THE RELATIONSHIP BETWEEN (ESG) DISCLOSURE AND FIRM VALUE: THE MODERATING ROLE OF PROFITABILITY IN MALAYSIA’S ENERGY SECTOR

Abstract

This study aims to analyze the relationship between environmental, social, and governance (ESG) disclosure and firm value with profitability (ROE) as the moderating variable. The sample of this study is 20 energy sector companies listed on Bursa Malaysia Main Market. This study adopts quantitative research design using panel data for the financial year of 2022-2024, resulting 60 firm-year observations. The data were analyzed using SPSS and EViews statistical software. The results of this study show that environmental, social, and governance disclosure has a positive but insignificant impact on firm value. Additionally, the Return on Equity (ROE) does not strengthen the relationship between ESG disclosure and firm value. These findings suggest that investors in Malaysia’s energy sector are not considering ESG practices as the basis of decision-making for investment, but rather as additional practices and reporting. Thus, the implication of this study indicates that regulators, such as Bursa Malaysia should strengthen the ESG-related regulations and educate investors on the importance of sustainability practices and investments. For companies, they are advised to enhance transparency of ESG practices, including informing the positive impact of it in their report. Moreover, the findings imply that the stakeholder and signalling theories may not fully explain the occurrence of observed in this study.