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Nexus of the CSR disclosures and corporate financial performance: evidence from Asian countries climate policy uncertainty

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Abstract

Financial performance is a critical aspect of a company’s overall health and sustainability. It directly influences investor decisions, stock market performance, credit ratings, and the company’s ability to access capital. Corporate financial performance is influenced by multitude of facts, both internal and external such as disclosure of the information, and social and environmental factors. On the ground of the facts, we aimed to investigate non-financial firms that belong to Asian economies affected by climate policy uncertainty and corporate social responsibility disclosures in terms of their financial performance. To conduct quantitative study analysis, we used the two effective statistical tools such as two-stage regression method and generalized method of movement (GMM). Our results show that corporate high value of social responsibility disclosure and climate policy uncertainty has significant negative impact on return on asset (ROA) of the listed organizations of China, Pakistan, and India. Moreover, CSR disclosure attributes higher values such as social (SC) and governance score (GOV), and climate policy uncertainty (CPU) has significant negative relationship with return on equity (ROE) and earning per share (EPS) respectively, while a higher value of ESG total score and the environmental (ENV) score has a significant positive impact on ROE and EPS. Additionally, the research concludes that climate policy uncertainty is a key factor that motivates CSR disclosure practices, which ultimately improves corporate financial performance. Moreover, we concluded from our finding that the climate policy uncertainty creates ambiguity surrounding government regulations, international agreements, or market mechanisms that affect financial performance. Moreover, environmental disclosure information that has the large part in total ESG scores attract the investors around the globe which leads to rise in the financial performance, while the other attributes of the CSR disclosure decrease performance. This study advocated the great implications for researchers, investors, the government, and regulatory authorities. Policy makers can make the policy about the CSR disclosure for creating the good image of the organization to attract investors around the globe.

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  1. Universiti Utara Malaysia College of Law, Government and International Studies, Sintok, Malaysia

    Muhammad Waris & Badariah Haji Din

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  1. Muhammad Waris
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All authors contributed to the article. Muhammad Waris contributed to introduction, methodology, results, conclusion, and data analysis. Badriah haji din contributed to literature, concept, objectives, and implications and also supervised in all contents.

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Waris, M., Din, B.H. Nexus of the CSR disclosures and corporate financial performance: evidence from Asian countries climate policy uncertainty. Environ Sci Pollut Res 31, 1995–2008 (2024). https://doi.org/10.1007/s11356-023-31307-9

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