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The Impact of ESG on Stock Misvaluation and Capital Structure in Publicly Listed Companies Across Five ASEAN Countries (2019–2023): Evidence Suggesting ESG Enhances Market Efficiency

In: Proceedings of the International Conference on Contemporary Risk Studies (ICONIC-RS 2025)

Author

Listed:
  • Ghina Farha Fasya Ataya

    (Faculty of Economics and Business, Universitas Indonesia)

  • Dewi Hanggraeini

    (Faculty of Economics and Business, Universitas Indonesia)

Abstract

This study aims to analyze the effect of Environmental, Social, and Governance (ESG) scores on stock misvaluation and its impact on the capital structure of companies in five emerging ASEAN countries, namely Indonesia, Malaysia, Thailand, the Philippines, and Vietnam, during the period 2019–2023. The study adopts a quantitative method using an unbalanced panel dataset of 320 companies and applies Fixed Effect regression and Two-Stage Least Squares (2SLS) models to address endogeneity issues. The main variables tested include ESG scores and their three component pillars, stock misvaluation indicators (based on the residual income model and analyst target prices), capital structure (changes in debt and equity, as well as the Debt-to-Equity ratio), with information asymmetry and market sentiment as moderating variables. The research results show that ESG performance has a significantly negative impact on stock misvaluation, where an increase in ESG indicates a decrease in misvaluation, suggesting that stronger ESG performance enhances market pricing efficiency. Additionally, the Governance pillar significantly affects capital structure through the debt-to-equity ratio.

Suggested Citation

  • Ghina Farha Fasya Ataya & Dewi Hanggraeini, 2026. "The Impact of ESG on Stock Misvaluation and Capital Structure in Publicly Listed Companies Across Five ASEAN Countries (2019–2023): Evidence Suggesting ESG Enhances Market Efficiency," Advances in Economics, Business and Management Research, in: Eka Puspitawati & Dewi Hanggraeni & Indra Kusumawardhana & Parulian Sihotang & Nanda Nurdianto (ed.), Proceedings of the International Conference on Contemporary Risk Studies (ICONIC-RS 2025), pages 4-23, Springer.
    • Handle: RePEc:spr:advbcp:978-2-38476-595-9_2
    DOI: 10.2991/978-2-38476-595-9_2
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