The study aims to investigate the relationship between ESG (Environment, Social, Governance) performance on bank value when moderated by loan loss reserves. Using all 11 Thai listed banks for the period 2017–2021, data were collected from Bloomberg database, the official website of the Stock Exchange of Thailand (SETSMART), and Bank of Thailand, totalling 55 observations. The selected CAMEL indicators served as the control variables. Multiple linear regression and conditional effect analyses were executed using Tobin’s Q as a bank value. This study carefully tested the validity of the dataset, including fixed and random effects. The research outcomes demonstrate the interaction between ESG performance and loan loss reserves has a notably negative effect on the association between ESG performance and bank value. Subsequent analysis reveals that the negative influence of ESG performance on bank value is more pronounced with higher levels of loan loss reserves. These findings have important implications for bankers, investors, and policymakers, offering insights into the dynamics of ESG and loan loss reserves considerations.

Adu, D. A., Al‐Najjar, B., & Sitthipongpanich, T. (2022). Executive compensation, environmental performance, and sustainable banking: The moderating effect of governance mechanisms. Business Strategy and the Environment, 31(4), 1439–1463. Portico. https://doi.org/10.1002/bse.2963

Ahmed, S., Ahmed, S. & Hasan, I. (2018). Why banks should consider ESG risk factors in bank lending? Banks and Bank Systems, 3, 71–80. https://doi.org/10.21511/bbs.13(3).2018.07

Albitar, K., Hussainey, K., Kolade, N., et al. (2020). ESG disclosure and firm performance before and after IR. International Journal of Accounting & Information Management, 28(3), 429–444. https://doi.org/10.1108/ijaim-09-2019-0108

Azmi, W., Hassan, M. K., Houston, R., et al. (2021). ESG activities and banking performance: International evidence from emerging economies. Journal of International Financial Markets, Institutions and Money, 70, 101277. https://doi.org/10.1016/j.intfin.2020.101277

Bank of Thailand (BOT). (2023a). Banking Sector Quarterly Brief (Q3 2023). Available online: https://www.bot.or.th/en/news-and-media/news/news-20231120.html (accessed on 13 October 2023).

Bank of Thailand (BOT). (2023b). Policy Statement of Bank of Thailand: Internalizing Environmental and Climate Change Aspects into Financial Institution Business. Available online: https://www.bot.or.th/en/financial-innovation/sustainable-finance/green/FIPCS-internalizing_environmental_and_climate_change.html#:~:text=The%20BOT%20issues%20Policy%20Statement,both%20in%20terms%20of%20opportunities (accessed on 20 October 2023).

Bartov, E., Gul, F. A, & Tsui, J. S. L., et al. (2000). Discretionary-accruals model and audit qualifications. Journal of Accounting and Economics, 30, 421–452. https://doi.org/10.1016/S0165-4101(01)00015-5

Bătaea, O. M., Dragomir, V. D., & Feleagă, L. (2020). Environmental, social, governance (ESG), and financial performance of European banks. Journal of Accounting and Management Information Systems, 19(3). https://doi.org/10.24818/jamis.2020.03003

Bloomberg. (2023). Bloomberg ESG Scores. Available online: https://hr.bloombergadria.com/data/files/Pitanja%20i%20odgovori%20o%20Bloomberg%20ESG%20Scoreu.pdf (accessed on 25 October 2023).

Breusch, T. S., & Pagan, A. R. (1979). A Simple Test for Heteroscedasticity and Random Coefficient Variation. Econometrica, 47(5), 1287. https://doi.org/10.2307/1911963

Buallay, A. (2019). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality: An International Journal, 30(1), 98–115. https://doi.org/10.1108/meq-12-2017-0149

Chang, H.-Y., Liang, L.-W., & Liu, Y.-L. (2021). Using Environmental, Social, Governance (ESG) and Financial Indicators to Measure Bank Cost Efficiency in Asia. Sustainability, 13(20), 11139. https://doi.org/10.3390/su132011139

Chiaramonte, L., Dreassi, A., Girardone, C., et al. (2021). Do ESG strategies enhance bank stability during financial turmoil? Evidence from Europe. The European Journal of Finance, 28(12), 1173–1211. https://doi.org/10.1080/1351847x.2021.1964556

Chung, R., Bayne, L., & Birt, J. L. (2023). Determinants of ESG disclosure among listed firms under voluntary and mandatory ESG disclosure regimes in Hong Kong. Journal of Applied Accounting Research. https://doi.org/10.1108/jaar-07-2022-0179

Citterio, A., & King, T. (2023). The role of Environmental, Social, and Governance (ESG) in predicting bank financial distress. Finance Research Letters, 51, 103411. https://doi.org/10.1016/j.frl.2022.103411

Clément, A., Robinot, É., & Trespeuch, L. (2022). Improving ESG Scores with Sustainability Concepts. Sustainability, 14, 13154.

Danisman, G. O. (2021). ESG Scores and Bank Performance During COVID-19. Handbook of Research on Global Aspects of Sustainable Finance in Times of Crises, 241–260. https://doi.org/10.4018/978-1-7998-8501-6.ch012

Di Tommaso, C., & Thornton, J. (2020). Do ESG scores effect bank risk taking and value? Evidence from European banks. Corporate Social Responsibility and Environmental Management, 27(5), 2286–2298. Portico. https://doi.org/10.1002/csr.1964

Drago, C., Di Nallo, L., & Russotto, M. L. (2024). Measuring and classifying the social sustainability of European banks: An analysis using interval-based composite indicators. Environmental Impact Assessment Review, 105, 107434. https://doi.org/10.1016/j.eiar.2024.107434

El Sood, H. A. (2012). Loan loss provisioning and income smoothing in US banks pre and post the financial crisis. International Review of Financial Analysis, 25, 64–72. https://doi.org/10.1016/j.irfa.2012.06.007

Elnahass, M., Izzeldin, M., & Abdelsalam, O. (2014). Loan loss provisions, bank valuations and discretion: A comparative study between conventional and Islamic banks. Journal of Economic Behavior & Organization, 103, S160–S173. https://doi.org/10.1016/j.jebo.2013.08.018

Ersoy, E., Swiecka, B., Grima, S., et al. (2022). The Impact of ESG Scores on Bank Market Value? Evidence from the U.S. Banking Industry. Sustainability, 14(15), 9527. https://doi.org/10.3390/su14159527

Gholami, A., Sands, J., & Rahman, H. U. (2022). Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different? Sustainability, 14(5), 2647. https://doi.org/10.3390/su14052647

Gujarati, D. & Porter, D. (2003). Basic Econometrics, 4th ed. McGraw-Hill, New York.

Hegde, S. P., & Kozlowski, S. E. (2021). Discretionary loan loss provisioning and bank stock returns: The Role of economic booms and busts. Journal of Banking & Finance, 130, 106186. https://doi.org/10.1016/j.jbankfin.2021.106186

Hirtle, B., & Lopez, J. (1999). Supervisory Information and the frequency of bank examinations. Federal Reserve Bank of New York. Economic Policy Review, 5, 1–20.

Izcan, D., & Bektas, E. (2022). The Relationship between ESG Scores and Firm-Specific Risk of Eurozone Banks. Sustainability, 14(14), 8619. https://doi.org/10.3390/su14148619

Jinook, J., Lee, K. (1999). Bootstrapped White’s Test for Heteroskedasticity in Regression Models. Economics Letters, 63(3), 261–267. https://doi.org/10.1016/S0165-1765(99)00036-1

Jumran, A., & Hendrawan, R. (2021). Stock Valuation using Discounted Cash Flow Method with Free Cash Flow to Equity and Relative Valuation Approaches on State-Owned Banks Listed on IDX for 2021 to 2025 Period Projection. International Journal of Science and Management Studies (IJSMS), 191–201. CLOCKSS. https://doi.org/10.51386/25815946/ijsms-v4i4p118

Kasikorn Bank. (2023). Get to know the concept of “ESG” The heart of Kasikorn Bank Sustainable growth. Available online: https://www.kasikornbank.com/th/career/Pages/possible-story/life-esg-kbank.html (accessed on 20 October 2023).

Kurniawan, K., Kim, S. (2023). Environmental, Social, and Governance (ESG) Performance on the Market Value of Banks in ASEAN. Enrichment: Journal of Management, 13(5), 2960–2969.

La Torre, M., Leo, S., & Panetta, I. C. (2021). Banks and environmental, social and governance drivers: Follow the market or the authorities? Corporate Social Responsibility and Environmental Management, 28(6), 1620–1634. https://doi.org/10.1002/csr.2132

Leftwich, R. W., Watts, R. L., & Zimmerman, J. L. (1981). Voluntary Corporate Disclosure: The Case of Interim Reporting. Journal of Accounting Research, 19, 50. https://doi.org/10.2307/2490984

Mahathanaseth, I., & Tauer, L. W. (2019). Monetary policy transmission through the bank lending channel in Thailand. Journal of Asian Economics, 60, 14–32. https://doi.org/10.1016/j.asieco.2018.10.004

Menicucci, E., & Paolucci, G. (2022). ESG dimensions and bank performance: an empirical investigation in Italy. Corporate Governance: The International Journal of Business in Society, 23(3), 563–586. https://doi.org/10.1108/cg-03-2022-0094

Miralles-Quirós, M., Miralles-Quirós, J., & Redondo Hernández, J. (2019). ESG Performance and Shareholder Value Creation in the Banking Industry: International Differences. Sustainability, 11(5), 1404. https://doi.org/10.3390/su11051404

Nguyen, A. H., Nguyen, H. T., Pham, H. T. (2020). Applying the CAMEL model to assess performance of commercial banks: empirical evidence from Vietnam. Banks and Bank Systems, 15, 177–186. https://doi.org/10.21511/bbs.15(2).2020.16

Mulyanto, N., Abdul, H., Donny, A. (2020). Effects of CAMEL Ratios on Indonesia Banking Share Price. Journal of Asian Finance, Economics and Business, 7(11), 101–106. https://doi.org/10.13106/jafeb.2020.vol7.no11.101

Organisation for Economic Co-operation and Development (OECD). (2023). Environmental social and governance (ESG) investing. Available online: https://www.oecd.org/finance/esg-investing.htm (accessed on 12 February 2023).

Palmieri, E., Ferilli, G. B., Stefanelli, V., et al. (2023). Assessing the influence of ESG score, industry, and stock index on firm default risk: A sustainable bank lending perspective. Finance Research Letters, 57, 104274. https://doi.org/10.1016/j.frl.2023.104274

Pesaran, M. H. (2006). Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure. Econometrica, 74(4), 967–1012. https://doi.org/10.1111/j.1468-0262.2006.00692.x

Prayoonrattana, J., Laosuthi, T., & Chaivichayachat, B. (2020). Empirical Measurement of Competition in the Thai Banking Industry. Economies, 8(2), 44. https://doi.org/10.3390/economies8020044

Safitri, K., Mertha, M., Wirawati, N., et al. (2020). The impact of debt-to-equity ratio, price earnings ratio, earnings per share to the stock price on banking sectors listed in Infobank15 Index 2014–2118. American Journal of Humanities and Social Sciences Research, 4(5), 49–56.

Shakil, M. H., Mahmood, N., Tasnia, M., et al. (2019). Do environmental, social and governance performance affect the financial performance of banks? A cross-country study of emerging market banks. Management of Environmental Quality: An International Journal, 30(6), 1331–1344. https://doi.org/10.1108/meq-08-2018-0155

Siam Commercial Bank (SCB). (2023). ESG: What is ESG? Available online: https://www.scbx.com/en/esg-main-page/ (accessed on 20 October 2023).

Suttipun, M. (2023). ESG Performance and Corporate Financial Risk of the Alternative Capital Market in Thailand. Cogent Business & Management, 10(1). https://doi.org/10.1080/23311975.2023.2168290

Masoud, T., Alirahm B. (2018). The effect of capital adequacy ratio on the ratio of the bank reserves accepted in the Tehran Stock Exchange. International Journal of Economics and Financial Issues, 8, 161–167.

The Thai Bankers’ Association (TBA) (2022). “Thai Bankers Association” announces ESG intentions to drive an environmentally friendly economy. Available online: https://www.tba.or.th/esg-intention/ (accessed on 20 October 2023).

Wooldridge, J. (2008). Introductory Econometrics, 4th ed. Mason, OH: Western Cengage Learning.

Yuen, M. K., Ngo, T., Le, T. D. Q., et al. (2022). The environment, social and governance (ESG) activities and profitability under COVID-19: evidence from the global banking sector. Journal of Economics and Development, 24(4), 345–364. https://doi.org/10.1108/jed-08-2022-0136