The impact of environmental, social, and governance performance on the firm's financial distress: An empirical study on the listed firms in Egypt

Sustainability is one of the core pillars for the success of any organization and a core concern across different fields. The Egyptian government issued Decree No. 108 that obligates firms to disclose their ESG (Environmental, Social and Governance) practices, this emphasizes the critical role of such practices in generating value for firms, improving the quality of information, and protecting the stakeholders' interests, and this study aims to empirically investigate the impact of ESG performance on the firm’s financial distress. This study focuses on an emerging market, Egypt, and the study sample includes 62 non-financial firms listed on the Egyptian Stock Exchange (EGX100) from 2012 to 2024, using a fixed effect regression to examine the study hypotheses and to answer the research question. The results report a statistically significant positive relation between the ESG listing index and the firm's financial distress in addition to the significance of one of the control variables, which is asset tangbibility. Overall, this study provides two main contributions, first it extends the existing literature by presenting empirical evidence from an emerging market, second it strengthens the ESG measurement through using two measurements where one of which is an application to the resently issued decree which provides a practical insight for the ESG impact on the firm’s financial stability in the Egyptian market.