Does ESG Disclosure Improve the Firms’ Financial Performance? Empirical Evidence from Vietnamese Pharmaceutical Firms

Environmental, social, and governance disclosure has become increasingly important as stakeholders pay greater attention to sustainable and ethical business practices. This study examines the effect of ESG disclosure on financial performance (FP) of 46 pharmaceutical companies in the Vietnamese stock market over the period 2015–2024. ESG disclosure scores are measured using content analysis of annual reports based on an industry-specific framework comprising 22 criteria across the environmental, social, and governance pillars. The regression results show that the ESG composite score (ScoreESG) and the individual pillar scores (ScoreE, ScoreS, ScoreG) are all positively and significantly associated with ROA. When ROA is replaced by ROE, the ScoreESG, ScoreE, and ScoreS remain positive and statistically significant, whereas the ScoreG remains positive but is no longer statistically significant. The lagged specification further shows that ESG disclosure in the preceding period remains positively associated with FP in the subsequent period. This study provides further empirical evidence to the ongoing debate on the relationship between ESG disclosure and corporate FP and provides implications for pharmaceutical companies in an emerging economy seeking to improve the quality of ESG disclosure, support FP, and promote sustainable development.