THE IMPACT OF ESG REPORTING ON CORPORATE FINANCIAL PERFORMANCE: A QUANTITATIVE ANALYSIS OF SAUDI LISTED COMPANIES

Abstract

In light of the growing regulatory focus on sustainability and ESG disclosure, particularly in emerging economies aiming to diversify their economic base, this research examines the influence of ESG reporting on the financial outcomes of Saudi listed firms across both financial and non-financial sectors. The study utilises data from 90 companies over a seven-year period spanning 2018 to 2024. Using a fixed-effects panel regression approach, the analysis demonstrates that ESG initiatives and reporting exert a positive and statistically significant effect on firm performance, measured by ROA. This suggests that ESG disclosure can enhance profitability by fostering stakeholder confidence and optimising operational processes, consistent with Stakeholder Theory. In contrast, LEV exhibits a negative and significant association with ROA, indicating that the burden of higher interest expenses outweighs the advantages of tax shields, in line with Trade-off Theory. The findings highlight the strategic value of ESG in building investor trust and loyalty, improving risk management, and facilitating economic diversification from oil dependency, while simultaneously enhancing operational efficiency. From a practical and policy standpoint, the results recommend that companies embed ESG considerations into their core business strategies, whereas regulators and policymakers should promote capacity development and establish more transparent ESG reporting guidelines to strengthen sustainable corporate performance. Collectively, these measures contribute to achieving sustainability, which is increasingly imperative.