Turning sustainability into value: Green accounting as a catalyst in the ESG and financial performance nexus
DOI:
https://doi.org/10.24191/jeeir.v14i2.12350Keywords:
Environmental, social and governance (ESG), Green accounting, Firm value, Natural resource-based view, ASEAN emerging marketsAbstract
Environmental, Social, and Governance (ESG) practices have emerged as a critical strategic consideration for firms, as sustainability initiatives are increasingly linked to enhanced financial performance and long-term value creation. Despite the growing global adoption of ESG practices, empirical evidence regarding direct impact on firm value remains inconclusive. This uncertainty is particularly evident in developing economies and environmentally sensitive industries, where further understanding on the effectiveness of ESG implementation is needed. Moreover, limited attention has been given to the role of accounting mechanisms in translating ESG commitments into tangible financial outcomes. This study examines the moderating role of green accounting in the relationship between ESG performance and firm value among mining and manufacturing companies across selected Southeast Asian countries. Grounded in the Natural Resource-Based View (NRBV), the study argues that firms can achieve sustainable competitive advantage by integrating environmental stewardship with robust accounting systems. Using a sample of 536 publicly listed companies from Indonesia, Malaysia, Thailand, Singapore, and the Philippines (2016–2023), the findings reveal that ESG performance alone does not significantly enhance firm value. The implementation of green accounting may initially impose additional costs on firms, potentially constraining short-term financial performance. However, when effectively integrated, green accounting strengthens the positive relationship between ESG performance and long-term firm value by improving transparency, enhancing accountability, and increasing investor confidence. These findings highlight the importance of green accounting as a strategic mechanism for converting sustainability initiatives into long-term financial value, particularly within emerging economies and environmentally intensive industries.
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