The Link Between Institutional Quality and Corporate Sustainable Performance: An ASEAN-5 Evidence

Odelia, Audrey (2026) The Link Between Institutional Quality and Corporate Sustainable Performance: An ASEAN-5 Evidence. S1 thesis, Universitas Andalas.

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Abstract

This study examines the effect of institutional quality on corporate sustainable performance, measured by environmental, social, and governance (ESG) scores, across ASEAN-5 countries from 2020 to 2024. Drawing on institutional theory, the study uses six World Governance Indicators, namely Political Stability, Voice and Accountability, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption, to assess the institutional environment of 217 listed firms across Indonesia, Malaysia, the Philippines, Singapore, and Thailand. A balanced panel of 1,085 firm-year observations is analyzed using Fixed Effects and two-step System Generalized Method of Moments to address endogeneity and ESG persistence. Aggregate institutional quality is not statistically significant in either specification, reflecting institutional heterogeneity, limited temporal variation, and opposing effects across dimensions. At the dimension level, Government Effectiveness has a positive and significant effect on ESG performance in the static model, while Control of Corruption has a negative and significant relationship in both models. Economic growth and firm size are positively associated with ESG performance, whereas Tobin’s Q shows a negative short-run relationship. The findings extend institutional theory to the ASEAN emerging market context and provide implications for governance-driven sustainability reform.

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