The Impact of Environment, Social and Governance (ESG) Practices on Financial Risk Management in Listed Companies on the Stock Exchange of Thailand of the SET100
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Abstract
This study aims to analyze the relationship between compliance with Environmental, Social and Governance (ESG) practices and financial risk management among listed companies in the Stock Exchange of Thailand (SET100 group). Financial risk management is measured using the debt-to-equity ratio (D/E Ratio) as a proxy for financial risk. The sample consists of 92 companies during the period 2021–2023, with data collected from company information summaries published on the official website of the Stock Exchange of Thailand. The statistical method employed for data analysis is multiple regression analysis. The results reveal that compliance with ESG practices in all three dimensions environmental, social, and governance has a statistically significant relationship with the D/E Ratio. In particular, the environmental and social dimensions show significance at the 0.01 and 0.05 levels, respectively. Additionally, control variables, namely company size and firm age, are found to have a positive relationship with the D/E Ratio, indicating that larger and older companies tend to rely more on debt financing. The multiple regression model explains 73.5% of the variation in the D/E Ratio, demonstrating a high level of predictive accuracy and effectiveness in financial risk management. Furthermore, a high F-statistic confirms that the regression model is statistically appropriate for prediction. Therefore, financial risk management based on ESG practices is a key strategic tool that can be applied in long-term and sustainable financial planning for businesses.
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