The Sustainability Performance and Corporate Financial Stability in Malaysia: The Moderating Effects of Ownership Structures

Abstract

Sustainability performance (SUSP) of the corporate sectors has increasingly gained attention among the market regulators and business stakeholders especially since the launching of the UN’s SDGs Agenda 2030 in 2015. Since then, many researches have been conducted to study the relationship between SUSP and corporate financial performance. However, there is scarce number of studies on the relationship between SUSP and corporate financial stability (CFS) and yet, the results are indecisive or inconclusive as revealed by the studies in the developed and other developing countries. Therefore, this study aims to investigate the relationships between the SUSP (ESG scores) and the CFS (Altman’s z-score) using the samples of 77 Shariah-compliant public listed companies in Malaysia. Additionally, this study examines the moderating effects of ownership structures (concentrated and managerial) on the SUSP-CFS nexus. The study spans from 2018 to 2023 with annual unbalanced panel data and employs the static panel analysis comprising the POLS, fixed and random effects estimations. The results prove that the environmental, social and governance performances have mixed relationships with the CFS in spite of insignificant results. Further, both ownership structures show significant moderating effects particularly on the environmental performance-CFS nexus. Meanwhile, the concentrated ownership reveals significant weakening effect on the social-CFS positive nexus. This study has policy and managerial implications, where it ignites the policy makers and corporate sectors to have concerted efforts in upholding the SUSP, strengthening the ownership structures and ultimately enhancing the CFS in Malaysia