How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3

Sustainable finance has become a major issue since the formation of the UN SDGs. At the same time, ESG disclosure has grown in its importance and is required by the financial authorities. Business practitioners, including investors, are now considering ESG performance as one of the important criteri...

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Main Authors: Purbasari, Asty, Rokhim, Rofikoh
Format: text
Published: Archīum Ateneo 2024
Online Access:https://archium.ateneo.edu/jmgs/vol12/iss1/1
https://archium.ateneo.edu/context/jmgs/article/1219/viewcontent/JMGS_2012.1_20__20Purbasari_20and_20Rokhim_20__20How_20Does_20ESG_20Rating_20Impact_20Firm_20Profitability_20and_20Cost_20of_20Capital_20__20L2_20SPACING.pdf
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spelling ph-ateneo-arc.jmgs-12192024-07-02T13:18:03Z How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3 Purbasari, Asty Rokhim, Rofikoh Sustainable finance has become a major issue since the formation of the UN SDGs. At the same time, ESG disclosure has grown in its importance and is required by the financial authorities. Business practitioners, including investors, are now considering ESG performance as one of the important criteria for a good investment. The implementation of ESG in ASEAN has only recently gained popularity. As previous literature is limited, we identify an opportunity to investigate the relationship between a firm’s ESG rating and its profitability and cost of capital within ASEAN countries plus Japan, China, and the Korean Republic. The financial data and ESG ratings of 489 listed firms in the period of 2017–2021, comprising 1718 observations, were collected. Using panel data regression, we found that the ESG rating significantly adds value to a firm’s ROA/ROE and reduces the cost of capital. Yet, while this is significant, we also concluded that the correlation between ESG ratings and profitability or cost of capital remains weak. This study contributes to enriching the existing literature about sustainable finance practices. To the best of our knowledge, this is the first study that provides a comprehensive result, as we also investigate the diversity of ESG practices among the ASEAN+3 countries. 2024-05-16T07:00:00Z text application/pdf https://archium.ateneo.edu/jmgs/vol12/iss1/1 info:doi/10.13185/2244-6893.1219 https://archium.ateneo.edu/context/jmgs/article/1219/viewcontent/JMGS_2012.1_20__20Purbasari_20and_20Rokhim_20__20How_20Does_20ESG_20Rating_20Impact_20Firm_20Profitability_20and_20Cost_20of_20Capital_20__20L2_20SPACING.pdf Journal of Management for Global Sustainability Archīum Ateneo
institution Ateneo De Manila University
building Ateneo De Manila University Library
continent Asia
country Philippines
Philippines
content_provider Ateneo De Manila University Library
collection archium.Ateneo Institutional Repository
description Sustainable finance has become a major issue since the formation of the UN SDGs. At the same time, ESG disclosure has grown in its importance and is required by the financial authorities. Business practitioners, including investors, are now considering ESG performance as one of the important criteria for a good investment. The implementation of ESG in ASEAN has only recently gained popularity. As previous literature is limited, we identify an opportunity to investigate the relationship between a firm’s ESG rating and its profitability and cost of capital within ASEAN countries plus Japan, China, and the Korean Republic. The financial data and ESG ratings of 489 listed firms in the period of 2017–2021, comprising 1718 observations, were collected. Using panel data regression, we found that the ESG rating significantly adds value to a firm’s ROA/ROE and reduces the cost of capital. Yet, while this is significant, we also concluded that the correlation between ESG ratings and profitability or cost of capital remains weak. This study contributes to enriching the existing literature about sustainable finance practices. To the best of our knowledge, this is the first study that provides a comprehensive result, as we also investigate the diversity of ESG practices among the ASEAN+3 countries.
format text
author Purbasari, Asty
Rokhim, Rofikoh
spellingShingle Purbasari, Asty
Rokhim, Rofikoh
How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3
author_facet Purbasari, Asty
Rokhim, Rofikoh
author_sort Purbasari, Asty
title How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3
title_short How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3
title_full How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3
title_fullStr How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3
title_full_unstemmed How Do ESG Ratings Impact Firms’ Profitability and Cost of Capital? Evidence from ASEAN+3
title_sort how do esg ratings impact firms’ profitability and cost of capital? evidence from asean+3
publisher Archīum Ateneo
publishDate 2024
url https://archium.ateneo.edu/jmgs/vol12/iss1/1
https://archium.ateneo.edu/context/jmgs/article/1219/viewcontent/JMGS_2012.1_20__20Purbasari_20and_20Rokhim_20__20How_20Does_20ESG_20Rating_20Impact_20Firm_20Profitability_20and_20Cost_20of_20Capital_20__20L2_20SPACING.pdf
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