Environmental Social Governance (ESG) and Firm Value: A Case of Southeast Asian Countries

Abstract

This dissertation investigates the relationship between Environmental, Social, and Governance (ESG) performance and firm value across six Southeast Asian countries—Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Vietnam—over the period 2008–2024. ESG performance is disentangled into short-term ESG, long-term ESG (permanency), and ESG controversies to capture different time horizons and dimensional aspects of sustainability practices. Using Ordinary Least Squares (OLS) with robust standard errors, the results show that both short-term and long-term ESG performance are positively and significantly associated with firm value, while ESG controversies are insignificant. The results remain robust under Two-Stage Least Squares (2SLS) estimation and alternative firm value measures. Further analyses reveal that ESG performance and permanency enhance firm value only among non–state-owned enterprises (non-SOEs), while the relationship is insignificant for SOEs, suggesting that investors perceive ESG engagement in SOEs as compliance-driven rather than strategic driven. The positive ESG–value link is also stronger for large firms, where visibility and stakeholder pressure are higher. This study contributes to the literature by showing that different time horizons and dimensions of ESG performance yield heterogeneous impacts on firm value, and by revealing how ownership structure influences market responses to ESG activities. Limitations include potential biases in third-party ESG ratings, omitted variables such as governance quality and media exposure, and the possibility of nonlinear ESG–value relationships. Future research could examine how media coverage and market competition moderate the effects of ESG controversies on firm value in emerging markets.