Environmental, social and governance impact on financial performance: Evidence from the Levant countries

Abstract

Purpose: This paper aims to investigate whether the sustainability disclosure with the environmental, social and governance (ESG) aspects has an impact on the financial performance represented by Tobin’s Q, return on assets (ROA) and return on equity indices in the Levant countries for the period 2012–2019, which was a period of turmoil and political repercussions that affected the countries of the region. Design/methodology/approach: Using the content analysis technique, the data was collected from 124 nonfinancial companies from Levant countries (Jordan, Palestine, Syria and Lebanon), and 883 observations were collected as panel data for the research analysis. Findings: The findings indicate that the environmental, social and ESG collective performance maximizes financial performance, while the governance performance influences ROA only. This suggests that companies pay great attention to various stakeholders, mainly external. Maximizing stakeholder value remains an optimal strategy to achieve the company’s financial goals. Thus, improving the disclosure levels of nonfinancial performance in the capital markets will improve the chances of growth of the financial performance indicators of companies. Originality/value: The study provided insights about the ESG role and its impact on the financial performance of companies in a less explored context by previous literature, namely, the Levant.