Abstract

This study explores the effect of Environmental, Social, and Governance (ESG) practice on the dividend policy across the ASEAN-5 region companies, with return on assets (ROA) as a mediating variable. Based on stakeholder theory and legitimacy theory, this study aims to evaluate the impact of ESG on dividend policy, as well as the mediating role of ROA. This research sample consists of 596 data points from 149 companies across the ASEAN-5 region during 2020-2024. The data was collected using a purposive sampling method and analyzed using the PLS method. The research finds that the environmental pillar shows a positive effect on the dividend policy when profitability is included, and a negative effect when profitability is excluded as a mediator. The governance pillar positively impacts dividend policy both directly and when profitability is considered. Individual ROA doesn’t significantly reduce the effect of dividend policy. However, in the relationship between ESG factors and dividend policy, profitability plays a mediating role.

Keywords

ASEAN-5 Region, Dividend Policy, ESG, Return on Asset, Stakeholder Theory, Legitimacy Theory,

Metrics

Metrics Loading ...

References

  1. Adeneye, Y.B., Kammoun, I., Ab Wahab, S.N.A. (2023). Capital structure and speed of adjustment: the impact of environmental, social and governance (ESG) performance. Sustainability Accounting, Management and Policy Journal, 14(5), 945–977. https://doi.org/10.1108/SAMPJ-01-2022-0060
  2. Ahmad, R.A.R., Aminurrashid, W.I.D., Sarman, S.R., Bakar, Z.A., Zakaria, N.B. (2025). Comparative analysis of ESG performance among ASEAN firms: Evidence from Malaysia, Singapore, Thailand, and Indonesia. International Journal of Research and Innovation in Social Science, 9(10), 3717-3730. https://dx.doi.org/10.47772/IJRISS.2025.910000306
  3. Al-Hiyari, A. (2024). Does top executive gender diversity matter for the value relevance of ESG controversies? Empirical evidence from European tech firms. Journal of Accounting and Organizational Change. https://doi.org/10.1108/JAOC-01-2024-0009
  4. Andersen, Z.J., Hoffmann, B., Morawska, L., Adams, M., Furman, E., Yorgancioglu, A., Greenbaum, D., Neira, M., Brunekreef, B., Forastiere, F., Rice, M.B., Wakenhut, F., Coleen, E., Boogaard, H., Gehring, U., Melén, E., Ward, B., De Matteis, S. (2021). Air pollution and COVID-19: clearing the air and charting a post-pandemic course: a joint workshop report of ERS, ISEE, HEI and WHO. European Respiratory Journal, 58(2), 2101063. https://doi.org/10.1183/13993003.01063-2021
  5. Aydoğmuş, M., Gülay, G., Korkmaz Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(2), 119-127. https://doi.org/10.1016/j.bir.2022.11.006
  6. Benlemlih, M. (2019). Corporate social responsibility and dividend policy. Research in International Business and Finance, 47, 114–138. https://doi.org/10.1016/j.ribaf.2018.07.005
  7. Bilyay-Erdogan, S., Danisman, G.O., Demir, E. (2023). ESG performance and dividend payout: A channel analysis. Finance Research Letters, 55(PA), 103827. https://doi.org/10.1016/j.frl.2023.103827
  8. Buertey, S., Ramsawak, R., Nguyen, B.H. (2025). Sustainability reporting awards and market reaction: The sustainability awareness of investors on the Vietnam Stock Market. Corporate Social Responsibility and Environmental Management, 32(3), 3423–3437. https://doi.org/10.1002/csr.3135
  9. Chen, Z., Xie, G. (2022). ESG disclosure and financial performance: Moderating role of ESG investors. International Review of Financial Analysis, 83, 102291. https://doi.org/10.1016/j.irfa.2022.102291
  10. Cheung, A., Hu, M., Schwiebert, J. (2018). Corporate social responsibility and dividend policy. Accounting and Finance, 58(3), 787–816. https://doi.org/10.1111/acfi.12238
  11. Chintrakarn, P., Chatjuthamard, P., Jiraporn, P. (2025). Dividend policy and the takeover market: Half a century of evidence. Research in International Business and Finance, 75, 102774. https://doi.org/10.1016/j.ribaf.2025.102774
  12. Chokchaisiri, P. (2023). ESG performance and dividend payout in ASEAN: The moderation by cash holdings. Independent Study, Faculty of Commerce and Accountancy, Thammasat University.
  13. Clarkson, P.M., Overell, M.B., Chapple, L. (2008). Environmental reporting and its relation to corporate environmental performance. Abacus, 44(4), 538–568. https://doi.org/10.1111/j.1467-6281.2011.00330.x
  14. Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd Ed). Lawrence Erlbaum Associates.
  15. Deegan, C., Rankin, M. (1996). Do Australian companies report envinromental news objectively? An analysis of environmentaldisclosures by firms prosecutedsuccessfully by the EnvironmentalProtection Authority. Accounting, Auditing & Accountability, 9(2), 50–67. https://doi.org/10.1108/09513579610116358
  16. Demerjian, P., Lev, B., McVay, S. (2012). Quantifying managerial ability: A new measure and validity tests. Management Science, 58(7), 1229–1248. https://doi.org/10.1287/mnsc.1110.1487
  17. Desai, R. (2024). Nexus between mandatory ESG disclosure regulation and abnormal stock returns: a study of an emerging economy. International Journal of Law and Management, 66(2), 236–258. https://doi.org/10.1108/IJLMA-07-2023-0154
  18. E-Vahdati, S., Wan-Hussin, W.N., Mohd Ariffin, M.S. (2022). Sustainability performance and board compensation in Japan and ASEAN-5 countries. Borsa Istanbul Review, 22, S189–S199. https://doi.org/10.1016/j.bir.2022.12.004
  19. Friede, G., Busch, T., Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
  20. Garrido-Ruso, M., Otero-González, L., López-Penabad, M.C., Santomil, P.D (2024). Does ESG implementation influence performance and risk in SMEs?. Corporate Social Responsibility and Environmental Management, 31(5), 4227-4247. https://doi.org/10.1002/csr.2783
  21. Glossner, S., Matos, P., Ramelli, S., Wagner, A.F. (2020). Where do institutional investors seek shelter when disaster strikes? Evidence from COVID-19. Swiss Finance Institute Research Paper No. 20-56, European Corporate Governance Institute – Finance Working Paper No. 688/2020, Forthcoming, Management Science, 1-66. https://dx.doi.org/10.2139/ssrn.3655271
  22. Gompers, P., Ishii, J., Metrick, A. (2003). Corporate governance and equity prices. The Quarterly Journal of Economics, 118(1), 107–156. https://doi.org/10.1162/00335530360535162
  23. Grewal, J., Riedl, E.J., Serafeim, G. (2019). Market reaction to mandatory nonfinancial disclosure. Management Science, 65(7), 3061–3084. https://doi.org/10.1287/mnsc.2018.3099
  24. Hair, J.F., Ringle, C.M., Gudergan, S.P., Fischer, A., Nitzl, C., Menictas, C. (2019). Partial least squares structural equation modeling-based discrete choice modeling: an illustration in modeling retailer choice. Business Research, 12(1), 115–142. https://doi.org/10.1007/s40685-018-0072-4
  25. Hamidah, H., Puspowai D. (2023). The effect of ESG-corporate, company Size, and size of board director on financial performance with audit quality as a moderating Variable in Public companies in Indonesia. American Journal of Sciences and Engineering Research, 6(2), 312-319.
  26. Hassel, L., Nilsson, H., Nyquist, S. (2005). The value relevance of environmental performance. European Accounting Review, 14(1), 41–61. https://doi.org/10.1080/0963818042000279722
  27. Ismillah, N.H., Faisal, M. (2023). ESG and dividend policy: Evidence from ASEAN-5 countries. Jurnal Manajemen Strategi dan Aplikasi Bisnis, 6(2), 285-300. https://doi.org/10.36407/jmsab.v6i2.821
  28. Jiang, J., Wang, I.Y., Wang, K.P. (2019). Big N auditors and audit quality: New evidence from quasi-experiments. The Accounting Review, 94(1), 205–227. https://doi.org/10.2308/accr-52106
  29. Jiraporn, P., Kim, J.C., Kim, Y.S. (2011). Dividend payouts and corporate governance quality: An empirical investigation. Financial Review, 46(2), 251-279. https://doi.org/10.1111/j.1540-6288.2011.00299.x
  30. Junior, W.D,d.S., Hijazi, M,M., Tarcísio Pedro da Silva, T.P.d. (2024). Determinants of dividend pay out policy: More evidence from emerging markets 0 G20 bloc. International Journal of Finance & Economics, 30(4), 4113-4124. https://doi.org/10.1002/ijfe.3111
  31. Khan, M.A., Khan, A., Hassan, M.K., Maraghini, M,P. (2024). Market response to environmental social and governance performance: A global analysis. Research in International Business and Finance, 67, 102131. https://doi.org/10.1016/j.ribaf.2023.102131
  32. Kumar, S., Ghalke, A. (2025). ESG performance and dividend payout: The moderating role of ESG controversies and legal systems. Business Strategy and the Environment, 34(6), 7210-7227. https://doi.org/10.1002/bse.4355
  33. Lanis, R., Richardson, G. (2013). Corporate social responsibility and tax aggressiveness: A test of legitimacy theory. Accounting, Auditing and Accountability Journal, 26(1), 75–100. https://doi.org/10.1108/09513571311285621
  34. Le, T.T.H., Nguyen, X.H., Tran, M.D. (2019). Determinants of dividend payout policy in emerging markets: Evidence from the Asean region. Asian Economic and Financial Review, 9(4), 531-546.
  35. Lins, K.V., Servaes, H., Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4), 1785–1824. https://doi.org/10.1111/jofi.12505
  36. Liou, R.S., Ting, P.H., Chen, Y.Y. (2023). The cost of foreign ownership: Voluntary sustainability reporting and financial performance in an emerging economy. Cross Cultural and Strategic Management, 30(3), 581–612. https://doi.org/10.1108/CCSM-09-2021-0165
  37. Mahmood, S.H. (2023). The effect of financial leverage on dividend payout ratio: An applied study for industrial companies listed on the Qatar Stock Exchange. World Economics & Finance Bulletin, 27(2023), 1-11.
  38. Malau, Y. N., Andini, C. S., Angelicca, A., & Ginting, W. A. (2024). The influence of net profit, free cash flow, networking capital, unding and profitability on dividend policy in ood and beverage companies for the 2019-2022 period. Mount Hope Economic Journal, 2(1), 131-137.
  39. Merza Radhi, D.S., & Sarea, A. (2019). Evaluating financial performance of Saudi Listed Firms: using statistical failure prediction Models. International Journal of Business Ethics and Governance, 2(1), 1–18. https://doi.org/10.51325/ijbeg.v2i1.20
  40. Nazarova, V., Lavrova, V. (2022). Do ESG factors influence investment attractiveness of the public companies?. Journal of Corporate Finance Research, 16(1), 38-64. https://doi.org/10.17323/j.jcfr.2073-0438.16.1.2022.38-64
  41. Niccolo, N., Battisti, E., Papa, A., Miglietta, N. (2020). Shareholder value and dividend policy: the role of ESG strategies. IEEE International Conference on Technology Management, Operations and Decisions (ICTMOD). IEEE, Marrakech, Morocco. https://doi.org/10.1109/ICTMOD49425.2020.9380585
  42. Park, D,S-H., Lee, T., Kim, H.K., Kim, S, S-C. (2024). Implementation of environment, social, and governance (ESG): Case of Korean global firms. Preprints, 1-16.
  43. Parmar, B.L., Freeman, R.E., Harrison, J.S., Wicks, A.C., Purnell, L., De Colle, S. (2010). Stakeholder theory: The state of the art. Academy of management annals, 4(1), 403-445. https://doi.org/10.5465/19416520.2010.495581
  44. Phan, T.K.H., Trand, N,H. (2019). Dividend policy and stock price volatility in anemerging market: Does ownership structure matter?. Cogent Economics & Finance, 7, 1637051. https://doi.org/10.1080/23322039.2019.1637051
  45. Putri, J., Kusmayadi, I. (2025). The Influence of ESG Dividend Policy on Firm Value in Non-Financial Companies Listed on the BEI in 2021-2023. East Asian Journal of Multidisciplinary Research (EAJMR), 4(4), 1617-1631. https://doi.org/10.55927/eajmr.v4i4.114
  46. Qu, W., Zhang, J. (2023). Environmental, Social, and Corporate Governance (ESG), Life Cycle, and Firm Performance: Evidence from China. Sustainability, 15(18), 14011. https://doi.org/10.3390/su151814011
  47. Rastogi, S., Singh, K., Kanoujiya, J. (2023). Firm’s value and ESG: the moderating role of ownership concentration and corporate disclosures. Asian Review of Accounting. 32(1), 70–90. https://doi.org/10.1108/ARA-10-2022-0266
  48. Refinitiv. (2022). Environmental, social, and governance scores from refinitiv. Revinitiv, 1-25.
  49. Rozi, F., Agung Budi Santoso, A.B., Mahendri, I.G.A.P., Hutapea, R,T,P., Wamaer, D., Siagian, V., Elisabeth, D.A.A., Sugiono, S., Handoko,, Herman Subagio, H., Syam, A. (2023). Indonesian market demand patterns for food commodity sources of carbohydrates in facing the global food crisis. Heliyon, 9(6), 1-12. https://doi.org/10.1016/j.heliyon.2023.e16809
  50. Rudianto, P., Darmono, Tontowi, A.J. (2024). Sustainable Investment Strategies: An Analyzing the Interplay Between ESG Ratings, Dividend Policy, Financial Performance, and Investor Trust. Intarnational Journal of Bussiness, Law, and Education. 5(2), 2892-2901. https://doi.org/10.56442/ijble.v5i2.952
  51. Saidi, H., Tabessi, S., Hakimi, A. (2025). The impact of ESG performance and corporate governance on dividend policies: Empirical analysis for European companies. Risks, 13(12), 237. https://doi.org/10.3390/risks13120237
  52. Salvi, A., Nirino, N., Battisti, E., Gianfrancsco, I. (2024). Payout policy and ESG: A Europesn investigation. Research in International Business and Finance, 68, 102189. https://doi.org/10.1016/j.ribaf.2023.102189
  53. Samy El-Deeb, M., Ismail, T.H., El Banna, A.A. (2023). Does audit quality moderate the impact of environmental, social and governance disclosure on firm value? Further evidence from Egypt. Journal of Humanities and Applied Social Sciences, 5(4), 293–322. https://doi.org/10.1108/JHASS-11-2022-0155
  54. Suchman, M.C. (1995). Managing legitimacy: Strategik and institutional approaches. The Academy of Management Review, 20(3), 571-610. https://doi.org/10.2307/258788
  55. Treepongkaruna, S., Suttipun, M. (2024). The impact of environmental, social and governance (ESG) reporting on corporate profitability: evidence from Thailand. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-09-2023-0555
  56. Tri widodo, F.P., Praptapa, A., Suparlinah, I., Setyorini, C.T. (2021). The effect of company size, institutional ownership, profitability and leverage on dividends payout ratio. Journal of Contemporary Accounting, 3(2), 77-87. https://doi.org/10.20885/jca.vol3.iss2.art3
  57. Utami, F. L. (2022). Profitability, Liquidity, Firm Size, Dividend Payout Ratio and Moderating Effect of Leverage. International Journal of Multidisciplinary Research and Analysis, 5(07), 1855-1865. https://doi.org/10.47191/ijmra/v5-i7-33
  58. Vaihekoski, M., Yahya, H. (2023). ESG and firm performance: Evidence from the nordic countries. Nordic Journal of Business, 72(3), 164-189.
  59. Velte, P. (2017). Does ESG Performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169-178. https://doi.org/10.1108/JGR-11-2016-0029
  60. Vo, X.V. (2021). The effect of activity ratios, liquidity, and profitability on the dividend payout ratio. Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2021.2018906
  61. Xie, J., Nozawa, W., Yagi, M., Fujii, H., Managi, S. (2019). Do environmental, social and governance activities improve corporate financial performance?. Business Strategy and the Environment, 28(2), 286-300. https://doi.org/10.1002/bse.2224
  62. Zahid, R.M.A., Taran, A., Khan, M.K., Chersan, I.C. (2023). ESG, dividend payout policy and the moderating role of audit quality: Empirical evidence from Western Europe. Borsa Istanbul Review, 23(2), 350–367. https://doi.org/10.1016/j.bir.2022.10.012
  63. Zhong, H., Guo, Y., Mohamed Al-Duais, Z.A. (2024). Accelerated depreciation of fixed assets and cash dividend distribution. North American Journal of Economics and Finance, 71(75), 102092. https://doi.org/10.1016/j.najef.2024.102092