Vision 2030 in action: how ESG disclosure shape financial performance in Saudi Arabia

Purpose This study aims to examine the relationship between environmental, social and governance (ESG) and financial performance across non-financial firms listed on the Saudi Stock Exchange (Tadawul). It employs the lens of agency theory and stakeholder theory in order to understand the impact of ESG dimensions on financial performance. Design/methodology/approach We examine non-financial companies listed on Tadawul between 2019 and 2023, focusing on 33 firms with 165 firm-year observations. The analysis uses a variety of econometric methods such as ordinary least squares, random effects, robust regression and Tobit models for the period of 2019–2023. Findings The results indicated that robust corporate governance practices were statistically significant and positive mediating effect. However, the relationship between ESG disclosure and return on assets (ROA) is inconsistent. This advises that effective governance mechanisms enhance the translation of ESG activities into improved ROA. Using robustness checks, this paper employ return on equity and earnings per share as alternative performance measures to validate these results. Practical implications These insights offer actionable implications for firms, policymakers and investors in Saudi Arabia by demonstrating the impact of ESG dimensions on financial performance. This can be achieved through the enhancement to economic performance, attract foreign investment and foster sustainable development. Social implications These insights offer actionable implications for firms, policymakers and investors in Saudi Arabia by demonstrating the impact of ESG dimensions on financial performance. This can be achieved through the enhancement to economic performance, attract foreign investment and foster sustainable development. Originality/value This study contributes to the corporate governance literature by empirically demonstrating the mediating role of governance (via principal component analysis-composited mechanisms) in translating ESG into financial benefits, refining agency and stakeholder theories in an Islamic finance-influenced emerging market. It provides novel insights into how Vision 2030's sustainability push interacts with governance to drive performance, bridging conflicting literature, and offers a methodological template for ESG research in similar contexts.