Open Access
ARTICLE
THE IMPACT OF ESG SCORES ON FIRM’S FINANCIAL PERFORMANCE: CROSS REGIONAL ANALYSIS BETWEEN EUROPE AND ASIA
Issue Vol. 2 No. 03 (2026): March April 2026 --- Section Articles --- Published Date: 2026-04-13
Abstract
This study examines the impact of Environmental, Social, and Governance (ESG) score performance across Europe and Asia, offering a unique opportunity to understand how regional and firm contexts shape the relationship between sustainability practices and a firm's financial performance. As the world progresses towards sustainable growth, ESG practices are increasingly being adopted by firms. Companies are no longer evaluated solely on financial metrics, but also on their ability to manage environmental risks, uphold social responsibility and maintain strong governance structures. This global progression reflects growing investor demand, evolving regulatory framework, and increased awareness of long term sustainability.
This study is distinctive in conducting a regional comparative analysis on the impact of ESG on firm financial performance to determine if region context and firm context shape the relationship, and contributes to literature, by first, this study employs a comparative perspective for Europe and Asia. While previous studies such as (Makridou, Doumpos & Lemonakis, 2024; Loew, Endres & Xu, 2024, Koundouri, Pittis & Plataniotis, 2022) examine the relationship of ESG performance in Europe and other studies such as (Lee, Lee, & Yee, 2025; Abdul Rahman & Alsayegh, 2021, Martynova & Lukina, 2023) have examined the same relationship in Asia, these studies individually cannot be compared with each other or to make a comparison between the two regions, as the sample size, variables, and quantitative metrics, differ, making it incomparable. This study uses an equal sample size with the same comparable metrics and variables for both regions. Secondly, previous research has been limited to the top performing firms, which tend to be firms with high capitalization, and high capitalization firms have more profitability and higher ESG scores. Thus, the correlation will already be positive, whereas this study has an equal distribution of firms with similar market capitalization in order to fairly understand the relationship.
