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<p>This paper aims to examine whether Environmental, Social and Governance (ESG) activities, their individual pillars and ESG disclosure exert linear and non-linear effects on the financial performance of ASEAN-5 listed banks, drawing on the resource-based view, stakeholder theory and the too-much-of-a-good-thing effect. The analysis uses an unbalanced panel of 57 listed banks in Indonesia, Malaysia, the Philippines, Singapore and Thailand over 2015–2024. The empirical strategy proceeds in two stages: first, bank fixed-effects regressions with lagged performance and ESG variables are estimated to identify baseline linear relationships; second, dynamic panel threshold models and U-tests are employed to detect regime-dependent and inverted U-shaped ESG effects for overall ESG, the environmental, social and governance pillars and ESG disclosure, while controlling for bank size, capital adequacy, macroeconomic conditions and the COVID-19 period. The findings indicate that overall ESG and its pillars exhibit positive and statistically significant linear associations with financial performance, whereas ESG disclosure does not. Once non-linearity is modelled, all four ESG activity dimensions display statistically significant inverted U-shaped patterns, with performance maximising at intermediate ESG scores and declining beyond these thresholds, while ESG disclosure remains financially insignificant across regimes. The study contributes by demonstrating that ESG-performance relationships in emerging, bank-based systems are concave rather than linear, and by providing empirically grounded thresholds for overall ESG and each pillar in ASEAN-5 banking. Methodologically, it integrates fixed-effects estimation with dynamic panel threshold modelling in a unified ESG-performance setting. The implications are that banks should calibrate ESG activities to economically optimal ranges rather than maximising scores, regulators should emphasise substantive ESG integration over disclosure inflation and investors should avoid interpreting high ESG or disclosure scores as uniformly value-enhancing.</p>

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Do ESG pillars and ESG disclosure have linear and non-linear effects on the financial performance of ASEAN-5 banks?

  • 期刊论文

  • 发表日期：

    2026年1月24日

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  • Mohammed R. M. Salem

摘要

This paper aims to examine whether Environmental, Social and Governance (ESG) activities, their individual pillars and ESG disclosure exert linear and non-linear effects on the financial performance of ASEAN-5 listed banks, drawing on the resource-based view, stakeholder theory and the too-much-of-a-good-thing effect. The analysis uses an unbalanced panel of 57 listed banks in Indonesia, Malaysia, the Philippines, Singapore and Thailand over 2015–2024. The empirical strategy proceeds in two stages: first, bank fixed-effects regressions with lagged performance and ESG variables are estimated to identify baseline linear relationships; second, dynamic panel threshold models and U-tests are employed to detect regime-dependent and inverted U-shaped ESG effects for overall ESG, the environmental, social and governance pillars and ESG disclosure, while controlling for bank size, capital adequacy, macroeconomic conditions and the COVID-19 period. The findings indicate that overall ESG and its pillars exhibit positive and statistically significant linear associations with financial performance, whereas ESG disclosure does not. Once non-linearity is modelled, all four ESG activity dimensions display statistically significant inverted U-shaped patterns, with performance maximising at intermediate ESG scores and declining beyond these thresholds, while ESG disclosure remains financially insignificant across regimes. The study contributes by demonstrating that ESG-performance relationships in emerging, bank-based systems are concave rather than linear, and by providing empirically grounded thresholds for overall ESG and each pillar in ASEAN-5 banking. Methodologically, it integrates fixed-effects estimation with dynamic panel threshold modelling in a unified ESG-performance setting. The implications are that banks should calibrate ESG activities to economically optimal ranges rather than maximising scores, regulators should emphasise substantive ESG integration over disclosure inflation and investors should avoid interpreting high ESG or disclosure scores as uniformly value-enhancing.