ASSESSING THE IMPACT OF ENVIRONMENTAL, SOCIAL, GOVERNANCE AND SAFETY FACTORS ON FIRM’S RISK IN PAKISTAN

Abstract

This study investigates the relationship between environmental, social, governance, and safety (ESGS) factors and firm risk within the Pakistani context, utilizing panel data ranging from 2012 to 2021. Proxy such as price volatility measured as dependent variable assess firm risk, and data collection based on dummy variables (0, 1) derived from annual reports represent ESGS practices. We also incorporate control variables such as market value to book ratio, total debts, dividend yield, leverage, firm size, and firm age to account for other potential influences on firm risk. The regression model used for analysis and findings indicate significant relationship between ESGS factors and firm risk. Specifically, environmental and safety factors exhibit negative impacts, suggesting that firms with stronger environmental performance and safety protocols experience lower levels of risk. Conversely, governance factors display a positive influence on firm risk, indicating that strong governance structures may contribute to increased risk levels. Social factors yield mixed results, suggesting an exact relationship between social sustainability practices and firm risk. These findings emphasize the importance of integrating sustainability considerations into risk management strategies for firms operating in Pakistan's dynamic business landscape.