Corporate Sustainability and Firm Value: Evidence from emerging countries

Abstract

Although corporate sustainability reports have been around for a long time in the financial markets, its popularity and application have expanded as people have become increasingly concerned about the environmental and social impact of businesses’ activities on our world and its future. The relationship between corporate sustainability reports and firm value has been extensively studied. However, the results have been inconsistent and ambiguous. Furthermore, most of these studies are concentrated on the context of developed countries. Thus, this study investigates the correlation between corporate sustainability reports and firm value in the context of emerging countries. The investigation is based on a sample consisting of (170) listed firms from three different developing countries, Saudi Arabia, Singapore, and Malaysia for a period of two years from 2019 to 2020. An ESG score is used to measure corporate sustainability performance, whereas a market-to-book ratio is used to measure firm value. Employing panel data regression, the results reveal a non-significant association between ESG score and firm value. However, narrowing down to investigate the effect of each component of ESG individually. The result shows that the G component has a significant positive association with firm value. In addition to adding to the existing literature, this research makes a substantial contribution by expanding the regional context (i.e., the emerging market), which has often been ignored in corporate sustainability disclosure studies.