108

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