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

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.

The Role of Green Finance in Promoting High Quality Economy: A Case Study of Yangtze River Economic Belt

“…Green bonds focuse on long-term sustainable investments, so they become an important hedging tool against rare disasters (Guo and Zhou, 2021) [4], to give rise to sustainable development. With the cooperation of banks and enterprises, companies develop green technology innovations, assisting entrepreneurship and innovation [5,6], which can also give rise to high q sustainable development.…”

“…At present, there is little empirical research on the support of high-quality economy for green finance, and there is little research on the dynamic relationship between the two [6]. In the analysis of influencing factors, there are mostly single system studies [7,8], but there is relatively little research on the influencing factors of the coupling and coordination between green finance and high-quality economy.…”