Governance in Addressing Sustainability Risks: Implications for Banking Performance in ASEAN

Abstract

This study examines the impact of Governance and Sustainability Risks on Bank Performance among ASEAN banks from 2018 to 2022. Using path analysis and Slack Resources Theory, the research explores both direct and indirect effects of these variables. The study uses purposive sampling, with a sample size of 70 banks. The findings reveal that Governance does not have a direct significant impact on Bank Performance, suggesting that governance structures alone may not be sufficient to enhance performance. In contrast, Sustainability Risks show a significant positive effect on Bank Performance, highlighting the importance of managing sustainability-related risks to improve performance outcomes. Furthermore, the analysis indicates a full mediation effect when combining Governance and Sustainable Finance in influencing Bank Performance, demonstrating that effective governance must integrate sustainable financial practices to translate into better performance. The originality of this research lies in its application of Slack Resources Theory within the context of ASEAN banking, offering new insights into how governance and sustainability factors jointly influence performance. This study contributes to the literature by emphasizing the critical role of sustainable finance in mediating governance impacts on bank performance, providing practical implications for policymakers and bank managers aiming to align governance strategies with sustainability to enhance performance.