ESG and Firm Value: The Moderating Role of Leverage in ASEAN Non-Financial Firms

Amrie Firmansyah; Ammar Ramadhan

doi:10.2478/sbe-2026-0031

.blurhash-client-img { display: none !important; }

ESG and Firm Value: The Moderating Role of Leverage in ASEAN Non-Financial Firms

Studies in Business and Economics

Volume 21 (2026): Issue 2 (August 2026)

By: Amrie Firmansyah and Ammar Ramadhan

Open Access

|Sep 2026

Abstract

This study examines the effect of Environmental, Social, and Governance (ESG) performance on firm value and the moderating role of leverage in non-financial firms in the ASEAN region. The study employs secondary data obtained from Bloomberg ESG Data Services and firms’ annual reports, comprising 820 firm-year observations from ASEAN-5 countries during the period 2018-2022. Panel data regression analysis is employed to test the direct effect of ESG on firm value and the moderating effect of leverage. Firm value is measured using Tobin’s Q and price-to-book value (PBV), and robustness tests are conducted with lagged ESG variables and alternative firm-value proxies. The results indicate that ESG has a positive and statistically significant effect on firm value, suggesting that stronger ESG performance enhances market valuation and investor confidence in ASEAN firms. Furthermore, leverage weakens the positive effect of ESG on firm value, suggesting that high debt levels reduce ESG’s ability to enhance market valuation. These findings suggest that the ESG-firm value relationship is conditional and influenced by firms’ financial structure and risk profile. This study contributes to the literature by integrating ESG and capital structure perspectives within the context of emerging ASEAN markets.

References

Alsayegh, M. F., Rahman, R. A., & Homayoun, S. (2020). Corporate economic, environmental, and social sustainability performance transformation through ESG disclosure. Sustainability, 12(9), 1–20. https://doi.org/10.3390/su12093910
Search in Google Scholar Back to article
Anabtawi, A., Azimli, A., & Anabtawi, A. (2025). ESG performance and firm value: The moderating roles of ESG controversies and gender diversity in Western Europe. Investment Analysts Journal, 0(0), 1–20. https://doi.org/10.1080/10293523.2025.2578075
Search in Google Scholar Back to article
Aprilina, V., Lestari, T., Mulyasari, W., & Indriana, I. (2025). Media exposure as a moderator in the ESG-firm value relationship. Financial And Credit Activity: Problems Of Theory And Practice, 2(61), 597–608. https://doi.org/10.55643/fcaptp.2.61.2025.4699
Search in Google Scholar Back to article
Arif, M., Sajjad, A., Farooq, S., Abrar, M., & Joyo, A. S. (2021). The impact of audit committee attributes on the quality and quantity of environmental, social and governance (ESG) disclosures. Corporate Governance, 21(3), 497–514. https://doi.org/10.1108/CG-06-2020-0243
Search in Google Scholar Back to article
ASEAN Taxonomy Board. (2023). ASEAN taxonomy for sustainable finance: version 2. https://asean.org/book/asean-taxonomy-for-sustainable-finance-version-2/
Search in Google Scholar Back to article
Battisti, E., Bollani, L., Miglietta, N., & Salvi, A. (2020). The impact of leverage on the cost of capital and market value: Evidence from Sharīah-compliant firms. Management Research Review, 43(9), 1081–1096. https://doi.org/10.1108/MRR-01-2019-0007
Search in Google Scholar Back to article
Cardillo, M. A. dos R., & Basso, L. F. C. (2025). The ESG disclosure–performance paradox in BRICS: Evidence from shareholder returns and firm value. Sustainable Futures, 10, 101510. https://doi.org/10.1016/j.sftr.2025.101510
Search in Google Scholar Back to article
Chung, K. H., & Pruitt, S. W. (1994). Simple approximation of Tobin’s q. Financial Management, 23(3), 70–74. https://doi.org/10.2307/3665623
Search in Google Scholar Back to article
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: a review and assessment. Journal of Management, 37(1), 39–67. https://doi.org/10.1177/0149206310388419
Search in Google Scholar Back to article
Difalla, S. A. (2026). Statistical analysis to measure the impact of ESG disclosure on firm value and stock performance: Evidence from Saudi Arabia. Journal of Statistics Applications &Probability, 15(3), 403–453. https://doi.org/10.18576/jsap/050306
Search in Google Scholar Back to article
Dohrmann, M. (2025). Environmental performance and firm value: The moderating role of ESG-executive compensation. Sustainable Development, 33, 6215–6227. https://doi.org/10.1002/sd.3454
Search in Google Scholar Back to article
Ehsan, S., Nazir, M. S., Nurunnabi, M., Khan, Q. R., Tahir, S., & Ahmed, I. (2018). A multimethod approach to assess and measure corporate social responsibility disclosure and practices in a developing economy. Sustainability, 10, 1–18. https://doi.org/10.3390/su10082955
Search in Google Scholar Back to article
Fang, M., Hong, J., Nie, H., & Shen, X. (2025). Environmental regulation, ESG, and firm value: evidence from China. Applied Economics, 57(58), 10009–10024. https://doi.org/10.1080/00036846.2024.2425117
Search in Google Scholar Back to article
Faure, C., Nys, E., & Tarazi, A. (2025). Subcategories of ESG controversies and firm value. Finance Research Letters, 79, 1–11. https://doi.org/10.1016/j.frl.2025.107260
Search in Google Scholar Back to article
Freeman, R. E. (1984). Strategic management: a stakeholder approach. In Pitman series in business and public policy CN - HD30.28 .F73 1984. Pitman.
Search in Google Scholar Back to article
Freeman, R. E. (2010). Strategic management: a stakeholder approach. Cambridge University Press.
Search in Google Scholar Back to article
Freeman, R. E., Phillips, R., & Sisodia, R. (2020). Tensions in stakeholder theory. Business and Society, 59(2), 213–231. https://doi.org/10.1177/0007650318773750
Search in Google Scholar Back to article
García-Sanchez, I.-M., Hussain, N., Aibar-Guzman, C., & Aibar-Guzman, B. (2025). ESG controversies and external assurance: Examining their impact on firm value and image. The British Accounting Review, 1–28. https://doi.org/10.1016/j.bar.2025.101704
Search in Google Scholar Back to article
Hassan, M. K., Lahyani, F. E., & Albitar, K. (2025). Beyond quotas: how ESG disclosure and critical mass of female directors shape firm value in France. Journal of Applied Accounting Research, 27(1), 64–85. https://doi.org/10.1108/JAAR-02-2025-0048
Search in Google Scholar Back to article
Huang, J., Hu, P., Wang, D. D., & Wang, Y. (2025). The double signal of ESG reports: Readability, growth, and institutional influence on firm value. Sustainability, 17, 1–16. https://doi.org/10.3390/su17062514
Search in Google Scholar Back to article
Kraus, A., & Litzenberger, R. H. (1973). A state-preference model of optimal financial leverage. The Journal of Finance, 28(4), 911–922. https://doi.org/10.1111/j.1540-6261.1973.tb01415.x
Search in Google Scholar Back to article
Lee, J., & Nam, D. (2026). ESG shareholder engagement and firm value: evidence from Korea National Pension Service. Applied Economics, 00(00), 1–16. https://doi.org/10.1080/00036846.2026.2619792
Search in Google Scholar Back to article
Li, X., & You, Z. (2025). The impact of ESG performance on firm value in the Chinese market. Finance Research Letters, 85(PC), 108114. https://doi.org/10.1016/j.frl.2025.108114
Search in Google Scholar Back to article
Lu, D., Wu, H., Xing, C., Xu, J., & Zhang, G. (2026). Natural disasters, corporate ESG performance and firm value. International Review of Economics and Finance, 107, 105082. https://doi.org/10.1016/j.iref.2026.105082
Search in Google Scholar Back to article
Mahmood, A., Terzani, S., Luca, F. De, & Djajadikerta, H. G. (2025). The effect of ESG disclosure on firm value in the European context. Management Decision, 1–32. https://doi.org/10.1108/MD-10-2024-2480
Search in Google Scholar Back to article
Makhija, H., Raghukumari, P. S., & Sethiya, A. (2025). Does board gender diversity moderate the impact of ESG on firms’ economic value added ? Evidence from an emerging economy. International Journal of Productivity and Performance Management, 74(3), 819–840. https://doi.org/10.1108/IJPPM-12-2023-0664
Search in Google Scholar Back to article
Monteiro, A. P., Cepêda, C., Borges, A. P., & Vieira, E. (2024). Does CSR committee presence, stakeholder engagement, gender equality (SDG 5) and firm value influence ESG performance reporting? An EU pre and during Covid-19 analysis. Measuring Business Excellence, 1–22. https://doi.org/10.54499/UIDB/04752/2020
Search in Google Scholar Back to article
Nguyen, T. L. A., & La, T. T. T. (2025). ESG And firm value in Vietnam: The moderating role of profitability. International Journal of Analysis and Applications, 23, 1–15. https://doi.org/10.28924/2291-8639-23-2025-234
Search in Google Scholar Back to article
Ochoa-marquez, P., & Gehrke, C. J. (2026). Financial payoff of sustainability in Mexican companies: ESG performance, profitability and firm value. Sustainability, 1–11. https://doi.org/10.3390/su18020682
Search in Google Scholar Back to article
OECD. (2023). Sustainable Finance in Asia: ESG and climate-aligned investing and policy considerations. https://www.oecd.org/finance/Sustainable-finance-Asia-ESG-climate-aligned-investing-policy-considerations.pdf
Search in Google Scholar Back to article
Patekar, A., & Mahajan, S. (2025). Unraveling the ESG-firm value nexus: A systematic analysis of current literature and emerging themes. Business Performance Review, 3(2), 49–65. https://doi.org/10.22495/bprv3i2p5
Search in Google Scholar Back to article
Prabawati, P. I., & Rahmawati, I. P. (2022). The effects of environmental, social, and governance (ESG) scores on firm values in ASEAN member countries. Jurnal Akuntansi Dan Auditing Indonesia, 26(2), 119–129. https://doi.org/10.20885/jaai.vol26.iss2.art2
Search in Google Scholar Back to article
Rashwan, M., Farouk, N., & Pasha, R. (2025). Can ESG strategies drive firm value growth in the MENA region? Sustainability, 17, 1–30. https://doi.org/10.3390/su17177894
Search in Google Scholar Back to article
Salama, A. A., Bilal, A. O. A., Gamer, S. D., Alzahrani, A. S., Jawadi, R. H., & Alamri, S. M. (2026). How ESG performance and sustainability governance shape SDGs disclosure and firm value: Evidence from OECD firms. Sustainability, 1–27. https://doi.org/10.3390/su18052474
Search in Google Scholar Back to article
Sari, A. . P. A. M. P., & Tjahjadi, B. (2026). Financial leverage, political connection, profitability and firm value during global crisis era: A moderated mediation analysis. Montenegrin Journal of Economics, 22(1), 123–134. https://doi.org/10.14254/1800-5845/2026.22-1.11
Search in Google Scholar Back to article
Shubita, M. F. (2024). The effect of tax avoidance on firm value with leverage as a moderating variable. Investment Management and Financial Innovations, 21(2), 336–344. https://doi.org/10.21511/imfi.21(2).2024.27
Search in Google Scholar Back to article
Singh, M., & Kumar, G. (2025). Unveiling climate risk’s role in ESG and firm value dynamics: an emerging market perspective. Studies in Economics and Finance, 1–30. https://doi.org/10.1108/SEF-12-2024-0883
Search in Google Scholar Back to article
Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355–373. https://doi.org/10.2307/1882010
Search in Google Scholar Back to article
Sun, J. K., & Zhang, D. (2026). Powering innovation through sustainability: exploring the effects of firm ESG performance on innovation volume and value. Social Responsibility Journal, 21(7), 1503–1528. https://doi.org/10.1108/SRJ-10-2024-0737
Search in Google Scholar Back to article
Surya, R. A. S., Andreas, E. H. H., & Zarefar, A. (2026). ESG performance and firm value in Indonesia: Do political connections and external assurance matter? Journal of Risk and Financial Management, 19(2), 1–19. https://doi.org/10.3390/jrfm19020131
Search in Google Scholar Back to article
Tran, D. L., & Nguyen, Q. K. (2026). The moderating effect of monetary policy and ESG practices on the relationship between leverage and firm value in ASEAN-5 emerging countries. Applied Economics, 58(8), 1563–1578. https://doi.org/10.1080/00036846.2025.2467289
Search in Google Scholar Back to article
Tulcanaza-Prieto, A. B., Lee, Y., & Anzules-Falcones, W. (2024). The moderating role of corporate governance in the relationship between leverage and firm value: evidence from the Korean Market. Risks, 12(1), 1–19. https://doi.org/10.3390/risks12010011
Search in Google Scholar Back to article
Utami, W., Pernamasari, R., Chairunisa, M., & Tanjung, J. (2025). Competitive advantage in moderating the three pillars of ESG on firm value. International Journal of Economics and Financial Issues, 15(4), 292–298. https://doi.org/10.32479/ijefi.19099
Search in Google Scholar Back to article
Wijayanto, A., & Supanto, F. (2025). ESG performance, firm value, and the mediating role of financial performance: evidence from top ESG companies in the largest ASEAN economies. Studies in Business and Economics, 20(3), 366–386. https://doi.org/10.2478/sbe-2025-0059
Search in Google Scholar Back to article
Wu, M., Zhu, Y., & Zhang, F. (2025). Second-generation involvement, ESG performance and family firm value. Applied Economics Letters, 32(5), 592–595. https://doi.org/10.1080/13504851.2023.2276365
Search in Google Scholar Back to article
Xu, Z., Liu, D., Li, Y., & Guo, F. (2025). ESG and stock price volatility risk: Evidence from Chinese A-share market. North American Journal of Economics and Finance, 75, 102277. https://doi.org/10.1016/j.najef.2024.102277
Search in Google Scholar Back to article
Yanrou, H., Fun, C. S., Herda, N., & Abdullah, N. (2025). Moderating role of capital market openness between ESG and firm value among public listed companies in China. Management And Accounting Review, 24(2), 447–469. https://doi.org/10.24191/MAR.V24i02-17
Search in Google Scholar Back to article
Yu, Z., Farooq, U., Alam, M. M., & Dai, J. (2024). How does environmental, social, and governance (ESG) performance determine investment mix? New empirical evidence from BRICS. Borsa Istanbul Review, 24(3), 520–529. https://doi.org/10.1016/j.bir.2024.02.007
Search in Google Scholar Back to article
Yuan, W., Zhang, M., Guo, X., & Jiang, Y. (2025). ESG disclosure and firm long-term value: The mediating effect of tax avoidance. Finance Research Letters, 83, 107728. https://doi.org/10.1016/j.frl.2025.107728
Search in Google Scholar Back to article
Zhao, H., He, Z., Banerjee, T., & Han, T. (2025). ESG rating divergence and firm value: evidence from China. Applied Economics Letters, 00(00), 1–7. https://doi.org/10.1080/13504851.2024.2449560
Search in Google Scholar Back to article

Articles in this issue

DOI: https://doi.org/10.2478/sbe-2026-0031 | Journal eISSN: 2344-5416 | Journal ISSN: 1842-4120

Journal RSS Feed

Language: English

Page range: 289 - 309

Published on: Sep 10, 2026

Published by: Lucian Blaga University of Sibiu

In partnership with: Paradigm Publishing Services

Keywords:

ESG,

Related subjects:

Business and economics,

Business management,

Management accounting, financial controlling, cost calculation, investment,

Management, organization, corporate governance,

Business development, change management, cooperation,

Entrepreneurship

© 2026 Amrie Firmansyah, Ammar Ramadhan, published by Lucian Blaga University of Sibiu
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Volume 21 (2026): Issue 2 (August 2026)