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The Role of Sustainability Disclosure in Enhancing Bank Performance: Evidence from ASEAN Countries

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  • Reni Listyawati
  • Hadri Kusuma
  • Yuni Nustini

Abstract

This study explores the effect of Sustainability Disclosure on Bank Performance by using Bank Risk as a mediating variable in ASEAN countries. Sustainability disclosure, which includes Environmental, Social, and Governance (ESG) aspects, is increasingly recognized as an important factor in improving transparency, risk management, and financial performance. This study uses Risk Density as an indicator of Bank Risk, which is considered more accurate in assessing the quality of asset portfolios and financial stability of banks than traditional methods such as Altman Z-Score. Using panel regression and Sobel Test, the results show that Sustainability Disclosure has a negative effect on Bank Risk, suggesting that higher disclosure correlates with lower risk. In addition, Bank Risk is shown to mediate the effect of sustainability disclosure on Return on Assets, Return on Equity, and Tobin's Q. However, the direct effect of Sustainability Disclosure on bank performance is not significant. This study contributes to the literature by introducing Risk Density as a more comprehensive tool for measuring banking risk and assessing the impact of ESG disclosure. The results support the Stakeholder Theory, which states that effective risk management and transparent disclosure not only strengthen the relationship between firms and stakeholders but also improve long-term financial stability and performance. The findings provide insights for policymakers and stakeholders on the importance of ESG integration in banking business practices in ASEAN countries.

Suggested Citation

  • Reni Listyawati & Hadri Kusuma & Yuni Nustini, 2025. "The Role of Sustainability Disclosure in Enhancing Bank Performance: Evidence from ASEAN Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 21-43.
    • Handle: RePEc:bas:econst:y:2025:i:6:p:21-43
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    More about this item

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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