Research Article 14
Journal of Finance & Economics Research - Volume 9, Issue 2 2024
By Dr. Arshad Iqbal, Dr. Farman Ali, Dr. Naveed
10.20547/jfer2409208
Keywords: Environmental, Social, Governance and Workplace safety ; firm financial performance; stakeholder theory; ROA; EPS

This study investigates the influence of environmental, social, governance, and safety (ESGS) factors on the financial performance of firms listed on the Pakistan Stock Exchange (PSX). Adopting a post positivist framework, the study formulates and empirically tests hypotheses derived through deductive reasoning. Focusing on both financial and non-financial firms, the study encompasses 551 companies across 37 sectors over two distinct periods (2012 to 2016 and 2017 to 2021). The research uses secondary data extracted from yearly reports using pooled Ordinary Least Squares (OLS) regression analysis across two distinct periods: 2012 to 2016 and 2017 to 2021. The dummies used to codes (0,1) for ESGS items indicate whether or not they are present in the reports. Using a stratified proportional sampling approach, we can ensure a fair representationofeveryindustry,resultinginasamplesizeof384firmsthatcloselyrepresenttheentirepopulation. UsingpooledOLSregressionanalysis,thestudyexaminestherelationshipbetweenESGSfactorsand financial performance indicators—return on assets (ROA) and earnings per share (EPS). Control variables include market-to-book ratio, debt, dividend yield, leverage, firm size, and age. During the overall research period, the results indicate a strong positive relationship between ESGS factors and firms’ financial performances. In particular, social, governance, and safety aspects trail behind environmental variables in terms of their considerable positive effects on ROA and EPS. Control variables, such as market book ratio, total debt, dividend yield, leverage, firm size, and firm age, have distinct relationships with financial performance measures. These findings emphasis the significance of incorporating environmental, social, governance, and safety (ESGS) factors into corporate plans to improve financial performance and create long-term value. The report provides significant insights for firms seeking to overcome sustainability difficulties and attain improved financial results in the dynamic Pakistani market.

Submission Date: 11 Nov, 2024 Reviews Completed: 1 Mar, 2025
Acceptance Date: 9 Mar, 2025 Publication Date: 10 Mar, 2025