The Triangulation of Shariah-compliancy, ESG-transparency, and the Financial Performance of Malaysia Islamic Equities.

This study examines the impact of environmental, social and governance (ESG) practices on the financial performance of Malaysian Shariah-compliant companies from 2017 to 2021. A Static Panel Data regression models are employed to examine the effect of ESG practices on the financial performance of Shariah-screened equities and the moderating effects of ESG-Leaders-Laggards on the relationship between ESG practices of Islamic companies on value maximisation. This study finds a positive relationship between ESG practices and firm financial performance, suggesting Shariah-screened stocks combined with ESG-screened, particularly firms with higher social engagement, is value-creating. The authors also find varying evidence on the subcomponents, namely Environmental (negative), Social (positive), and Governance (not related). Finally, it is also evident that ESG-Leaders/Laggards (scores of higher/lower than 50) positively/negatively enhance the ESG impact on financial performance.