The Influence of ESG on Firm Performance: The Moderating Role of Earnings Quality in Firms Listed in the Thailand Sustainability Investment (THSI) Group

บทคัดย่อ

This study aims to analyze the impact of Environmental, Social, and Governance (ESG) scores on firm performance, specifically market performance (Tobin’s Q) and financial performance (ROA), considering the combined effects of all three ESG dimensions: Environmental, Social, and Governance. Additionally, the study examines the moderating role of Earnings Quality (EQ) in this relationship. Data were collected from firms listed in the Thailand Sustainability Investment (THSI) between 2018 and 2022. Firm performance was measured using Tobin’s Q (market value) and Return on Assets (ROA), while Partial Least Squares Structural Equation Modeling (PLS-SEM) was applied for data analysis using SmartPLS.

The results indicate that ESG scores contribute positively to a firm’s market valuation, as companies with strong ESG practices tend to gain higher investor confidence and attract more market interest. This suggests that firms demonstrating commitment to environmental, social, and governance principles may be perceived as lower-risk investments, thereby increasing their market value. However, the study finds that ESG performance does not directly translate into improved financial profitability, as reflected in the return on assets. This implies that while ESG initiatives may create long-term strategic benefits, they do not necessarily generate immediate financial gains in terms of asset utilization efficiency.

Furthermore, Earnings Quality (EQ) plays a crucial role in moderating the ESG-Tobin’s Q relationship. Firms with high EQ can effectively leverage ESG to enhance market value, while firms with low EQ may face investor skepticism, as ESG initiatives could be perceived as a mere branding strategy lacking credibility. However, EQ does not significantly moderate the relationship between ESG and ROA, suggesting that earnings quality does not directly enhance the profitability effects of ESG.

These findings highlight that ESG is more influential in shaping a firm’s market value than its financial performance, particularly when considering Earnings Quality as a moderating factor. EQ serves as an essential component in reinforcing the credibility of financial information and strengthening the value of ESG initiatives for firms.