Effects of esg controversies on financial performance in Malaysia

Teng, Tsay Hui (2025) Effects of esg controversies on financial performance in Malaysia. Final Year Project, UTAR.

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Abstract

Purpose – This study examines the impact of environmental, social and governance (ESG) controversies on company financial performance, and it proposes the moderating roles of board independence over the relationship. Design/Methodology/Approach – The research data included 75 PLCs in Malaysia over the period 2019-2023 (325 observations). The data were obtained from the LSEG database. The panel regression model was used to examine the relationships of the variables studied. Findings – The study finds that ESG controversies are negative and significantly influence financial performance. Moreover, this study finds that board independence plays significant moderating roles in mitigates the negative effects of ESG controversies on financial performance. Implications – The findings may be used as a basis for the Malaysian government to mandate the disclosure of ESG controversies in company report. Furthermore, companies need to be mindful of the importance of the ESG controversies-corporate governance linkage and imbed this relationship in their strategic development blueprints. Research Limitations/Recommendations – The findings focus solely on Malaysian PLCs and include only board independence as moderator. Future study may include cross-country and more moderator.

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