Unlocking the Power of ESG: How ESG Scores Drive Firm Performance (ROE) with Firm Size as a Key Moderator : Evidence from Southeast Asia

Abstract This study examines the impact of Environmental, Social, and Governance (ESG) scores on firm performance in Southeast Asia, with a focus on the moderating role of firm size. Using data from companies in Indonesia, Malaysia, and Singapore from 2012 to 2023, the research empirically investigates how ESG scores influence profitability and whether firm size strengthens or weakens this relationship. The study employs robust econometric models to analyze panel data, controlling for industry effects and other firm-specific characteristics. The results show that higher ESG scores are positively correlated with better firm performance, as reflected in higher Return on Equity (ROE). Additionally, firm size is found to significantly moderate the relationship between ESG performance and profitability, with larger firms exhibiting a stronger positive relationship between ESG scores and financial performance. These findings highlight the importance of adopting ESG practices for companies in Southeast Asia and provide critical insights for policymakers, investors, and company managers seeking to improve profitability through sustainable business practices. This research contributes to the literature on ESG and financial performance in emerging markets, providing valuable empirical evidence for research and policy development in the region..