The Impact of ESG on Firm Performance: Study of Listed Saudi Arabian Companies

Journal Article

2025

Published in: https://cfjournal.hse.ru/article/view/28242

The Impact of ESG on Firm Performance: Study of Listed Saudi Arabian Companies

Abstract
This study examines how Environmental, Social, and Governance (ESG) performance affects financial outcomes for listed
Saudi Arabian companies between 2019 and 2023. Through a study of 50 firms, we address methodological limitations in
previous research by using advanced statistical methods that are correct for biases obscuring the true ESG-performance
relationship. Our findings provide compelling evidence that all three ESG pillars – Environmental, Social, and Governance
– significantly enhance both profitability and market valuation. Particularly noteworthy is the fact that environmental
initiatives demonstrate clear financial benefits, reversing earlier findings that suggested negligible or negative impacts.
The results prove robust across various analytical approaches and industry settings, including a focused banking sector
analysis. Since this is the first study to establish a causal connection between ESG and financial performance in the Saudi
market, these findings have important strategic implications for companies advancing sustainability under Vision 2030.
The main limitation stems from the restricted sample size, a consequence of limited ESG disclosure in the Kingdom, which
may limit broader applicability.
Keywords: ESG, financial performance, ROE, Tobin’s Q, sustainability, corporate governance

• Publication Work Type: Research Paper
• Publisher Name: Journal of Corporate Finance Research (SCOPUS Indexed)
• Volume Number: 19
• Issue Number: 4
• Pages: 18-30