The relationship between ESG disclosure and credit risk: Evidence from Vietnamese commercial banks

This study investigates the relationship between environmental, social, and governance (ESG) disclosure and credit risk in Vietnamese commercial banks. Using a panel dataset of 34 banks from 2016 to 2023, we employ both fixed-effects and system GMM estimations to address unobserved heterogeneity and potential endogeneity concerns. The findings indicate that greater ESG disclosure is associated with lower levels of credit risk. However, the magnitude of this effect varies by bank size. Specifically, the impact of ESG disclosure is more pronounced among smaller banks compared to their larger counterparts. These results highlight the importance of ESG practices in strengthening financial stability, particularly for banks with limited scale. JEL code: G21, G32, Q56