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Article

The Influence of Environmental, Social, and Governance Factors on the Financial Performance of Saudi Listed Companies

by
Hassan Ali Alqahtani
1,*,
Mohammed Ali Alghamadi
2,
Hiba Awad Alla Ali Hussin
3,
Nadia Bushra Mohammed Ali
3 and
Asaad Mubarak Hussien Musa
2
1
Department of Finance, College of Business Administration in Hawtat Bani Tamim, Prince Sattam Bin Abdulaziz University, Al-Kharj 11942, Saudi Arabia
2
Department of Accounting, College of Business Administration in Hawtat Bani Tamim, Prince Sattam Bin Abdulaziz University, Al-Kharj 11942, Saudi Arabia
3
Department of Finance, Faculty of Business, Imam Mohammad Bin Saud Islamic University, Riyadh 11564, Saudi Arabia
*
Author to whom correspondence should be addressed.
Sustainability 2026, 18(6), 2976; https://doi.org/10.3390/su18062976
Submission received: 2 February 2026 / Revised: 11 March 2026 / Accepted: 16 March 2026 / Published: 18 March 2026
Versions Notes

Abstract

This study examined the influence of Environmental, Social, and Governance factors on the financial performance of companies listed on the Saudi Stock Exchange (Tadawul). Employing a panel data approach, the analysis covers 450 firm observations collected annually during the period 2018–2023. Financial performance is measured using Return on Assets (ROA) and Return on Equity (ROE), while ESG disclosure scores are disaggregated into their three constituent pillars. Firm size, revenue per share, and leverage are incorporated as control variables. The fixed effects regression results reveal that social factors demonstrate statistically significant positive relationships with both ROA and ROE, supporting the stakeholder theory-based perspective that strong social practices enhance operational efficiency and investor confidence. Conversely, environmental and governance factors exhibit no significant association with either financial performance metric within the study period. Leverage shows a significant negative relationship with ROA but not with ROE, while revenue per share consistently demonstrates strong positive associations with both performance measures. These findings contribute to the limited literature on ESG–performance linkages in Gulf Cooperation Council markets and offer important implications for corporate managers, investors, and policymakers seeking to advance sustainability objectives within the framework of Saudi Vision 2030.

1. Introduction

In recent years, environmental, social, and governance (ESG) factors have been established as essential considerations for any organisation seeking to achieve sustainable growth and long-term financial performance. Following the global monetary crisis, institutional and individual investors have come to recognise that businesses should be more accountable to society and the environment, beyond simply generating profits. According to [1], corporate stakeholders have recently called for greater openness in environmental, social, and governance disclosures. ESG disclosures are non-financial data that are gaining attention from investors and contributing to raising awareness globally—especially regarding how businesses handle non-financial issues—which promotes the consideration of both non-financial and financial aspects when carrying out investment analyses and decision-making [2].
According to [3], ESG represents a framework for evaluating an organisation’s impact on the environment and the efficiency of its governance structures. Due to the huge demand for ESG practices, different stakeholders (e.g., consumers and investors) highly value organisations that adopt such practices while addressing critical global issues such as social inequality and climate change [4]. Companies can easily gain regulatory compliance benefits by prioritising energy efficiency, carbon footprint reduction, and resource sustainability. As described in [5], research on social factors has focused on the different ways in which businesses interact with employees and consumers, such as emphasising diversity and fair practices. Meanwhile, governance plays a critical role in enhancing the ethical management of companies with robust internal controls [6]. Through governance, companies can also enhance the transparency of their leadership, foster investor trust, and minimise risk.
The publication of internal control rules in 2000 marked a substantial improvement in Saudi corporate governance norms. The initial corporate governance regulations were issued by the Saudi Capital Market Authority (CMA) in 2006. At the time of their introduction, compliance with these regulations was voluntary for listed companies; however, the provisions became mandatory starting in 2010; subsequently, it became mandatory. In 2017, the Saudi corporate governance code underwent its most recent revisions. There are many obstacles hindering the adoption of ESG disclosure in Saudi Arabia; in particular, as businesses must deal with shifting laws and a diverse range of international reporting standards, regulatory fragmentation remains a major obstacle [7]. Limited knowledge of ESG reporting systems, particularly in SMEs, makes compliance more difficult and compromises the effectiveness of disclosures [8].
Existing literature on ESG and corporate governance has predominantly centred on developed markets, which feature well-established ESG reporting frameworks and practices. In contrast, research focusing on emerging economies remains comparatively limited [9]; For instance, although GCC nations have embraced a favourable stance towards the UN While significant ESG reforms advance the Sustainable Development Goals (SDGs), compliance with ESG principles is still optional, as indicated in [10].
Additionally, little research has focused on how ESG factors affect financial performance in the Gulf Cooperation Council member states, including Saudi Arabia.
Existing studies have carefully examined the effects of ESG adherence and reporting on different aspects of organisations. Based on the research reported in [11], the adoption of ESG positively impacts financial outcomes such as profitability, market valuation, and risk mitigation. This is consistent with [12], in which it was argued that ESG is highly helpful for organisations with significant environmental footprints, such as those in the construction and manufacturing industries. Through the implementation of energy-efficient practices, a company can highly benefit from operational resilience and cost savings. In [13], it was found that different companies in Saudi Arabia listed on the Tadawul Stock Exchange have taken advantage of increased investor interest due to reduced legal risks. In another study on companies registered on the Saudi Exchange (Tadawul) [14], it was discovered that financial outcomes are significantly influenced by social dimensions such as diversity and employee relations. Such social initiatives play a critical role in improving internal productivity and enhancing brand loyalty and customer retention. In Saudi Arabia, banking and retail are crucial industries and, as a result, organisations with strong social responsibility practices have highly benefited in terms of financial performance and market competitiveness [7,15]. Equally, organisations that have implemented initiatives focused on community engagement and customer trust create long-term value, ultimately making the business more resilient in a volatile market [16,17]. In this context, every organisation that has ranked high in terms of employee satisfaction has yielded higher stock returns.
At the same time, transparent governance structures and ethical leadership help organisations to navigate financial scandals and legal challenges, eventually enhancing their market performance. Based on [18], a relationship exists between governance practices and financial outcomes, particularly in emerging markets, with the study further adding that governance indicators play a critical role in improving financial metrics such as ROE and stock price stability. Governance reforms in Saudi Arabia can be aligned with Vision 2030, as they encourage companies to enhance the adoption of international best practices for greater investment overflow [19]. In this context, organisations with high ESG adherence have achieved superior financial outcomes compared with those with low ESG adherence. However, as noted in [20], even though ESG highly influences financial performance, organisations have been experiencing difficulties such as inconsistent measurement frameworks and the high cost of integrating ESG practices. Therefore, when prioritising ESG metrics, it remains important to align with global sustainability trends and national objectives. In this way, companies will be able to position themselves to sustain competitive advantage and long-term growth.
In [21], it was observed that due to changes in consumer behaviours, organisations that adopt ESG practices have a better chance of attracting and retaining customers, thus resulting in better performance. Other scholars have argued that ESG-compliant companies end up having reduced costs of capital and better market valuations [22]. Such outcomes are highly beneficial for listed organisations in Saudi Arabia, as ESG practices can assist them in aligning with The Vision 2030 of the Kingdom while diversifying the economy and attracting foreign investment. Therefore, ESG metrics should always be considered essential tools for decision-making, as they serve as indicators of resilience and adaptability in the changing global economy; for example, they have been utilised to investigate the influence of family ownership and CEO characteristics on CSR reporting in Saudi Arabia [23,24], and to analyse how Saudi Arabian CSR reporting is affected by the characteristics of the CEO and family ownership.
In 2021, the study [25] analysed the impact of environmental sustainability disclosure on the stock returns of Saudi listed enterprises, considering financial limitations as a moderating variable; furthermore, in [26], the impact of institutional ownership on ESG reporting in publicly traded companies in Saudi Arabia was examined.
This study seeks to address the deficiencies in the existing literature regarding the correlation between financial success and ESG in the Saudi capital market, consequently yielding significant implications for legislators, investors, corporate management, and regulators.
The reasons for performing this study within the Saudi Arabian context are as follows. First, Saudi Arabia is a G20 country and one of the world’s leading oil exporters. Saudi Vision 2030 states that the country’s capital market is expanding rapidly and that the government is taking significant steps to attract international capital, moving away from an oil-dependent economy toward a more diversified one. Second, by experimentally examining the connection between ESG and financial performance, This study contributes to the existing knowledge on ESG within Saudi Arabia’s burgeoning market, which is especially significant given that ambiguous and inconclusive results have previously been reported concerning this association. Finally, this study addresses a gap in the literature on ESG disclosure measurement by offering further data regarding the efficacy, reliability, and the reliability of various measurement channels for evaluating ESG-related information.

2. Institutional Background

The Kingdom of Saudi Arabia (KSA) has long been linked to oil, being the largest petroleum exporter globally and possessing the second-largest confirmed oil reserves. However, the Saudi economy has seen a dramatic change in recent years due to the need to diversify and reduce its dependency on oil earnings [22,27,28]. To address these issues, Saudi Arabia introduced Vision 2030, a comprehensive strategic plan aimed at reducing the country’s dependence on oil, fostering private sector growth, and developing new economic sectors such as technology, entertainment, and tourism [29]. Furthermore, the programme places strong emphasis on privatisation, FDI, and increasing the private sector’s GDP contribution [30]. Saudi Vision 2030 is a comprehensive strategic framework that was introduced in 2016 with the goal of diversifying the economy and elevating Saudi Arabia to the status of a global investment leader. This plan encompasses enhanced ESG disclosure mandates and the alignment of national agendas with global sustainability standards [31]. Vision 2030 posits that attaining energy efficiency and waste reduction objectives diminishes operational expenses and enhances workforce diversity, while community service fosters customer loyalty and bolsters corporate reputation [32].
Under the ambit of Vision 2030, the Saudi government has introduced a suite of regulatory frameworks and initiatives designed to cultivate environmental, social, and governance (ESG) practices within the corporate sector. This endeavour is underpinned by the recognition that sustainability is indispensable for fostering long-term economic growth and attracting foreign direct investment [33].
Saudi Vision 2030 urges businesses to make their operations more sustainable through social and environmental actions, laying the groundwork for ESG disclosure. This vision places a strong emphasis on environmental sustainability, social responsibility, and government reform. To enhance operational performance and resilience within a competitive global marketplace, Saudi Arabia has implemented an ESG reporting framework that leverages strategic business tools [34].
Initiatives for diverse boards and moral leadership within governance changes also encourage better risk management and higher-calibre decisions, both of which enhance business success. Both domestic and foreign investors seeking sustainable businesses have been drawn to the connection between Vision 2030 goals and ESG disclosure [35]. In 2018, the Saudi Capital Market Authority enhanced its regulations pertaining to foreign investment in the Saudi capital market to streamline the eligibility criteria for foreign investors, their affiliates, foreign portfolio managers, and their managed funds. As a result, international investors can easily access the Saudi Stock Exchange, also known as Tadawul, which has a market value of approximately $564 billion in the Arab stock market [36]. In Saudi Arabia, most of the corporate ownership is held by families or the state. Over 70% of the listed companies are family-owned, while the Saudi government owns around 30% of them [37]. According to [38], Saudi families held more than 41% of the executive board positions and dominated the boards of 68 of the 168 Saudi companies that were public at the time. The boards of the other listed Saudi corporations were also controlled by 17 families.
In such environments, the primary governance challenge shifts to a principal–principal (PP) agency conflict, where the interests of controlling shareholders (the family or state) diverge from those of minority investors [39]. Within this framework, board independence is systematically undermined by the proprietors’ ability to control information flows and leverage informal networks. As discussed in [21], family dominance in executive positions creates significant information asymmetry, rendering independent directors incapable of effective monitoring because they are excluded from decision-critical knowledge and must rely on curated data provided by the very owners they are meant to oversee.
The mechanism through which concentrated ownership neutralises formal governance relies on the processes of director nomination and the strategic use of board positions for symbolic legitimacy. Independent directors in family or state-controlled firms are often selected based on their alignment with (or deference to) the controlling shareholders—a dynamic intensified by Saudi Arabia’s socio-cultural context where personal relationships and familial ties can supersede formal institutional roles [27]. The involvement of royal family members on boards, for instance, exemplifies how status and connection—rather than independent financial expertise—can secure positions, transforming directors into strategic assets for external relations rather than active monitors [40]. This results in a form of institutional decoupling; that is, firms comply with Capital Market Authority mandates for independent directors to signal legitimacy and attract foreign investment under Vision 2030 [24,26], but these structures remain ceremonial. The board thus becomes a “façade” that meets symbolic metrics for international investors while real control is exercised through shadow governance systems, thus reducing pressure for genuine reform [9].
Consequently, the altered risk and incentive structures for directors in this environment foster passivity or co-optation, rather than active monitoring. An independent director who challenges a decision in a diffusely held firm may face resistance from management but can appeal to the broader board; in a firm dominated by a single family or the state, such a challenge directly confronts the ultimate power source, leading to swift removal. This creates a powerful disincentive for rigorous oversight, socialising directors into a culture of difference where their role transforms from active monitors to passive advisors [25]. Over time, this dynamic not only renders the board inefficient in improving financial performance—as evidenced by the study’s non-significant governance findings—but can also entrench poor decisions by providing a veneer of independent oversight to strategies that primarily benefit the controlling shareholders at the expense of long-term firm value and minority interests.

3. Literature Review

3.1. Environmental, Social, and Governance (ESG)

ESG disclosures are becoming crucial tools for enhancing the sustainability, accountability, and transparency of businesses. Companies use ESG disclosure to provide the public with information about their sustainability policies, corporate social responsibility (CSR) programmes, and governance frameworks [41]. Companies that exhibit a dedication to sustainability and open ESG practices develop strong relationships with government organisations, employees, and customers. Therefore, by strengthening the company’s brand and enhancing employee and customer happiness, greater stakeholder engagement fosters long-term value development [42]. The research in [43] indicates that firms with comprehensive environmental, social, and governance (ESG) disclosures exhibit superior performance relative to their competitors, particularly in the domains of customer loyalty and market reputation. As a result, a broad spectrum of stakeholders—including local communities, employees, investors, regulatory bodies, and consumers—are increasingly exerting pressure on corporations to provide more comprehensive reporting through Environmental, Social, and Governance (ESG) frameworks [42]. Given the growing recognition that sustainability-related risks can materially influence a company’s financial performance and investment outcomes, institutional investors, in particular, have emerged as key drivers behind the demand for enhanced ESG disclosures [44].
Notwithstanding the myriad benefits of ESG disclosure, certain issues remain unresolved. The absence of standardised reporting frameworks markedly exacerbates inconsistencies in the comparability and quality of ESG data [41].
The voluntary nature of many ESG reporting frameworks often engenders selective disclosure practices, thereby undermining the comparability and reliability of the information presented to stakeholders [45]. Moreover, the absence of standardised reporting frameworks creates ambiguity for investors and other stakeholders, thereby impeding their ability to conduct meaningful comparative assessments of corporate ESG performance [46].
The costs associated with disclosure can be a significant disincentive, especially for small- and medium-sized enterprises (SMEs) who are devoid of the resources to invest in robust Environmental, Social, and Governance reporting systems [47]. The absence of rigorous verification protocols and independent third-party audits exacerbates this challenge, consequently diminishing stakeholder confidence and impairing the credibility of ESG disclosures [48]. These issues underscore the imperative for enhanced regulatory oversight, the formulation of universally accepted ESG reporting standards, and the implementation of capacity-building initiatives to support companies—particularly those in developing economies—in refining their ESG reporting practices [40]. Prior research indicates that discrepancies in reporting practices often lead to selective disclosure, wherein companies accentuate favourable ESG aspects while omitting those that might reflect negatively on them [45]. Furthermore, greenwashing remains a persistent concern, undermining the reliability and validity of ESG disclosures [49]. However, problems such as scarce resources and lax legal frameworks hinder the implementation of comprehensive ESG reporting in developing countries [50].
Saudi Arabia has instituted initiatives such as the Tadawul ESG Guidelines, which establish criteria for companies demonstrating robust environmental, social, and governance (ESG) performance and facilitate the alignment of corporate operations with sustainable principles [51]. These initiatives are integral to the Kingdom’s Vision 2030, which prioritises social development, environmental stewardship, and economic diversification [30]. According to a recent analysis [50], publicly traded companies in Saudi Arabia are increasingly integrating ESG disclosures into their corporate strategies in response to regulatory reforms and growing stakeholder expectations. This transition is further supported by the development of frameworks and regulations tailored to local contexts, enabling companies to address challenges such as resource efficiency, social inequality, and climate change [51].

3.1.1. Stakeholder Theory

In recent years, a sharp increase has been seen in the amount of research on ESG disclosure, backed by several theoretical frameworks. The foundational stakeholder theory, as originally articulated by Freeman [27], offers a comprehensive framework for analysing the dynamic interactions between corporations and their stakeholders [52]. This perspective posits that firms engaging proactively with stakeholder concerns are better positioned to cultivate trust, credibility, and goodwill. In accordance with the theoretical model, these relational assets are anticipated to contribute positively to organisational performance [30]. Stakeholders are demanding greater accountability and transparency in corporate operations, as well as complete ESG disclosures from businesses [46]. ESG disclosure increases consumer loyalty and brand equity, both of which are elements that impact profitability. Goods and services from businesses with excellent governance, moral labour practices, and environmental responsibility are valued more highly by consumers [53].
A substantial body of research has investigated the influence of stakeholder pressures on environmental, social, and governance (ESG) disclosure practices. For example, it has been argued in [54] that firms operating in environmentally sensitive sectors, such as manufacturing and energy, face heightened scrutiny from regulatory bodies and environmental advocacy groups., resulting in more comprehensive ESG reporting. In addition to attracting customers and investors, more open organisations also tend to have increased employee satisfaction and lower risks. The strategic significance of stakeholder-oriented practices within the contemporary sustainability-focused business landscape is underscored by empirical research indicating that organisations issuing comprehensive environmental, social, and governance (ESG) disclosures tend to achieve superior financial performance [55]. While certain stakeholders may endorse ESG initiatives due to their alignment with ethical, social, or environmental imperatives, others may resist such measures, particularly when they entail substantial costs or disrupt established operational processes. This divergence in stakeholder perspectives underscores the imperative for corporate boards to meticulously balance competing interests when formulating ESG-related decisions, thereby ensuring that organisational objectives are aligned with long-term viability, equity, and sustainability [46].

3.1.2. Agency Theory

Jensen and Meckling highlighted the distinction between ownership and governance in companies in 1976. To serve the principal’s best interests, the principal (owner) often delegates the administration and monitoring of resources to the management (agent) [56]. The principals (owners) typically provide the management (agents) with power and administration of resources so that they can act in the best interests of the principals. Conflicts of interest force agents to reveal information that might not be optimal for the principal, particularly when assessing the agents’ performance. This conflict of interest results from the agent’s incentives, which are often influenced by financial gain and short-term opportunities [57]. When it comes to ESG disclosure—which includes disclosing information regarding sustainable environmental, social, and governance practices—strong corporate governance may ensure that management prioritises the interests of shareholders [58]. According to agency theory, reducing information asymmetry and effective monitoring require a diverse board, with this enhanced oversight being essential for companies to report truthful and open ESG data [59]. Agency theory posits that independent directors enhance the effectiveness of corporate governance by providing objective and impartial evaluations of managerial performance. Their independence enables them to strengthen oversight mechanisms and ensure that board procedures are properly monitored and implemented. According to [60], the presence of independent directors contributes to improved monitoring of management activities and supports more effective governance practices within the board. this happens because these managers are less involved in the business’ operations and, as a result, are less reliant on the CEO’s control. Female directors tend to be more keen on preserving transparency in CG processes, In addition to demonstrating a heightened awareness of social and environmental issues, these stakeholders are positioned to exert influence over board-level decisions and contribute to the formulation of more robust ESG policies and practices. This involvement is anticipated to result in a higher level of corporate disclosure [61].

3.2. ESG Factors and Financial Performance

3.2.1. Environmental Factors (E) and Financial Performance

Saudi listed firm performance levels in terms of ROE and ROA show significant sensitivity to environmental conditions while being highly influenced by firm size and revenue per share metrics. In [62], it was proven that capital structure choices influence ROE and ROA through environmental conditions and firm size, which magnifies these results. In [63], how diverse ownership structures enable companies to better adapt to changing market conditions while improving ROE and yielding inconsistent ROA performance was explored. In [64], it was confirmed that financial reporting quality and external audits magnify environmental compliance benefits, which improve both Returns on Assets and Returns on Equity within large companies generating substantial revenues. The research reported in [65], focusing on oil and gas companies, demonstrated that environmental variables impact ROA more than ROE in resource-intensive industries; however, these effects depend on revenue per share levels. Therefore, these studies reveal how ecological factors impact financial performance models.
Firm size and revenue per share act as control variables, which moderate the relationships between environmental influences and the ROE and ROA performance of Saudi listed businesses. Environmental disclosure shows a positive relationship with ROE while positively influencing ROA, specifically in major companies with higher revenue levels, according to [7]. The analysis in [66] demonstrated that capital structure affects both ROE and ROA but generates more substantial ROE effects as firm size increases through environmental interactions. As pointed out in [14], disclosure of (ESG) practices leads to sustainable growth that boosts ROE together with ROA, and benefits most in terms of revenue per share. According to [67], ROA benefits more than ROE from environmentally compliant, sustainable growth rates among companies with elevated revenue per share. As a result, these discoveries become apparent when examining the relationships between multiple variables through specific control parameters.
As a result, the following hypothesis is stated:
H1: 
Environmental factors significantly influence the financial performance of Saudi listed companies.

3.2.2. Social Factors (S) and Financial Performance

Social influences such as royal family involvement, employee welfare, and Shariah compliance have been investigated due to their direct impacts on financial performance measurements of ROE and ROA in Saudi listed companies, while firm size and revenue per share control expression levels. According to [68], banks demonstrating superior employee satisfaction and community engagement tend to achieve enhanced ROE and ROA figures, where larger institutions gain substantial advantages stemming from their extensive resource pool. In [69], it was demonstrated that audit committees exhibiting diversity and social responsibility yield superior ROE and ROA results, mainly when revenue per share is high. According to [70], firm dimensions control the ideal leverage and social responsibility combinations to generate better profits for large corporate entities while producing weaker positive ROA outputs throughout the analysed period. In [71], it was revealed that companies that initiate social initiatives obtain better ROA performance than ROE, with higher revenue per share intensifying this effect. Thus, research studies of moderate complexity show that social forces transform accounting outcomes into complex financial results.
The financial performance of Saudi listed financial indicators, including ROE and ROA, presents interactive associations which are driven by the size of the participating businesses combined with revenue tracking, either strengthening or weakening these effects. Businesses with royal family board members achieve better ROE performance as royal ties strengthen stakeholder trust, yet produce mixed results for ROA, according to [39]. In [72], it was found that elements affecting social welfare—including employee well-being and customer happiness—generate enhanced returns on assets and equity for more prominent insurance firms, producing higher revenue per share. In [73] it was demonstrated that Shariah compliance, as a socially motivated factor, enhances ROE more than ROA in non-financial enterprises, with company size strengthening this link. In [7], social disclosure as part of ESG policies was reported to increase ROE and ROA, especially in high-revenue enterprises, demonstrating broad-based performance gains. These results collectively indicate that social factors have a significant but diverse impact on financial performance, with firm size and revenue per share functioning as crucial moderators of their effects on ROE and ROA in Saudi listed companies.
As a result, the following hypothesis is stated:
H2: 
Social factors significantly influence the financial performance of Saudi listed companies.

3.2.3. Governance Factors (G) and Financial Performance

Governance factors significantly impact ROE and ROA measurements for Saudi listed companies, with firm size and revenue per share increasing these impacts. In [74], it was revealed that effective corporate governance practices enhance ROE and ROA, while more substantial firms benefit to a greater extent as their dimension and extent create additional challenges. According to [75], ROE grows due to board attributes under Saudi corporate governance standards, with firm size having exponential effects on ROE; however, it manifests minimal changes in ROA. Agent performance evolution, manifested through leadership change, results in improved corporate effectiveness, especially in organisations with elevated revenue per share metrics, which boosts ROA according to [76]. In [77], how governance reforms, improved audit quality, and more substantial board features boost ROE and ROA was revealed, where this effect is more significant among companies with higher revenue per share and larger market capitalisation. Hence, financial results depend heavily on management rules, with firm size and revenue per share further influencing these impacts.
A strong corporate governance framework leads to improved Return on Equity and Return on Assets performance within Saudi listed firms when researchers accounted for firm size and revenue per share. Insurance companies benefit from better business control mainly through big-firm gains that raise ROE but tend to show a slight change in ROA [78]. A previous study [79] demonstrated how strong corporate governance directly affects ROE and ROA, showing that larger companies have stronger relationships between revenue per share. High-leveraged firms and those with a more significant size present gains in ROE due to governance quality, while ROA performance gains are influenced by revenue considerations [80]. According to [81], ownership concentration and managerial ownership are other governance variables that increase ROE, with firm size and revenue per share acting as accelerating factors. Therefore, research indicates that firm governance is key to financial performance, moderating the essential influences of firm size and revenue per share.
As a result, the following hypothesis is stated:
H3: 
Governance factors significantly influence the financial performance of Saudi listed companies.

4. Methodology

4.1. Sample Selection and Data Collection

The methodology for this study was based on a sample of Saudi listed companies, resulting in a final dataset of 450 firm-year observations spanning the period from 2018 to 2023, encompassing 75 unique firms. The data for the study were obtained from the Refinitiv Eikon Database. The selected period captures the accelerating pace of change—particularly in corporate governance—following the announcement of Saudi Vision 2030 [33].

4.2. Data Analysis Procedures

The data analysis commenced with a statistical overview of the dataset. Subsequently, the correlation matrix was examined to explore the relationships among all variables in the model. Upon confirming the validity of the data, multiple regression analysis was conducted to determine the direction and strength of these relationships. Finally, a series of robustness tests were performed to verify the consistency and reliability of the results.

4.3. Dependent Variables: ROA and ROE

Return on Equity (ROE) and Return on Assets (ROA), two prominent accounting-based metrics, are employed in this study to operationalize the dependent variable of firm financial performance.
While ROE represents the return given to equity shareholders, ROA indicates how well a business manages its assets to produce profits. By capturing both internal operational efficiency and external investor returns, the use of both metrics provides a more comprehensive picture. This approach aligns with accepted practices in the literature on finance and governance [82].

4.4. Independent Variable: Environmental, Social, and Governance

This study’s independent variable is the amount of Environmental, Social, and Governance (ESG) disclosure provided by a company, which is further broken down into three main pillars to allow for a more detailed analysis.
The (E) pillar reflects how a business affects the natural world; this includes aspects such as how it uses resources, how much it pollutes, and what it does about climate change.
The (S) pillar looks at how well a company manages its relationships with important people, such as its employees, suppliers, customers, and the communities where it does business.
The (G) pillar refers to the rules and systems that a company uses to run and control itself, such as the structure of the board, the rights of shareholders, and how people should act [82].
The research recognises that the impacts of these components on financial performance may vary, and thus, analyses them individually. This three-part operationalisation fits with what is already known in the fields of finance and governance, and enables us to better test different hypotheses about how each dimension affects the outcome [83].

4.5. Control Variables: Firm Size, Revenue per Share, and Leverage

To ascertain the distinct impact of ESG disclosures on financial performance, the study includes two principal control variables recognised for their influence on profitability.
The size of a company is determined by taking the natural logarithm of its total assets while considering the size or scale of its operations. Larger companies may have better access to capital, economies of scale, and different risk profiles than smaller companies. All these factors can affect performance metrics such as ROA and ROE.
RPS is a measure of a company’s sales efficiency and market power compared with its equity base, which is calculated by dividing the total revenue by the number of outstanding shares. This variable measures how well the company can grow its top line, which is a key factor in profitability that differs from ESG initiatives in theory.
Adding these controls—which both had strong positive correlations with the performance measures in the initial analysis—helps to ensure that the estimated coefficients for the ESG variables are not confounded with these basic characteristics of the firm.
The study employs a multiple regression model for hypothesis testing. Two separate models were run for the two dependent variables (ROA and ROE). The general form of the model is
Financial Performance = f(Environmental, Social, Governance, Control Variables)
The specific econometric models are as follows (Table 1):
Model 1 (ROA):
ROAit = β0 + β1Eit + β2Sit + β3Git + β4Sizeit + β5RPSit + β5Leverageit + ui + εit
Model 2 (ROE):
ROEit = β0 + β1Eit + β2Sit + β3Git + β4Sizeit + β5RPSit + β5Leverageit + ui + εit
  • where
  • i denotes the company, and t denotes the year.
  • β0 is the constant term.
  • β1 to β5 are the coefficients to be estimated.
  • ui is the unobserved, time-invariant individual effect for company i (controlled for in the fixed effects model).
  • εit is the idiosyncratic error term.
Table 1. Definitions of variables.
Table 1. Definitions of variables.
VariableAcronymMeasurement
Independent Variable
EnvironmentalERefers to how a company manages its impact on the environment.
SocialSFocuses on how a company manages relationships with employees, suppliers, customers, and communities.
GovernanceGRefers to how a company is directed and controlled.
Dependent Variable
Return of AssetsROAThe ratio of net income to total assets.
Return on EquityROEThe ratio of net income to total equity.
Control Variables
Firm SizeSIZEThe scale or magnitude of a company, defined as the natural log of total assets.
Revenue per ShareRPSHow much sales the company generates for each outstanding share.
LeverageLeverageUse of borrowed funds to increase the potential return on an investment.

4.6. Descriptive Analysis

Table 2 presents the descriptive statistics for all variables employed in the study, based on 450 firm-year observations from Saudi listed companies. Notably, the environmental (E) scores range from 0.00 to 83.60, with a mean of 28.92 (SD = 25.14), indicating substantial variation in environmental practices among sampled firms. This considerable dispersion suggests that while some Saudi companies have embraced environmental initiatives—potentially aligned with Saudi Vision 2030’s sustainability goals [83]—others maintain minimal environmental engagement.
Social (S) scores demonstrate a mean of 32.18 (SD = 21.37), with values spanning from 0.25 to 86.02, while Governance (G) scores exhibit a higher mean of 53.37 (SD = 22.06), suggesting that governance practices are relatively more developed than environmental or social dimensions among Saudi listed companies. This pattern aligns with observations that governance mechanisms often precede environmental and social investments in emerging markets [84].
The financial performance variables reveal that the sample firms achieved mean ROA of 5.1% (SD = 7.9%) and mean ROE of 10.8% (SD = 22.1%), indicating reasonable profitability with considerable variation. The negative minimum values for both ROA (−15.2%) and ROE (−91.0%) confirm the inclusion of financially distressed firms. Leverage also shows substantial variation (mean = 4.62, SD = 15.47) with a notable maximum of 159.20, suggesting that some firms employ aggressive debt financing. Firm size (natural logarithm) exhibits relatively low variation (mean = 22.21, SD = 1.92), indicating a relatively homogeneous sample in terms of firm scale. The RPS scores range from 0.05 to 30.98 (mean = 5.41, SD = 6.83), reflecting considerable differences in research-related activities.

4.7. Correlation Matrix

The correlation matrix provides preliminary insights into the relationships among the considered variables. Environmental (E) and social (S) scores demonstrate a strong positive correlation (r = 0.68, p < 0.01), suggesting that firms investing in environmental practices simultaneously pursue social initiatives. This complementarity supports the integrated nature of ESG frameworks [85].
Governance (G) correlates positively with both E (r = 0.41, p < 0.01) and S (r = 0.46, p < 0.01), though more moderately, indicating that governance practices may develop independently to some extent.
Notably, the correlations between ESG dimensions and financial performance measures are generally weak. Environmental scores show negligible negative correlations with ROA (r = −0.05) and ROE (r = −0.03), while social scores correlate positively but modestly with ROE (r = 0.15, p < 0.01). Governance demonstrates no significant correlation with either performance measure. These weak bivariate relationships underscore the importance of multivariate analysis to control for confounding factors [86].
Among the control variables, leverage exhibits significant negative correlations with S (r = −0.15, p < 0.01), G (r = −0.11, p < 0.05), and ROA (r = −0.26, p < 0.01), consistent with theoretical predictions that debt financing constrains both sustainability investments and profitability. Firm size correlates positively with all ESG dimensions (E: r = 0.36; S: r = 0.30; G: r = 0.44; all p < 0.01), supporting the resource-based view that larger firms possess greater capacity for sustainability initiatives [85]. RPS demonstrates consistent positive correlations with all ESG dimensions and both performance measures, suggesting its appropriateness as a control variable. Importantly, the correlation coefficients among independent variables remain below conventional multicollinearity thresholds, with the highest correlation (E-S: 0.68) suggesting no severe multicollinearity concerns for subsequent regression analyses.

Multicollinearity Diagnostics: Variance Inflation Factor (VIF) Analysis

Variance Inflation Factor (VIF) analysis was employed to detect the presence of multicollinearity among the explanatory variables. Multicollinearity occurs when predictor variables are highly correlated, potentially distorting regression coefficient estimates and inflating standard errors. While the correlation matrix (Table 3) revealed moderate correlations between some ESG dimensions—particularly between Environmental and Social scores (r = 0.68)—formal VIF testing provides a more rigorous assessment of multicollinearity concerns.
We report the Variance Inflation Factor (VIF) statistics for the independent variables in the regression model in Table 4. Following established guidelines [87], VIF values exceeding 10 indicate problematic multicollinearity, while values above 5 warrant careful examination.
All Variance Inflation Factor (VIF) values are substantially below the conventional threshold of 10, with the maximum value of 2.18 observed for Social ratings. The mean VIF of 1.55 further indicates that the independent variables exhibit acceptable levels of intercorrelation.
The moderate correlation between Environmental and Social scores identified in the correlation matrix (r = 0.68) does not translate into problematic VIF values, as the VIF for Environmental scores (2.07) and Social scores (2.18) remain well within acceptable limits. This suggests that while these ESG dimensions are related—consistent with theoretical expectations that firms pursuing environmental sustainability often simultaneously invest in social initiatives—they capture sufficiently distinct aspects of corporate sustainability to permit separate examination of their effects on financial performance.
Among the control variables, Leverage demonstrates the lowest VIF (1.05), indicating minimal shared variance with other predictors. Revenue per Share (VIF = 1.12) and Firm Size (VIF = 1.38) similarly show low multicollinearity, supporting their inclusion as distinct control variables capturing different aspects of firm characteristics.
These diagnostic results provide confidence that the coefficient estimates in the fixed effects regression models (Table 5 and Table 6) are not distorted by multicollinearity, and that the observed significant relationships—particularly the positive association between Social factors and both ROA and ROE—represent genuine effects rather than statistical artefacts arising from predictor intercorrelations.

4.8. Regression Analysis

4.8.1. Fixed Effects Regression Results for ROA

Table 5 presents the regression results with ROA as the dependent variable. The model has an R-squared value of 0.214, which means that the independent variables explain about 21.4% of the variation in ROA within the firm. The model as a whole is statistically significant (F-statistic = 23.45, p < 0.001).
Table 5 presents the fixed effects regression results examining ESG determinants of ROA. The model demonstrates statistical significance (F = 9.87, p < 0.01) with a within-firm R-squared value of 0.122, indicating that the predictors explain approximately 12.2% of the temporal variation in ROA within firms.
Among ESG dimensions, only social factors (S) exhibit a statistically significant positive relationship with ROA (β = 0.0004, p < 0.05). This finding suggests that improvements in social practices—potentially encompassing employee relations, community engagement, and human rights—generate operational efficiencies that enhance ROA. This result aligns with the findings of [83] in Saudi heavy-polluting companies, where ESG performance positively influenced financial outcomes. Similarly, a study of Saudi manufacturing firms documented significant positive associations between sustainability reporting and ROA [88].
Environmental factors (E) demonstrate a negative but insignificant coefficient (β = −0.0001, p = 0.651), while governance (G) shows a positive yet insignificant relationship (β = 0.0002, p = 0.264). These non-significant findings may reflect the short-term costs associated with environmental investments, which have not yet materialised as performance improvements [86]. In [86], it was observed that ESG benefits in U.S. IT firms emerged only over long-term horizons, suggesting that environmental investments by Saudi firms may require extended observations to provide evidence for the generation of returns.
Among the control variables, leverage exhibits a strong negative relationship with ROA (β = −0.0013, p < 0.01), consistent with the correlation analysis and theoretical predictions that debt servicing requirements constrain profitability. Firm size shows no significant relationship (β = −0.0026, p = 0.495), while RPS demonstrates a robust positive association (β = 0.0023, p < 0.01), confirming that research-oriented activities complement operational profitability.
The constant term (β = 0.1250, p = 0.137) is insignificant, suggesting that the model specifications adequately capture the determinants of ROA without systematically omitted variable bias.

4.8.2. Fixed Effects Regression Results for ROE

Table 6 presents the results of the fixed-effects regression analysis with ROE, revealing both similarities and differences when compared with the ROA model. The model achieves statistical significance (F = 9.40, p < 0.01) with a within-firm R-squared value of 0.117, indicating comparable explanatory power to the ROA model.
Consistent with the ROA findings, social factors (S) demonstrate a significant positive relationship with ROE (β = 0.0015, p < 0.05), although the coefficient is substantially larger. This amplified effect suggests that social initiatives influence equity returns through channels beyond operational efficiency, potentially including enhanced investor confidence and reduced cost of capital [89]. The meta-analysis by Singh et al. [90] confirmed that corporate sustainability practices positively influence firm performance across multiple dimensions, with stakeholder theory providing explanatory power for these relationships.
Environmental factors (E) again show a negative but insignificant coefficient (β = −0.0004, p = 0.471), while governance (G) remains insignificant (β = 0.0005, p = 0.371). The persistent insignificance of environmental and governance dimensions may reflect the early stage of ESG integration among Saudi firms, where social practices represent the most visible and immediately impactful sustainability initiatives.
Notably, leverage loses statistical significance in the ROE model (β = −0.0001, p = 0.862), contrasting sharply with its strong negative effect on ROA. This divergence suggests that, while debt servicing directly impacts operational profitability (ROA), its effect on equity returns is moderated by capital structure decisions and financial leverage effects inherent in the ROE calculation. Firm size remains insignificant (β = −0.0141, p = 0.204), while RPS demonstrates an even stronger positive relationship with ROE (β = 0.0085, p < 0.01) than with ROA, confirming that research-related activities generate substantial equity returns.
The constant term approaches significance (β = 0.4070, p = 0.094), potentially indicating modest omitted variable bias or model misspecification, although this does not undermine the primary findings.
The first hypothesis, proposing that environmental factors significantly influence financial performance, is not supported by the empirical analysis. Environmental scores fail to achieve statistical significance in either the ROA model (p = 0.651) or the ROE model (p = 0.471). This finding contrasts with meta-analytic evidence that environmental disclosures positively influence firm performance [84]; however, contextual factors may explain this discrepancy. Saudi Arabia’s heavy-polluting industries face unique environmental challenges, and the costs of environmental compliance may temporarily outweigh benefits [83]. Furthermore, the long-term nature of environmental returns, as documented in [86], suggests that the benefits of environmental investments may not have yet materialised in the study period. The resource-based view [85] posits that environmental capabilities generate competitive advantage only when they become valuable, rare, and inimitable—a process requiring sustained investment and organisational learning.
In contrast, the second hypothesis receives strong empirical support. Social factors demonstrate significant positive relationships with both ROA (β = 0.0004, p < 0.05) and ROE (β = 0.0015, p < 0.05), confirming that social initiatives enhance financial performance among Saudi listed companies. This finding aligns with stakeholder theory [88], which posits that meeting the expectations of stakeholders—including employees, communities, and society—generates goodwill, reduces conflict, and enhances operational efficiency. The result is consistent with both studies in the Saudi context [83,88] and broader meta-analytic evidence [83,89]. The stronger effect on ROE suggests that social practices particularly enhance investor confidence and equity valuation, potentially through improved corporate reputation and reduced stakeholder-related risks. Furthermore, evidence from a systematic review confirms that social disclosures positively influence firm performance across diverse institutional contexts [91].
The third hypothesis, concerning governance factors, receives no empirical support, with governance scores failing to achieve significance in either regression model (ROA: p = 0.264; ROE: p = 0.371). This non-finding may reflect several considerations. First, governance mechanisms in Saudi listed companies may be relatively homogeneous due to regulatory requirements, reducing the variation necessary to detect performance effects. Second, governance practices may influence financial performance indirectly; for example, through risk reduction rather than profitability enhancement [89]. Third, the benefits of good governance may accrue primarily to stakeholders other than shareholders, such as debtholders or regulators, without directly enhancing accounting returns. The correlation matrix reveals that governance correlates positively with firm size, suggesting that larger firms—potentially with more sophisticated governance structures—do not necessarily achieve superior profitability.

5. Conclusions

This study investigated the influences of Environmental, Social, and Governance factors on the financial performance of Saudi listed companies over the period from 2018 to 2023, providing empirical evidence from one of the largest and most rapidly developing capital markets in the Gulf Cooperation Council region. The analysis uncovered nuanced relationships between environmental, social, and governance (ESG) dimensions and corporate financial performance, thereby contributing to the academic debate on the viability of sustainable business practices within emerging markets.
The empirical results demonstrated that social factors exert a significant positive influence on both ROA and ROE, confirming that investments in employee relations, community engagement, and broader social responsibility initiatives generate tangible financial benefits for Saudi listed firms. This finding aligns with stakeholder theory-based predictions that meeting the expectations of diverse stakeholder groups enhances operational efficiency, reduces conflict costs, and strengthens corporate reputation, ultimately translating into improved profitability. The stronger effect observed for Return on Equity suggests that social practices particularly enhance investor confidence and equity valuation, potentially through improved risk profiles and reduced cost of capital. These results are consistent with prior research in the Saudi context and provide empirical support for the continued emphasis on social responsibility within the Vision 2030 framework.
Conversely, the study found no significant relationship between environmental factors and financial performance, nor between governance factors and the selected performance metrics. The non-significance of environmental factors may reflect the early stage of environmental investment among Saudi firms—where compliance costs and capital expenditures have not yet yielded measurable returns—or may indicate that environmental benefits require longer time horizons than the six-year period considered in this study to materialise. The persistent insignificance of governance factors, despite relatively higher mean scores among the sample firms, suggests that governance mechanisms in Saudi listed companies may be sufficiently homogeneous due to regulatory requirements that their performance-differentiating effects are limited, or that governance benefits accrue primarily through risk reduction and stakeholder protection rather than direct profitability enhancement.
The results for the control variables reinforce the importance of revenue generation capacity as a driver of financial performance, while the differential effect of leverage on ROA versus ROE highlights the complex interplay between capital structure decisions and profitability metrics. Overall, the study’s findings suggest that while the ESG agenda has gained substantial traction in Saudi Arabia, the financial returns with respect to sustainability investments are presently concentrated in the social dimension, while extended timeframes or alternative measurement approaches may be required to effectively capture environmental and governance benefits.

5.1. Limitations

This work provides significant contributions to the literature, is subject to several limitations that warrant acknowledgment and should inform the interpretation of the reported findings. First, the six-year observation period from 2018 to 2023, while capturing the post-Vision 2030 acceleration in ESG practices, may be insufficient to fully capture the long-term financial returns associated with environmental and governance investments. Prior research has suggested that sustainability initiatives—particularly those related to environmental infrastructure and governance restructuring—often require extended implementation periods before their performance effects become observable in accounting-based metrics. Second, the sample composition of 75 firms, while representative of actively traded companies, excludes smaller listed entities and non-listed firms, potentially limiting the generalisability of findings to the broader Saudi corporate sector. Third, the reliance on Refinitiv Eikon ESG scores, while consistent with established research practice, introduces potential measurement bias associated with the coverage criteria, scoring methodologies, and potential self-reporting biases inherent in commercial ESG databases. Fourth, despite the inclusion of key control variables, the possibility of omitted variable bias remains, as unobserved factors such as corporate culture, managerial quality, or industry-specific dynamics may influence both ESG practices and financial performance. Fifth, the study’s reliance on accounting-based performance indicators—specifically, Return on Assets (ROA) and Return on Equity (ROE)—provides an inherently retrospective view of firm performance. Consequently, it does not consider market-based metrics such as Tobin’s Q or stock returns, which may capture distinct facets of the relationship between ESG factors and corporate financial performance. Sixth, the single-country context, while providing depth and institutional specificity, limits cross-national comparability and the generalisability of findings to other emerging or developed markets with different regulatory frameworks, cultural contexts, and economic structures. Finally, the potential for reverse causality—whereby better-performing firms invest more in ESG practices, rather than ESG practices driving performance—cannot be definitively ruled out given the observational research design.

5.2. Recommendations

Based on the findings and limitations of this study, several recommendations are proposed for corporate managers, policymakers, investors, and future researchers. For corporate managers in Saudi listed companies, the significant positive relationship between social factors and financial performance suggests that continued investment into employee welfare, community engagement, and broader social responsibility initiatives represents a value-enhancing strategy rather than merely a compliance exercise. Managers should consider integrating social metrics into their performance evaluation systems and strategic planning processes to fully leverage the operational and reputational benefits documented in this study. Regarding environmental and governance dimensions, managers should maintain commitment to these initiatives while recognising that their financial returns may require longer time horizons; patient capital allocation and sustained investment in environmental efficiency and governance infrastructure remain important for long-term competitiveness and risk management.
For policymakers and regulators—particularly the Saudi Capital Market Authority and the Ministry of Investment—these findings support continued efforts to enhance ESG disclosure frameworks while recognising that different ESG dimensions may follow distinct trajectories regarding their relationships with financial outcomes. The significant findings for the social dimension validate Vision 2030′s emphasis on social development and quality of life initiatives, suggesting that regulatory incentives for social disclosure and practice improvement are well-founded. However, the non-significant environmental and governance findings indicate that additional policy measures may be necessary to accelerate the translation of these investments into financial returns, potentially including capacity-building programmes, technical assistance for environmental reporting, and enhanced shareholder protection mechanisms that more directly link governance quality to market valuations.
For investors—both domestic and international—the findings suggest that when ESG factors are integrated into investment decisions, the heterogeneous effects of different sustainability dimensions should be taken into consideration. The significant social–performance link supports the inclusion of social criteria in investment analyses, while the non-significant environmental and governance findings caution against assuming uniform financial benefits across all ESG categories. Investors should consider extended time horizons when evaluating environmental investments and complement ESG score analysis with fundamental analyses of firm-specific sustainability strategies and implementation capabilities.
For future researchers, this study identifies several promising avenues for further investigation. Extended longitudinal studies covering longer time periods would help in determining whether environmental and governance investments ultimately generate financial returns, consistent with theoretical predictions. Comparative studies across Gulf Cooperation Council countries would illuminate the extent to which the institutional context moderates ESG–performance relationships. Research employing market-based performance metrics alongside accounting measures can be expected to provide a more comprehensive assessment of how different stakeholder groups value sustainability practices. Qualitative research methods—including case studies and managerial interviews—could complement the quantitative findings reported here by illuminating the mechanisms through which social practices translate into improved financial outcomes. Finally, investigations into the potential moderating effects of ownership structure, industry characteristics, and board composition on ESG–performance relationships would further enrich our understanding of the boundary conditions under which sustainability investments generate financial returns in emerging market contexts.

Author Contributions

Methodology, A.M.H.M.; Formal analysis, H.A.A.A.H.; Resources, N.B.M.A.; Data curation, M.A.A.; Writing—original draft, H.A.A. All authors have read and agreed to the published version of the manuscript.

Funding

The authors extend their appreciation to Prince Sattam bin Abdulaziz University for funding this research work through the project number (PSAU/2024/02/31439).

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The raw data supporting the conclusions of this article will be made available by the authors on request.

Conflicts of Interest

The authors declare no conflicts of interest.

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Table 2. Descriptive statistics.
Table 2. Descriptive statistics.
VariableNMeanStd. Dev.MinMax
E45028.9225.140.0083.60
S45032.1821.370.2586.02
G45053.3722.062.8295.21
ROA4500.0510.079−0.1520.316
ROE4500.1080.221−0.9100.760
Leverage4504.6215.47−12.02159.20
Size (ln)45022.211.9219.1227.32
RPS4505.416.830.0530.98
Table 3. Pearson correlation matrix.
Table 3. Pearson correlation matrix.
VariableESGROAROELeverageSizeRPS
E1.00
S0.68 ***1.00
G0.41 ***0.46 ***1.00
ROA−0.050.080.071.00
ROE−0.030.15 ***0.050.76 ***1.00
Leverage−0.09−0.15 ***−0.11 **−0.26 ***−0.021.00
Size0.36 ***0.30 ***0.44 ***−0.08−0.040.031.00
RPS0.19 ***0.25 ***0.23 ***0.21 ***0.28 ***−0.080.051.00
*** p < 0.01, ** p < 0.05.
Table 4. Variance Inflation Factor (VIF) Results.
Table 4. Variance Inflation Factor (VIF) Results.
VariableVIFTolerance (1/VIF)
E2.070.483
S2.180.459
G1.480.676
Leverage1.050.952
Size1.380.727
RPS1.120.893
Table 5. Fixed effects regression results for ROA.
Table 5. Fixed effects regression results for ROA.
Independent VariablesCoefficientStd. Errort-Statisticp-Value
E−0.00010.0002−0.450.651
S0.0004 **0.00022.140.033
G0.00020.00021.120.264
Leverage−0.0013 ***0.0002−5.830.000
Size (ln)−0.00260.0038−0.680.495
RPS (USD)0.0023 ***0.00054.790.000
Constant0.12500.08391.490.137
Model Statistics
R-squared (within)0.122
F-statistic9.87 ***
Observations450
*** p < 0.01, ** p < 0.05.
Table 6. Fixed effects regression results for ROE.
Table 6. Fixed effects regression results for ROE.
Independent VariablesCoefficientStd. Errort-Statisticp-Value
E−0.00040.0006−0.720.471
S0.0015 **0.00062.450.015
G0.00050.00050.900.371
Leverage−0.00010.0007−0.170.862
Size (ln)−0.01410.0111−1.270.204
RPS (USD)0.0085 ***0.00146.140.000
Constant0.40700.24301.680.094
Model Statistics
R-squared (within)0.117
F-statistic9.40 ***
Observations450
*** p < 0.01, ** p < 0.05.
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MDPI and ACS Style

Alqahtani, H.A.; Alghamadi, M.A.; Ali Hussin, H.A.A.; Ali, N.B.M.; Musa, A.M.H. The Influence of Environmental, Social, and Governance Factors on the Financial Performance of Saudi Listed Companies. Sustainability 2026, 18, 2976. https://doi.org/10.3390/su18062976

AMA Style

Alqahtani HA, Alghamadi MA, Ali Hussin HAA, Ali NBM, Musa AMH. The Influence of Environmental, Social, and Governance Factors on the Financial Performance of Saudi Listed Companies. Sustainability. 2026; 18(6):2976. https://doi.org/10.3390/su18062976

Chicago/Turabian Style

Alqahtani, Hassan Ali, Mohammed Ali Alghamadi, Hiba Awad Alla Ali Hussin, Nadia Bushra Mohammed Ali, and Asaad Mubarak Hussien Musa. 2026. "The Influence of Environmental, Social, and Governance Factors on the Financial Performance of Saudi Listed Companies" Sustainability 18, no. 6: 2976. https://doi.org/10.3390/su18062976

APA Style

Alqahtani, H. A., Alghamadi, M. A., Ali Hussin, H. A. A., Ali, N. B. M., & Musa, A. M. H. (2026). The Influence of Environmental, Social, and Governance Factors on the Financial Performance of Saudi Listed Companies. Sustainability, 18(6), 2976. https://doi.org/10.3390/su18062976

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