Environmental, Social, and Governance (ESG), Green Finance, and Firm Value: Evidence from Banking Sector in ASEAN Countries

Abstract

Studies examining the moderating role of green finance in the relationship between ESG and firm value in the banking sector across ASEAN countries remain relatively limited. Therefore, this study analyses the effects of environmental, social, and governance (ESG) and green finance on firm value, while also testing the moderating role of green finance on the relationship between ESG and firm value in the banking sector across the ASEAN-5 (Indonesia, Malaysia, Singapore, Thailand, and Philippines) from 2020 to 2024. The sample consists of 46 banks with 177 unbalanced panel observations. Data were obtained from LSEG Workspace and sustainability reports. Firm value is proxied by Tobin’s Q, while PBV is used as a robustness test. Panel data regression analysis using a fixed-effects model and interaction analysis were employed to test the hypotheses. The results show that ESG, ESG pillars individually, and green finance do not have a significant positive effect on firm value. However, green finance significantly moderates the relationship between ESG and firm value. These findings indicate that green finance acts as a mechanism that enhances the effectiveness of ESG implementation in creating firm value, thereby enriching the literature on the relationship between ESG and firm value in the ASEAN banking sector.