Nurafifah Wulandari, Rahmat Saleh

ESG Controversy as a Moderator of the Impact of Environmental, Social, and Governance Indicators on High-Profile Companies' Performance in Asia

Introduction

esg controversy as a moderator of the impact of environmental, social, and governance indicators on high-profile companies' performance in asia. Investigate how ESG factors and controversies influence high-profile Asian company performance. Social & governance aspects are positive, but controversy weakens this link.

Abstract

The purpose of this research paper is to analyze the relationship of each environmental, social, and governance (ESG) aspect to the performance of high-profile companies, and the purpose of this study further analyzes the role of moderating ESG controversies on the relationship of every aspect of ESG disclosure to corporate performance. Application of research observation data, using observations from 2010 to 2019, is a company in an Asian country listed on the Sustainable Stock Exchange, which requires companies to publish and report ESG aspects. This study excludes the period 2020-2024 from the analysis because the global economic crisis due to the COVID-19 pandemic has caused the company to change its priorities. The purposive sampling method was used in this study, obtaining 847 samples of observational data from seven countries in the Asian region. Regression moderation analysis was used to examine the relationship between each aspect of ESG and the performance of high-profile companies with the controversy of ESG as a moderation variable. The study results obtained findings that social and governance aspects have a positive and significant effect on the performance of high-profile companies. However, environmental aspects were found to be insignificant. The findings of the ESG controversy weaken the relationship between social and governance aspects of high-profile company performance, and the ESG controversy does not moderate the relationship of environmental disclosure to company performance.

Review

This paper addresses a highly pertinent and evolving area of corporate finance and sustainability: the impact of Environmental, Social, and Governance (ESG) factors on firm performance, particularly within the dynamic Asian context. The core contribution lies in its dual objective: disaggregating the effects of individual ESG pillars (E, S, G) and, critically, investigating the moderating role of ESG controversies on these relationships. By focusing on "high-profile companies" listed on Sustainable Stock Exchanges in Asia from 2010-2019, the study targets a relevant and policy-sensitive sample, promising insights into how sustainability efforts truly translate into performance amidst public scrutiny. Methodologically, the study employs a sound approach. The use of a substantial dataset of 847 observations across seven Asian countries from a specific, relevant source (Sustainable Stock Exchange listings) adds credibility to the analysis. The decision to exclude the COVID-19 period (2020-2024) is a justifiable methodological strength, demonstrating an awareness of potential confounding macroeconomic factors that could distort normal ESG-performance relationships. Furthermore, the application of regression moderation analysis is appropriate for testing the hypothesized moderating role of ESG controversies, moving beyond simple direct effects and capturing more nuanced interactions. The disaggregation of ESG into its individual components is also a notable strength, as it allows for a more granular understanding than an aggregated ESG score might provide; a full paper would ideally specify the nature of "company performance" examined (e.g., financial, market-based). The findings present interesting and nuanced results. The positive and significant effects of social and governance aspects on performance are consistent with much of the existing literature, underscoring their importance. However, the insignificance of environmental aspects is a noteworthy and perhaps counterintuitive finding that warrants deeper exploration in the full paper. Crucially, the study's central tenet—the moderating role of ESG controversies—yields significant insights: controversies weaken the positive impact of social and governance factors. This highlights the double-edged sword of ESG, where perceived commitment can be undermined by adverse events, an important contribution for both academic understanding and corporate strategy. The finding that ESG controversy does not moderate the environmental disclosure-performance relationship also merits detailed discussion. Overall, this research offers valuable insights into the complex interplay of ESG factors, controversies, and corporate performance in Asia, making a relevant contribution to the literature and offering practical implications for companies navigating sustainability challenges.

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