THE IMPACT OF ESG DISCLOSURE ON THE FIRM’S FINANCIAL PERFORMANCE AND MARKET VALUE

Abstract

Purpose: Our study aims to explore the extent to which ESG disclosure (non-fmancial information) affects the financial performance and market value ofthe Pakistani companies. Methodology & Design: The data is analyzed using EViews software, a statistical tool developed for data analysis. Numerous tests were applied on the data set which includes descriptive statistics, correlation analysis, Hausman test. Multiple regression was used to test the overall fitness ofmodel and to find the significance of hypothesis. Findings: The results suggests that ESG disclosure is not relevant for Pakistani companies when tested forthe impact on financial performance but was found to be relevant for the market value. It reveals that disclosing non-fmancial information don’t affect the financial returns of a company however it increases the stakeholders confidence and firms reputation while reducing the financial risks and operating costs. Limitations: The study used Bloomberg ESG disclosure scores to measure the ESG limited number ofPakistani listed companies. Also, it has performance, but Bloomberg have adopted aggregate ESG disclosure score due to availability of combined scores on Bloomberg thus the study couldn’t explore the impact of each component on either financial or market value offirms. Recommendations: Firms must increase their ESG disclosure and revealing information into their financial reports. This will allow investors and stakeholders to have clear insights ESG performance allowing them to make decisions easily. The company must develop the priorities of stakeholders. Also, ESG disclosure was found . There is a need on firm’s its disclosure strategies as per to be relevantly low in Pakistani companies due to lack ofregulatory pressure to enforce sustainability disclosure by legislated bodies