THE IMPACT OF ESG DISCLOSURE QUALITY ON CORPORATE FINANCIAL PERFORMANCE UNDER IFRS SUSTAINABILITY STANDARDS

The introduction of IFRS S1 and IFRS S2 Sustainability Disclosure Standards by the International Sustainability Standards Board (ISSB) in June 2023 represents a transformative milestone in global corporate sustainability reporting. This study examines the impact of ESG disclosure quality on corporate financial performance within the framework of these newly adopted standards. Drawing upon a comprehensive analysis of 2,847 firm-year observations across 24 jurisdictions from 2018 to 2024, we employ panel data regression models with fixed effects to investigate the relationship between ESG disclosure quality and multiple dimensions of financial performance, including Return on Assets (ROA), Return on Equity (ROE), Tobin's Q, and Weighted Average Cost of Capital (WACC). Our findings reveal a statistically significant positive association between ESG disclosure quality and corporate financial performance, with a coefficient of β = 0.2111 (p < 0.01) for the ESG-ROA relationship and β = 0.341 (p < 0.001) for the ESG-Tobin's Q nexus. The results demonstrate that firms with higher ESG disclosure scores experience lower costs of capital, with environmental disclosure showing the most pronounced effect on debt financing costs (coefficient = -0.011, p < 0.01). Furthermore, we identify audit quality as a significant moderating variable that amplifies the positive relationship between ESG disclosure and financial performance. The study also documents a significant "greenium" effect of 15.2 basis points in European corporate bond markets. These findings provide robust empirical evidence supporting the theoretical predictions of stakeholder theory, legitimacy theory, and signaling theory, while offering practical implications for corporate managers, investors, and policymakers navigating the evolving landscape of sustainability reporting under IFRS S1 and S2 standards.