The Impact of Financial Inclusion on Bank Stability in Vietnam: The Moderating Role of ESG
Downloads
As inclusive and sustainable development becomes a global policy priority, understanding the nexus between financial access and banking system stability under the influence of emerging environmental, social, and governance (ESG) standards is of paramount importance. This study examines the impact of financial inclusion (FI) on bank stability (BS) and the moderating role of ESG factors across 19 listed commercial banks in Vietnam from 2010 to 2023. Utilizing panel data with the Fixed Effects Model (FEM), Driscoll–Kraay standard errors, and the Within–Between model, the results indicate that financial inclusion does not exert a uniform impact across the entire sample but depends heavily on bank size. Specifically, FI significantly enhances stability in large-scale banks due to their technological advantages and brand reputation, whereas it creates certain pressures for smaller banks. Notably, when decomposing ESG pillars, the study finds that the Environmental (E) factor plays the most powerful and positive moderating role ($p < 0.01$), amplifying the positive impact of financial inclusion on bank stability through a synergistic mechanism involving green credit and climate risk management. Conversely, the moderating effects of the Social (S) and Governance (G) pillars remain limited, as their implementation in Vietnam continues to be largely symbolic and incurs high short-term compliance costs. This research contributes empirical evidence regarding the asymmetric impact of FI and the value of integrating ESG into sustainable financial development pathways. Accordingly, the authors propose recommendations for refining the ESG legal framework integrated with credit risk management and financial inclusion strategies for the Vietnamese banking system.
Ahamed, M. M., & Mallick, S. K. (2019). Is financial inclusion good for bank stability? International evidence. Journal of Economic Behavior & Organization, 157, 403–427.
Alaeddin, O., Yousif, A. S., & Ahmed, E. R. (2019). Determinants of bank stability: Evidence from emerging economies. International Journal of Economics and Financial Issues, 9(4), 89-97.
Beck, T. (2016). Financial development and stability: The role of financial inclusion. World Bank Economic Review, 30(1), 1-23.
Beck, T. (2016). Financial development and stability: Theory and evidence. World Bank Economic Review, 30(S1), S1-S27. doi:https://doi.org/10.1093/wber/lhw012
Beck, T., Demirgüç-Kunt, A., & Martinez Peria, M. S. (2007). Reaching out: Access to and use of banking services across countries. Journal of Financial Economics, 85(1), 234-266. doi:https://doi.org/10.1016/j.jfineco.2006.07.002
Bell, A., & Jones, K. (2015). Explaining fixed effects: Random effects modeling of time-series cross-sectional and panel data. Political Science Research and Methods, 3(1), 133–153.
Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315–1344.
Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315-1344. doi:https://doi.org/10.1093/rof/rfac033
Berger, A. N., & Humphrey, D. B. (1997). Efficiency of financial institutions: International survey and directions for future research. European Journal of Operational Research.
Berger, A. N., & Mester, L. J. (1997). Inside the black box: What explains differences in the efficiencies of financial institutions? Journal of Banking & Finance.
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. doi:https://doi.org/10.1108/MEQ-12-2017-0149
Chang, H., Liang, L., & Liu, Y. (2021). Using Environmental, Social, Governance (ESG) and Financial Indicators to Measure Bank Cost Efficiency in Asia. Sustainability. doi:https://doi.org/10.3390/su132011139
Citterio, A., & King, T. (2022). The role of Environmental, Social, and Governance (ESG) in predicting bank financial distress. Finance Research Letters. doi:https://doi.org/10.1016/j.frl.2022.103411
Cornett, M. M., Erhemjamts, O., & Tehranian, H. (2016). Greed or good deeds: An examination of the relation between corporate social responsibility and the financial performance of U.S. commercial banks. Journal of Banking & Finance, 70, 137-159. doi:https://doi.org/10.1016/j.jbankfin.2016.04.024
Cull, R., Demirgüç-Kunt, A., & Martínez Pería, M. S. (2014). Banking on the poor: Financial inclusion and financial stability. Journal of Economic Perspectives, 28(4), 129-150.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2015). The Global Findex Database 2014: Measuring financial inclusion around the world. World Bank. doi:https://doi.org/10.1016/j.jfi.2015.12.003
Demirgüç-Kunt, A., Martinez Peria, M. S., & Tressel, T. (2020). The global financial crisis and the capital structure of firms: Was the impact more severe among SMEs and non-listed firms? Journal of Corporate Finance, 60, 1-18. doi:https://doi.org/10.1016/j.jcorpfin.2019.101514
Driscoll, J. C., & Kraay, A. C. (2015). Consistent covariance matrix estimation with spatially dependent panel data. Review of Economics and Statistics, 80(4), 549–560.
Duque‐Grisales, E., & Aguilera‐Caracuel, J. (2019). Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack. Journal of Business Ethics, 168, 315-334. doi:https://doi.org/10.1007/s10551-019-04177-w
Ersoy, E., Swiecka, B., Grima, S., Özen, E., & Romānova, I. (2022). The Impact of ESG Scores on Bank Market Value? Evidence from the U.S. Banking Industry. Sustainability. doi:https://doi.org/10.3390/su14159527
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233. doi:https://doi.org/10.1080/20430795.2015.1118917
Gangi, F., Meles, A., D’Angelo, E., & Daniele, L. M. (2019). Sustainable development and corporate governance in the financial system: Are environmentally friendly banks less risky? Corporate Social Responsibility and Environmental Management, 26(3), 529-547.
Gopalan, S., & Rajan, R. S. (2018). Financial inclusion and bank stability: Evidence from India. Emerging Markets Review, 35, 1-21.
Gutiérrez‐Ponce, H., & Wibowo, S. (2023). Do Sustainability Activities Affect the Financial Performance of Banks? The Case of Indonesian Banks. Sustainability. doi:https://doi.org/10.3390/su15086892
Gutiérrez‐Ponce, H., & Wibowo, S. (2023). Do sustainability practices contribute to the financial performance of banks? An analysis of banks in Southeast Asia. Corporate Social Responsibility and Environmental Management. doi:https://doi.org/10.1002/csr.2641
Han, R., & Melecky, M. (2013). Financial inclusion and stability: An empirical assessment. World Bank Policy Research Working Paper, 6572.
Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 7(3), 281–312.
Jahn, N., & Kick, T. (2011, 7). Determinants of banking system stability: A macro-prudential analysis. Deutsche Bundesbank Discussion Paper.
Kocisova, K., Gavurova, B., & Behun, M. (2018). Financial stability of banking sector in the Visegrad countries. Journal of Business Economics and Management, 19(5), 693-717. doi:https://doi.org/10.3846/jbem.2018.6263
La Torre, M., Leo, S., Panetta, I. C., & Stefani, U. (2021). Banking sustainability: The role of governance and ESG disclosure. Sustainability, 13(2), 1-19.
La Torre, M., Leo, S., Panetta, I. C., & Stefani, U. (2021). Corporate social responsibility and bank stability: The moderating role of governance. Corporate Social Responsibility and Environmental Management, 28(1), 360-372. doi:https://doi.org/10.1002/csr.2060
Mabkhot, H. A., & Al-Wesabi, H. A. (2022). Financial inclusion and banking stability: Evidence from emerging economies. Journal of Financial Regulation and Compliance, 30(2), 193-210. doi:https://doi.org/10.1108/JFRC-03-2021-0025
Mabkhot, H., & Al-Wesabi, H. A. H. (2022). Banks’ Financial Stability and Macroeconomic Key Factorsin GCC Countries. Sustainability, 14(23). doi:https://doi.org/10.3390/su142315999
Malik, A., Isa, A., Jais, M., Rehman, A., & Khan, M. (2021). Financial stability of Asian Nations: Governance quality and financial inclusion. Borsa Istanbul Review. doi:https://doi.org/10.1016/j.bir.2021.05.005
Meslier-Crouzille, C., Nys, E., & Sauviat, A. (2007). Contribution of rural banks to regional economic development: Evidence from the Philippines. Regional Studies, 41(6), 775-791.
Michelon, G., Pilonato, S., & Ricceri, F. (2015). CSR reporting practices and the quality of disclosure: An empirical analysis. Critical Perspectives on Accounting, 33, 59–78. doi:https://doi.org/10.1016/j.cpa.2014.10.003
Nguyen, T. H., & Vo, X. V. (2021). Financial inclusion and bank stability: Evidence from emerging markets. Borsa Istanbul Review, 21(4), 312-322.
Rupeika-Apoga, R., Zaidi, S. H., Thalassinos, E. I., & Thalassinos, Y. (2018). Bank stability: The role of bank efficiency and diversification. International Journal of Economics and Business Administration, 6(1), 3-24. doi:https://doi.org/10.1093/rof/rfac033
Rupeika-Apoga, R., Zaidi, S. H., Thalassinos, E., & Thalassinos, Y. (2018). Bank stability: The role of bank governance, regulation and supervision. Journal of Business Economics and Management, 19(1), 1-19.
Sarma, M. &. (2011). Financial inclusion and development. Journal of International Development, 23(5), 613-628. doi:https://doi.org/10.1002/jid.1698
Sarma, M., & Pais, J. (2011). Financial inclusion and development. Journal of International Development, 23(5), 613-628.
Stolbov, M., & Shchepeleva, M. (2022). The impact of ESG-factors on financial stability. Voprosy Ekonomiki. doi:https://doi.org/10.32609/0042-8736-2022-11-136-148.
Tóth, B., Lippai-Makra, E., Szládek, D., & Kiss, G. (2021). The Contribution of ESG Information to the Financial Stability of European Banks. Pénzügyi Szemle = Public Finance Quarterly. doi:https://doi.org/10.35551/pfq_2021_3_7
Wang, X., & Luo, D. (2022). ESG performance and bank stability. Finance Research Letters, 46(102469). doi:https://doi.org/10.1016/j.frl.2021.102469
Wooldridge, J. M. (2010). Econometric Analysis of Cross Section and Panel Data. MIT Press.
World Bank. (2018). Financial Consumer Protection and Financial Inclusion. Washington: World Bank.
Xue, L., Dong, J., & Zha, Y. (2023). How does digital finance affect firm environmental, social and governance (ESG) performance? — Evidence from Chinese listed firms. Heliyon, 9. doi:https://doi.org/10.1016/j.heliyon.2023.e20800
Copyright (c) 2026 Ta Duc Phuoc, MBA., Nguyen Thi Thu Trang, PhD., Phan Duong My Duyen, Nguyen Pham Huong Tien, Le Phan Nha Uyen, Kieu Minh Thy
This work is licensed under a Creative Commons Attribution 4.0 International License.
