Saunah Zainon¹, Rina Fadhilah Ismail², Sofwah Md. Nawi³, Roslina Mohamad Shafi⁴, Faridah Najuna Misman⁵ and Nor Balkish Zakaria<sup>6

1,3,4,5,6</sup>Universiti Teknologi MARA Cawangan Johor, Malaysia
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²Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam Campus, Selangor
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This study investigated the impact of environmental, social and governance (ESG) disclosures on financial performance as captured by firms’ value of public listed companies (PLCs) in Malaysia due to the growing interest in ESG disclosure practices. The sample consisted of 114 PLCs in Malaysia selected from Datastream. All the selected companies had a complete ESG for 2019. Using the ESG score index, the mean score for each disclosure was computed. Both correlation and regression analyses were carried out to investigate possible links between ESG and accounting measures of financial performance as a proxy by the Weighted Average Cost of Capital (WACC). Based on a regression analysis, ESG was discovered to have a significant relationship with WACC. In addition, further analysis revealed that out of the three dimensions of ESG, social disclosure had a significant impact on financial performance compared to environmental and governance disclosure. This study provides empirical evidence concerning the dominant impact of social disclosure for firms’ financial information. It also provides environmental and governance disclosures that are important for stakeholders. The results offer stakeholders more transparent and useful information on corporate social responsibility reporting which provides for a more visible reporting in order to gain trust from stakeholders.

Keywords: environmental, social, governance (ESG) disclosures, financial performance, weighted average cost of capital (WACC)