The Impact of Environmental, Social and Governance on Firm Performance: Moderating Role of Financial Slacks and Research &Development Intensity

Abstract

The purpose of this research is to investigate the moderating role of financial slacks and research & development intensity on the relationship between environmental, social, governance and firm performance in Pakistan. A secondary data quantity content analysis was employed for this research. The sample of this study involves data from 284 non-financial firms over 10 years (2012–2021), which contains 2840 observations. The findings demonstrate that a company's ESG reporting is statistically significant inverse impact on firm operational performance (ROA). While, when the elements of E, S, G are measured individually so it has favorably impact on corporates performance (ROA).   Furthermore, the outcomes shows that the presence of financial slacks as moderator variable impact significantly positive association among ESG and corporate’s operational performance (ROA). while, when the elements of E, S, G are measured individually, financial slacks also show a significant favorable impact on the association among E, S and G and firm’s operational performance (ROA). Similarly, when tested the second moderating variable R&D intensity on the association among ESG as whole and separately the similar positive impact found on firm performance. This research contributes to the body of knowledge regarding ESG reporting and how it impacts company performance. The findings of this research have important implications for government officials, regulators, and policy makers, as they can recognize the role of financial slacks and R&D intensity on the association among ESG and firm operational performance (ROA)