Sustainability Reporting as a Catalyst: How ESG Performance Shapes Corporate Financial Outcomes in Taiwan

Abstract

How sustainability information enters managerial and market decision‐making remains an open question. While firms increasingly invest in environmental, social, and governance (ESG) activities, capital markets can price such performance only when it is observable, comparable, and credible. This study examines whether sustainability reporting serves as an information‐economic mechanism that enables ESG performance to translate into corporate financial outcomes. Using the TESG index, the first SASB‐authorized ESG database in Taiwan, this study evaluates key financial indicators including ROA, ROE, and Tobin's Q to assess how ESG practices translate into measurable outcomes. The empirical findings reveal that firms with stronger ESG performance tend to exhibit superior financial results. In addition, the formal disclosure of sustainability reports is shown to be a significant moderating factor, strengthening the linkage between ESG efforts and financial value creation. These results provide strategic insights for firms navigating the global “Net Zero” transition and highlight the critical role of transparent sustainability disclosure in enhancing market confidence and supporting informed decision‐making in capital markets.