SUSTAINABILITY DISCLOSURE AND ITS IMPACT ON FIRM'S VALUE CREATION FOR ENERGY, MATERIALS AND HEALTHCARE INDUSTRIES

This study investigates the impact of environmental, social, and governance (ESG) disclosure on the value creation of Saudi Arabian companies within the Energy, Materials, and Healthcare industries. Panel data from 100 non-financial firms listed in Saudi Arabia for the period 2015 to 2024 were analyzed. To address potential endogeneity issues, fixed effects and Generalized Method of Moments (GMM) were employed to examine the influence of ESG disclosure on Tobin’s Q. The model includes three control variables: firm size, fixed asset ratio, and leverage ratio. The analysis also explores the moderating role of firm size in the relationship between ESG disclosure and firm value creation. The results reveal a positive and statistically significant impact of ESG disclosure on value creation, indicating that greater transparency in sustainability practices contributes to enhanced firm performance. Furthermore, firm size significantly moderates this relationship, suggesting that larger firms derive greater benefits from ESG disclosure in terms of value creation. For robustness, analyses using accounting-based performance measures (ROA and ROE) confirm that ESG disclosure positively influence profitability, with larger firms again benefiting more. These findings align with the predictions of agency, stakeholder, and signalling theories, which emphasize the value-enhancing effects of comprehensive ESG practices. This study adds to the growing body of literature on ESG and corporate performance in emerging markets and offers practical insights for policymakers, investors, and corporate decision-makers seeking to promote sustainable business practices in Saudi Arabia.