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The Mediating Role of Credit Risk in the Relationship Between ESG and Bank Efficiency: Evidence from ASEAN-4

Author

Listed:
  • Desmy Riani
  • Muhamad Zakie Hanifan
  • Rahmat Mulyana Dali

Abstract

This study examines how environmental, social, and governance (ESG) performance affects bank efficiency and the role of credit risk in this relationship across four ASEAN countries (Indonesia, Malaysia, the Philippines, and Thailand) from 2014 to 2023. The research uses the Generalised Method of Moments (2SYS-GMM) to address endogeneity and analyses 320 bank-year observations. The results show that ESG performance has a significant positive impact on bank efficiency. Additionally, credit risk plays a crucial role in how social and governance factors affect efficiency and partially mediates the effect of the environmental pillar and the overall ESG score. These findings suggest that integrating ESG principles into credit risk management can enhance bank operations and support sustainable growth in developing countries. This study contributes to the understanding of how ESG affects bank performance in the ASEAN context, particularly regarding credit risk.

Suggested Citation

  • Desmy Riani & Muhamad Zakie Hanifan & Rahmat Mulyana Dali, 2026. "The Mediating Role of Credit Risk in the Relationship Between ESG and Bank Efficiency: Evidence from ASEAN-4," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 44-65.
    • Handle: RePEc:bas:econst:y:2026:i:3:p:44-65
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    More about this item

    JEL classification:

    • 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
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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