The Impact of Environmental, Social and Governance (ESG) Disclosure on Financial Performance (Evidence from the Saudi Stock Market)

Document Type : Original Article

Authors

1 Jeddah International College (JIC)

2 Business Administration - Jeddah International College

Abstract

This study aims to examine the impact of Environmental, Social, and Governance (ESG) disclosure on the financial performance of non-financial companies listed on the Saudi Stock Exchange from 2019 to 2023. A quantitative methodology was adopted using multiple linear regression and correlation analysis based on data collected from published annual and sustainability reports. The sample consists of 75 companies across 18 sectors, totaling 375 firm-year observations. Composite indices were developed to measure environmental, social, and governance disclosures using 49 items derived from prior literature. The results indicate that social disclosure has a significant positive effect on financial performance, while environmental and governance disclosures showed no significant effect in most models. Moreover, audit quality was positively associated with financial performance, whereas the liquidity ratio was statistically insignificant. This study contributes to the growing body of knowledge on non-financial disclosure in emerging markets and supports Saudi Arabia’s Vision 2030 goals related to transparency, good governance, and sustainability.

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