This study examines the intersection of environmental, social, and governance (ESG) disclosure (operationalized through sustainability reporting), corporate financial performance, and the behavioral dynamics of herding in capital structure decisions among non-financial firms in five ASEAN countries. As ESG and sustainability finance gain prominence in addressing climate change and climate risk, understanding the behavioral factors that relate to ESG adoption is crucial. Employing a quantitative approach, this research utilizes a purposive sample of 125 non-financial firms from Indonesia, Malaysia, the Philippines, Singapore, and Thailand, gathered from the Bloomberg Terminal spanning 2018–2023. Managerial Herding Ratio (MHR) is used to assess herding behavior, while Sustainability Report Disclosure Index (SRDI) measures ESG disclosure. Partial Least Squares Structural Equation Modeling (PLS-SEM) and Multigroup Analysis (MGA) were applied for data analysis. This research finds that while sustainability reporting enhances return on assets (ROA) and Tobin’s Q, it does not significantly relate to net profit margin (NPM). The findings also confirm that herding behavior—where companies mimic the financial structures of peers—moderates the relationship between sustainability reporting and performance outcomes, with leader firms gaining more from transparency efforts. This highlights the double-edged nature of herding: while it can accelerate ESG adoption, it may dilute the strategic depth of climate action if firms merely follow rather than lead. The study provides actionable insights for regulators and corporate strategists seeking to strengthen ESG finance as a driver for climate resilience and long-term stakeholder value.

This study examines how banks navigate the dual strategic imperatives of securing market power and optimizing multidimensional operational efficiency—technical, scale, and allocative efficiency—within emerging and transitional banking systems. Focusing on business model diversification and financial stability, this study also accounts for the conditioning roles of governance quality, institutional complexity, credit risk, and digitalization. Using bank-level data from Association of Southeast Asian Nations (ASEAN) and Middle East and North Africa (MENA) countries, the analysis applies Partial Least Squares Structural Equation Modeling (PLS-SEM) and multi-group analysis to assess direct, mediating, and moderating relationships. The results indicate that diversification and financial stability significantly strengthen market power, while their effects on efficiency are largely negative across efficiency dimensions. Governance quality partially mediates the stability–market power relationship, whereas institutional complexity weakens this linkage. Digital transformation maturity and market digitalization condition the diversification–efficiency nexus, with effects varying across efficiency types and regions. Overall, the findings reveal a strategic trade-off between competitive positioning and operational efficiency, emphasizing the importance of governance structures and digital capabilities in shaping bank performance across heterogeneous institutional contexts.

This study examines the intersection of environmental, social, and governance (ESG) disclosure—operationalized through sustainability reporting—corporate financial performance, and the behavioral dynamics of herding in capital structure decisions among non-financial firms in five ASEAN countries. As ESG and sustainability finance gain prominence in addressing climate change and climate risk, understanding the behavioral factors that influence ESG adoption is crucial. Using Partial Least Squares Structural Equation Modeling (PLS-SEM) and Multigroup Analysis (MGA), this research finds that while sustainability reporting enhances return on assets (ROA) and Tobin’s Q, it does not significantly influence net profit margin (NPM). The findings also confirm that herding behavior—where companies mimic the financial structures of peers—moderates the link between sustainability reporting and performance outcomes, with leader firms gaining more from transparency efforts. This highlights the double-edged nature of herding: while it can accelerate ESG adoption, it may dilute the strategic depth of climate action if firms merely follow rather than lead. The study provides actionable insights for regulators and corporate strategists seeking to strengthen ESG finance as a driver for climate resilience and long-term stakeholder value.

This study examines how banks navigate the dual strategic imperatives of securing market power and optimizing multidimensional operational efficiency—technical, scale, and allocative efficiency—within emerging and transitional banking systems. Focusing on business model diversification and financial stability, the study also accounts for the conditioning roles of governance quality, institutional complexity, credit risk, and digitalization. Using bank-level data from ASEAN and MENA countries, the analysis applies Partial Least Squares Structural Equation Modeling (PLS-SEM) and multi-group analysis to assess direct, mediating, and moderating relationships. The results indicate that diversification and financial stability significantly strengthen market power, while their effects on efficiency are largely negative across efficiency dimensions. Governance quality partially mediates the stability–market power relationship, whereas institutional complexity weakens this linkage. Digital transformation maturity and market digitalization condition the diversification–efficiency nexus, with effects varying across efficiency types and regions. Overall, the findings reveal a strategic trade-off between competitive positioning and operational efficiency, emphasizing the importance of governance structures and digital capabilities in shaping bank performance across heterogeneous institutional contexts.