Environmental, Social and Governance Disclosure and Its Impact on Firms’ Financial Performance: Evidence from Pakistan

Abstract

The aim of this paper is to examine the effect of environmental, social and governance (ESG) disclosure and its effect of corporate financial performance in Pakistan. The majority of the current research focused on developed nations while, little research has been done on developing economies. Pakistan is also among those countries where an understanding on the ESG disclosure impact on firm performance still need to be explored. A quantitative content analysis and secondary data were used for this study. The over population of the current research was 423 Pakistani non-financial firms registered on Pakistan Stock Exchange. But due to non-availability of data the sample was reduced to 284 firms. The study spans 10 years from 2014 to 2023. The result of the study showed that combined ESG disclosure score has a inverse impact on firm operational performance. But the separate ESG components that is environmental score, social score and governance score are found to have a positive effect on firms’ operational performance. The  current research has significant implications for investors, policy makers, regulatory bodies.

Keywords: Environmental, Social and Governance Disclosure, Firm Performance, Pakistan Stock Exchange