ESG disclosure and REITs financial performance: a disaggregated static panel analysis

Purpose This study aims to investigate the effect of environmental, social and governance (ESG) disclosures on the financial performance of Malaysian Real Estate Investment Trusts (M-REITs), focusing on how individual ESG dimensions influence market valuation measured by Tobin’s Q. Design/methodology/approach Using a balanced panel dataset of 17 listed M-REITs from 2017 to 2023, the study employs two-stage least squares regression to address potential endogeneity and validate robustness. Separate models are estimated for disclosures to isolate their specific effects. Diagnostic tests for normality, heteroscedasticity and autocorrelation confirm the validity of the models. Findings The results show that environmental and governance disclosures significantly influence firm value, while social disclosures do not. Energy efficiency and board accountability enhance market valuation, whereas greenhouse gas emission reduction and Paris Agreement disclosures exhibit negative effects, suggesting perceived cost implications. The findings indicate that investors reward operational efficiency and credible governance but remain sceptical toward symbolic or compliance-driven ESG initiatives. Practical implications The results highlight the need for REIT managers to link ESG disclosures to measurable financial outcomes, for regulators to strengthen ESG reporting frameworks and for investors to integrate firm-specific ESG quality into valuation models. Originality/value This study provides one of the first empirical examinations of ESG–performance dynamics in the Malaysian REIT market using disaggregated ESG indicators and an instrumental-variable approach, offering nuanced insights into how emerging-market investors price sustainability information.