The Effect of Environmental, Social, and Governance on Firm Value in Southeast Asia: The Moderating Role of Digitalization

With an emphasis on the moderating effect of digitalization, this study links the relationship between corporate valuation in Southeast Asia and environmental, social, and governance (ESG) frameworks. Although the importance of ESG practices for long-term wealth creation and organizational sustainability is becoming more widely acknowledged, little scholarly attention has been dedicated to how digitalization affects the relationship between ESG and firm value in emerging markets. The influence of social engagement, environmental accountability, and governance quality on firm value metrics such as asset returns, equity return, and Tobin’s Q are assessed by utilizing a longitudinal dataset comprising 132 publicly traded companies from six Southeast Asian nations from 2017 to 2023. Panel Estimated Generalized Least Squares (EGLS) is employed to mitigate heteroskedasticity and cross-sectional dependence. The results show that digitalization has a moderating effect and that social and governance aspects greatly increase firm value. Digitalization specifically increases the influence between governance and asset returns and between social elements and Tobin’s Q, while decreasing the influence between social factors and asset returns, and between governance and Tobin’s Q. Furthermore, another finding shows that digitalization decreases the influence of social factors on return on equity. These findings point out how necessary it is to strategically incorporate technological development into ESG projects in order to optimize sustainable value creation.