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Does Sustainable Finance Work on Banking Sector in ASEAN?: The Effect of Sustainable Finance and Capital on Firm Value with Institutional Ownership as a Moderating Variable

Author

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  • Mochamad Roland Perdana

    (Management Department, Faculty of Economics and Business, Universitas Brawijaya, Kota Malang 65145, Indonesia)

  • Achmad Sudiro

    (Management Department, Faculty of Economics and Business, Universitas Brawijaya, Kota Malang 65145, Indonesia)

  • Kusuma Ratnawati

    (Management Department, Faculty of Economics and Business, Universitas Brawijaya, Kota Malang 65145, Indonesia)

  • Rofiaty Rofiaty

    (Management Department, Faculty of Economics and Business, Universitas Brawijaya, Kota Malang 65145, Indonesia)

Abstract

Management in the banking industry is not solely focused on financial performance but also on the sustainability of their portfolios. To achieve this, banks need to incorporate sustainable finance into their balance sheet. In addition, a global phenomenon has emerged where investors have demanded the inclusion of sustainable finance in portfolios. This financial instrument served to support the global agreement on climate change, which they were committed to making a reality. The impact of sustainable finance on firm value remains a question. Therefore, this study aimed to examine the effect of sustainable finance and capital on firm value within the banking industry, focusing on entities listed on the ASEAN stock market from 2015 to 2021. To assess investor demand for involvement in sustainable finance, a moderating variable was included in the model. Furthermore, this study used a quantitative design and a purposive sampling technique with panel data regression analysis for the hypothesis testing. The results showed that sustainable finance and capital had a significant effect on firm value. Institutional ownership moderated the relationship between sustainable finance and firm value, although it did not moderate the link between capital and firm value. This indicated that banks prioritized sustainable finance due to its positive impact on their operations, ultimately leading to an improvement in firm value. Furthermore, institutional ownership influenced the relationship between sustainable finance and firm value, as banks strived to comply with international society or enhance firm value. This study incorporated profitability ratios and firm size as the control variables.

Suggested Citation

  • Mochamad Roland Perdana & Achmad Sudiro & Kusuma Ratnawati & Rofiaty Rofiaty, 2023. "Does Sustainable Finance Work on Banking Sector in ASEAN?: The Effect of Sustainable Finance and Capital on Firm Value with Institutional Ownership as a Moderating Variable," JRFM, MDPI, vol. 16(10), pages 1-19, October.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:10:p:449-:d:1262342
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    References listed on IDEAS

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    1. Bhakti Agarwal & Rahul Singh Gautam & Pooja Jain & Shailesh Rastogi & Venkata Mrudula Bhimavarapu & Saumya Singh, 2023. "Impact of Environmental, Social, and Governance Activities on the Financial Performance of Indian Health Care Sector Firms: Using Competition as a Moderator," JRFM, MDPI, vol. 16(2), pages 1-11, February.
    2. Henri Fraisse & Mathias Lé & David Thesmar, 2020. "The Real Effects of Bank Capital Requirements," Management Science, INFORMS, vol. 66(1), pages 5-23, January.
    3. Irene Monasterolo, 2020. "Climate Change and the Financial System," Annual Review of Resource Economics, Annual Reviews, vol. 12(1), pages 299-320, October.
    4. repec:eme:ijlma0:ijlma-05-2017-0109 is not listed on IDEAS
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    1. Kumaran Vijayan & Dr. Rima Melini Md Tamin, 2025. "The impact of Green Financing, Fintech Adoption, Green Innovation and Corporate Social Responsibility on Bank Environmental Performance in Malaysia," Journal of Environment, CARI Journals Limited, vol. 5(4), pages 1-12.

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