The Impact of Traditional Versus Ethical Investment on Financial Performance of Distressed and Nondistressed Firms in South Asian Emerging Economies

Abstract

This study aims to study the impact of corporate governance (CG) versus ethical investment on the firm performance. It takes into account the firms of Bangladesh, India, and Pakistan for the purpose of the study. A composite variable of CG index and environmental, social, and governance (ESG) index is used to test the impact on the firm performance. Separate country wise and overall analysis is obtained. Regression analysis is used to obtain the results. Two measures of performance are used, one is return on assets (ROA) and other is Tobin Q. The findings of the study reveal that there is an impact of corporate governance index (CGI) on firm performance (overall and country wise) whereas ethical investment (EI) has an impact on firm performance when tested overall and no impact when checked for country wise results. The results further show that on country level, increase in CG measures may lead to positive results, but at the macro level, it may lower the performance. On the other hand, at the micro level, ethical finance may not show its impact; however, at the macro level, it has an impact. The study has implications for the investors and policymakers.

Citation

Zulfiqar, B., Mehmood, M.A., Butt, A.S. and Shafique, A. (2024), "The Impact of Traditional Versus Ethical Investment on Financial Performance of Distressed and Nondistressed Firms in South Asian Emerging Economies", Hunjra, A.I. and Hussainey, K. (Ed.) The Emerald Handbook of Ethical Finance and Corporate Social Responsibility, Emerald Publishing Limited, Leeds, pp. 487-504. https://doi.org/10.1108/978-1-80455-406-720241021