ESG disclosure and financial performance: Empirical study of Vietnamese commercial banks

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Environmental, social, and governance (ESG) disclosure becomes vital for banks to be transparent and accountable for their investments and lending decisions to shareholders, regulators, and society. The potential enhancement of shareholder value through ESG disclosure is still inconsistent. Empirical studies on the association between ESG disclosure and financial performance are mixed and limited in emerging economies. This study aims to examine whether ESG disclosure impacts the financial performance of 24 Vietnamese commercial banks in terms of return on assets (ROA), return on equity (ROE), and net interest margin (NIM). The study uses the feasible generalized least squares estimation method based on panel data from 2018 to 2022. The study employs content analysis on 12 themes related to environmental, social, and governance pillars to score policy disclosure based on the Fair Finance Guide Methodology. The results highlight the positive effects of ESG policy disclosure, individual environment disclosure (E), and individual governance disclosure (G) on bank financial performance. Notably, ESG, E, and G have the largest influence on ROE, with coefficients of 0.051, 0.036, and 0.027, respectively, at a 5% significance level. However, the study does not provide evidence of a statistically significant association between social disclosure and financial performance. These results provide empirical evidence for regulators and bank managers to shape ESG policies and practices aligning with international standards.

Acknowledgment
ESG disclosure score of 11 banks as primary data in this study is conducted under the project coordinated by the Fair Finance Vietnam coalition, as part of Fair Finance International.

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    • Table 1. Summary of variables
    • Table 2. Summary of ESG themes
    • Table 3. Descriptive statistics of variables
    • Table 4. Pearson correlations between variables in the model
    • Table 5. Panel regression results of the impact of ESG commitments on the financial performance of commercial banks
    • Conceptualization
      Bui Thi Thu Loan, Tran Thi Lan Anh, Trang Hoang
    • Data curation
      Bui Thi Thu Loan, Tran Thi Lan Anh, Trang Hoang
    • Formal Analysis
      Bui Thi Thu Loan
    • Methodology
      Bui Thi Thu Loan, Trang Hoang
    • Project administration
      Bui Thi Thu Loan
    • Supervision
      Bui Thi Thu Loan
    • Validation
      Bui Thi Thu Loan, Tran Thi Lan Anh, Trang Hoang
    • Writing – original draft
      Bui Thi Thu Loan
    • Investigation
      Tran Thi Lan Anh
    • Writing – review & editing
      Trang Hoang