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The Impact of Environmental, Social,and Governance Performance on Firm Risk in the ASEAN-5 Countries

Anindita Nur Annisa, Dwi Hartanti

Department of Accounting, Universitas Indonesia, Depok, Indonesia


This study examines the effect of environmental, social, and governance (ESG) performance on firm risk in South East Asia. The ESG performance is measured using the Thomson Reuter’s ESG Score, which is further classified into the ESG Score, the ESG Controversy Score, and the ESG Combined Score. The risk is measured using total risk, systematic risk, and idiosyncratic risk. Employing 145 firms in ASEAN-5 countries namely Indonesia, Malaysia, Thailand, the Philippines, and Singapore as samples for the period 2011–2017, it is found that the ESG performance has a significant inverse effect on firm risk after controlling for the law enforcement difference in each country and other control variables. The ESG performance significantly affects total risk and idiosyncratic risk, but not systematic risk. There is also no effect found for the ESG Controversy Score, which acts as the proxy for a firm’s involvement in controversial events related to ESG–on any proxy of risk. Overall, these findings support the previous studies in other regions that an increase in a firm’s ESG performance could lower firm risk.

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