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

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.