Signaling Sustainability: How Reporting Quality Translates Into Competitive Advantage in ASEAN Economies

This study empirically investigates how the quality of sustainability reporting (SRQ) influences firm competitive advantage (FCAD) through the mediating role of firm performance (FIP) within ASEAN‐6 countries over the period 2020–2024. In addition, the analysis examines whether environmental, social, and governance (ESG) performance and competitive intensity (COIN) condition the relationship between SRQ and FIP. Drawing on signaling theory, the study employs multilevel structural equation modeling (ML‐SEM) and analyzes data from 1721 publicly listed non‐financial firms. The findings indicate that SRQ, on its own, does not yield immediate financial gains. Instead, its economic relevance depends critically on alignment with robust ESG performance across environmental, social, and governance dimensions. This evidence suggests that SRQ serves as a credible signaling device only when it reflects underlying sustainability competencies, thereby reducing information asymmetry and enhancing FIP. However, the effectiveness of such signals weakens in markets characterized by intense competition, likely due to higher signaling costs and increased informational noise. These results imply that managers should move beyond viewing sustainability reporting as a purely regulatory or symbolic exercise and instead embed disclosure practices within substantive ESG strategies. Moreover, firms should tailor their sustainability approaches to the institutional and competitive conditions prevailing in each national context to strengthen their competitive positioning within the ASEAN region.