The strategic synergies between financial and sustainability levers：interaction effects on corporate financial performance in the Japanese chemical industry

Name: Hideki Yamada

keyword: Independent Study

ThaSH: Cost accounting

Classification :.DDC: 658.1552

; ESG performance

ThaSH: Chemical industry

; financial leverage

ThaSH: Industries -- Environmental aspects

; return on equity (ROE)

ThaSH: Costs, Industrial

; Japanese chemical industry

; sustainability strategy

; Resource-Based View (RBV)

; Stakeholder Theory

; Agency Theory

Abstract: This study investigated the strategic synergies between Environmental, Social, and Governance (ESG) performance and financial leverage on corporate financial performance, measured by Return on Equity (ROE), within the Japanese chemical industry. As global capital markets increasingly integrate sustainability criteria, understanding the tangible financial impact of ESG initiatives has become a critical strategic imperative, particularly for high-impact sectors. This research addressed a gap in the literature by examining not only the direct effects of individual ESG pillars but also the moderating role of capital structure in a unique institutional context. Employing a quantitative methodology, this study analyzed a balanced panel dataset of 100 publicly listed Japanese chemical companies over the fiscal years 2022 to 2024—a period marked by significant advancements in Japan’s ESG disclosure regulations. The analysis was theoretically grounded in Resource-Based View (RBV) and Stakeholder Theory, with Agency Theory applied as a complementary framework to explain how capital structure conditions managerial decision-making in ESG investment. The empirical findings, derived from a fixed-effects panel regression model, reveal a nuanced but clear picture. First, Environmental (E) performance demonstrates a strong, positive, and statistically significant relationship with ROE, supporting the RBV proposition that eco-efficiency and environmental innovation are valuable, hardto- replicate resources that enhance profitability. Conversely, Social (S) performance shows no statistically significant effect, and Governance (G) exhibits a weak negative association, indicating that their financial impacts may emerge over longer horizons. The most significant contribution of this study is the confirmation of a positive and highly significant interaction effect between Environmental performance and financial II leverage (D/E ratio). This finding suggests that leverage acts as a strategic amplifier: in firms with higher debt, the positive financial effect of strong environmental performance is magnified. This aligns with Agency Theory, in which the discipline imposed by debt obligations compels managers to select ESG projects with the most certain and measurable financial payoffs. From a managerial standpoint, the findings indicate that sustainability and capital efficiency are not mutually exclusive but complementary. Managers should integrate ESG considerations into capital allocation frameworks, viewing environmental investments as strategic assets rather than discretionary costs. This integration fosters cross-functional collaboration between finance, sustainability, and risk units, enabling firms to achieve sustainability-driven profitability through systemic alignment rather than isolated initiatives. For policymakers, the results highlight the importance of fostering an ecosystem that rewards this strategic integration of sustainability and finance. For investors, the study reinforces the value of a materiality-focused ESG analysis that captures the synergistic interplay between specific ESG pillars and financial structure. Keywords: ESG performance, financial leverage, return on equity (ROE), Japanese chemical industry, sustainability strategy, Resource-Based View (RBV), Stakeholder Theory, Agency Theory

Siam University. Library and Information Resource Center

Address: BANGKOK

Email: library@siam.edu

Name: Warangrat Nitiwannakul

Role: Advisor

Created: 2568

Modified: 2569-06-17

Issued: 2026-06-17

วิทยานิพนธ์/Thesis

application/pdf

eng

DegreeName: International Master of Business Administration (I.M.B.A.)

Level: Master's Degree

Descipline: Financial and Accounting

Grantor: มหาวิทยาลัยสยาม

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