ESG Performance and Corporate Value in an Emerging Market: The Moderating Role of Board Structures in Sustainability

Abstract

This study examines the relationship between publicly traded Thai companies’ ESG performance and value as well as how board structures moderate this. In the Thai context, there is a limited number of empirical studies that employ the board of directors’ structure as a moderating variable, despite the importance of the board’s role in corporate management. This study aims to address this research gap. A panel GMM regression model is employed to address endogeneity issues, and our sample consists of 94 Thai listed companies with available ESG data from 2019 to 2023, resulting in 470 firm-year observations. The results demonstrate positive direct impact of ESG score on corporate value. In addition, board independence is positively significant and relates to company value. However, this research found negative moderating effect of board independence on the relationship between ESG score and corporate value. Furthermore, the empirical results indicate that board size does not have a significant direct and moderate impact on corporate value. Moreover, firm size and leverage are not related to corporate value. The results confirm the agency theory and stakeholder theory. Based on the findings, company executives should integrate ESG practices into their strategic plans. Moreover, regulatory authorities should promote expertise diversity and independence within the board and promote ESG standards and disclosure, as well as offer tax incentives for companies with outstanding ESG. This would enable investors to consider ESG performance in their decision-making. This study represents a new contribution to literature, especially in the context of emerging markets.

1. Introduction

The significance of sustainable development in global business is growing. To facilitate the transition to sustainable development, the sustainable development goals (SDGs) were formulated. Firms are encouraged to integrate these objectives into their corporate reporting cycle, procedures, and strategies to effectively execute this transition (Awuah et al., 2024). Companies that aim to establish a business model that delivers sustainable value for society, shareholders, employees, and customers should prioritize corporate sustainability. Responsible environmental, social, and governance (ESG) strategies can achieve this. This three-dimensional framework improves management practices aimed at overseeing and promoting investments in sustainable business behaviors (Alsayegh et al., 2020).

For listed firms, the circular economy and ESG concepts are closely related. The circular economy serves as a crucial tactic and useful instrument that enables businesses to meet their sustainability objectives and enhance their performance in all three ESG pillars. Adopting a circular economy is crucial for listed firms to gain a competitive edge by attracting ESG-focused investors, fostering customer confidence, and guaranteeing long-term and sustainable economic success. This goes beyond merely complying with regulations.

In accordance with stakeholder theory, ESG concepts are the primary concern of corporate management, as they have the potential to direct and strengthen businesses to accomplish sustainable growth. In addition to particular stakeholders like shareholders, who are the main focus of agency theory, the corporate ESG concept takes a wide range of stakeholder groups into account, such as employees, customers, suppliers, competitors, governmental bodies, society, and environmental advocacy organizations.

As a result, companies are currently focused on integrating ESG practices into their business models to create long-term value for consumers, shareholders, employees, and society at large by instituting responsible ESG policies that emphasize corporate sustainability (Abdi et al., 2022; Aydoğmuş et al., 2022; Dkhili, 2024; Nekhili et al., 2021; Nguyen et al., 2023; Rastogi et al., 2024; Saha & Khan, 2024; Sain & Kashiramka, 2024). Consequently, the important question is whether substantial ESG investments can help corporations achieve better performance or maximize corporate value. Understanding how and why ESG factors affect corporate value is essential because a company must invest considerable resources to implement an ESG policy.

According to the literature, relevant studies exist that examine the relationship between ESG performance and corporate performance or corporate value; however, the results are still mixed. Specifically, some studies identified positive relationships (Abdi et al., 2022; Aydoğmuş et al., 2022; Dkhili, 2024; Feng & Wu, 2023; Nekhili et al., 2021; Nguyen et al., 2023; Zheng et al., 2022), while others identified negative results, such as Barnett and Salomon (2012), who discovered that companies with a poor corporate social performance (CSP) had a better financial performance than those with moderate CSPs. Moreover, Climent et al. (2025) also identified a negative relationship between the ESG pillar score and mutual fund performance. Furthermore, a study by Rastogi et al. (2024) established that a firm’s value is positively affected in a nonlinear (U-shaped) manner, whereas the linear relationship between ESG and value appears to be insignificant.

Businesses with strong ESG performance are favorably perceived by stakeholders, which raises the company’s value. Multiple stakeholders will positively react to outstanding ESG performances, resulting in favorable market responses, increased product price elasticity, lower borrowing interest rates, and preferential taxation and subsidies (Bardos et al., 2020; Feng & Wu, 2023). The value of a company is indirectly affected over the long run by this positive stakeholder feedback (Zheng et al., 2022).

Conversely, an investment in ESG may be viewed as a cost burden, which could impact a company’s performance; specifically, the net profit will decrease due to the expenses that management must enact in order to enact various ESG-strengthening policies. This may displease traditional shareholders who prioritize short-term profits. This reflects the fundamental conflict that organizations face: pursuing maximum profit in accordance with the demands of certain shareholder groups vs. upholding social and environmental responsibility in accordance with the demands of other stakeholders. Companies that adopt the stakeholder theory approach attempt to find a balance and create shared value that accommodates both sides.

The board of directors is responsible for ensuring that a firm is directed and managed in compliance with relevant policies, including ESG policies. Consequently, the board’s structural moderating effect on this relationship will be examined in this study. The research gap revealed is the limited number of previous empirical studies employing the board of directors’ structure as a moderating variable in the Thai context. In previous studies, common traits have been used to characterize boards, such as the presence of female board members (Suttipun et al., 2023) and board independence (Chaisalee & Manapreechadeelert, 2024). This study seeks to address this substantial research gap and suggest valuable applications in relation to policy formation, management practice, and academic scholarship.

Using board structure characteristics as a moderator, this study investigates how ESG performance, measured by an ESG score, relates to the value of SET-listed companies via a panel generalized method of moments (GMM) regression model. As an example of an emerging economy, investors in Thailand have been deeply concerned with the sustainability issue. In 2015, the SET implemented the Thailand Sustainability Investment (THSI) initiative. The group’s members are publicly listed companies that place an emphasis on the requirements of society and the environment, as well as straightforwardness in their operations and the implementation of good corporate governance practices, thereby generating long-term results. This offers an optimal investment strategy to investors as an alternative. The SET has aimed to provide additional investment information by introducing SET ESG evaluations known as “ESG Ratings” and rebranded this to “SET ESG Ratings” in 2023 (The Stock Exchange of Thailand, 2024).

However, even though the SET is concerned with ESG issues, there is still a lack of sustainability-related research in Thailand (Pasalao et al., 2024). Previous scholars who have explored this issue in the Thai context include Van Brecht et al. (2018), Yordudom and Suttipun (2020), Sook-aram (2022), Apiwatphokinkul and Chaiyakul (2024), Treepongkaruna and Suttipun (2024), and Moolkham (2025). These studies confirmed a positive relationship between ESG disclosure (Van Brecht et al., 2018), scores (Apiwatphokinkul & Chaiyakul, 2024), and reporting (Treepongkaruna & Suttipun, 2024) and corporate performance in Thailand. However, Yordudom and Suttipun (2020) achieved mixed results: there was a positive influence of environmental and social disclosures on firm value, while there was a negative influence of governance disclosure on firm value.

Moreover, in order to determine what factors moderate the relationship between ESG measures, corporate social responsibility (CSR) indicators, and corporate financial performance, Cardillo and Basso (2025) conducted an extensive literature analysis and systematic review. A wider examination of underexplored moderating variables is needed to understand how ESG and social responsibility activities affect firm profitability. As such, this study reviewed 108 publications from Scopus and Web of Science from 2019 to 2023. According to a recent empirical study and as proposed in agency theory, there are several moderating elements that impact the relationship between ESG actions and financial outcomes. The governance structure, and more specifically the features of board structures, is an important moderator.

Since the board of directors is crucial for guiding and controlling enterprises via appropriate policies, the moderating impact of the board’s structure on these relationships is also examined in this study. Our goal is to investigate how a more diverse board of directors influences the relationship between the ESG score and corporate value of listed companies in Thailand. Because of the board of directors’ essential role in formulating company policies and strategies, the board structure of a corporation may moderate its value.

This study’s potential contributions are as follows. First, it sheds light on the corporate sustainability literature by working to understand the extent to which ESG performance affects corporate value, moderated by board structure attributes, particularly within the context of emerging markets. Secondly, the findings produced in this research might aid company executives, as one of the main questions that come up in board meetings and committees that deal with these issues is whether the money required for ESG initiatives is financially justified. Corporate managers may utilize these findings as a justification for enhancing ESG resource mobilization and to understand the dynamics of corporate governance processes. Third, this work provides evidence to assist policymakers in formulating supplementary ESG-supportive policies. Lastly, investors could also benefit from this research, as the ESG aspect is useful for investors in assessing business conduct and ensuring business sustainability, creating sustainable and long-term stakeholder value.

The remainder of this article unfolds as follows: Section 2 develops a hypothesis and reviews relevant literature, while Section 3 presents the data and methodology. Section 4 presents the empirical results, Section 5 presents a discussion, and Section 6 contains the conclusion.

2. Literature Review and Hypothesis Development

2.1. Theoretical Framework

This research complies with two significant theories: the agency theory and the stakeholder theory. According to Cardillo and Basso (2025), academic frameworks underpin ESG and CSR financial research, including the abovementioned theories. These frameworks illustrate how organizations manage conflicting interests.

2.1.1. Agency Theory

Jensen and Meckling (1976) stated that agency theory considers the possibility of conflicting interests between principals (shareholders) and agents (managers). This theory assumes that the principal wants the agent to maximize the shareholder value. However, managers may have their own interests that differ from shareholders, such as seeking personal benefits or investing in low-risk projects to secure their positions. This conflict of interest leads to an agency problem.

From an agency theory perspective, investing in ESG activities might be seen as an expense that does not generate immediate financial returns, potentially reducing short-term profits. This could conflict with the shareholders’ goal of maximum returns. There are agency costs when managers pursue ESG efforts for their own benefit or to improve their reputation, even if these initiatives do not directly benefit shareholders. However, a well-structured board can evaluate and decide that certain ESG investments are beneficial in the long term and ultimately enhance corporate value. An appropriate board structure, such as one with a high number of independent directors or a diverse composition, helps to enable the monitoring and supervision of management, ensuring that their actions align with shareholder interests. This board oversight serves to mitigate agency problems. Robust governance measures, including independent boards and performance-based CEO compensation, may ensure that ESG efforts enhance long-term financial performance. These steps reduce agency conflicts by ensuring that managers act in a way that benefits shareholders. Businesses should disclose sustainability to lessen knowledge asymmetry with investors and increase shareholder value (Perumandla et al., 2025; Phillips et al., 2003).

2.1.2. Stakeholder Theory

Sustainable business operations refer to an organization’s commitment to economic growth, guided by policies and business plans rooted in corporate governance principles. This approach involves effective risk management, securing capital and profits for business expansion, and providing strong returns to shareholders. These economic objectives are achieved concurrently with a profound commitment to environmental and societal responsibility. This obligation encompasses the whole supply chain, comprising raw material suppliers, customers, partners, logistics providers, storage facilities, distributors, and local communities. All stakeholders can produce direct and indirect positive and negative effects on the organization and society at large, as well as immediate surroundings (The Stock Exchange of Thailand, 2024).

Freeman (1984) developed the stakeholder theory, which posited that an organization must consider all stakeholders involved in its operations apart from shareholders. This includes customers, suppliers, workers, communities, and the environment. The theory suggests that building good relationships and responding to the needs of these stakeholders helps foster sustainability and increases the company’s value over the long term. Consequently, generating value for all stakeholders, rather than exclusively prioritizing shareholders, results in sustained financial prosperity for the organization.

According to Azizul Islam and Deegan (2008), stakeholder theory explains how specific demands from stakeholder groups impact corporate sustainability performance (Perumandla et al., 2025). Companies that are capable of successfully aligning the interests of all stakeholders achieve enhanced sustainability. In addition to shareholders’ profit maximization, the interests of other corporate stakeholders are prioritized (Aydoğmuş et al., 2022).

ESG activities inherently correspond with stakeholder theory, as they reflect a company’s obligation to address the demands and concerns of diverse stakeholder groups. The E (environmental) in ESG relates to care for the environment, community, and society; S (social) focuses on employees and customers; and G (governance) refers to the transparent and fair management of the company for/by all parties.

2.2. Sustainability and ESG in Thailand

SET established the Thailand Sustainability Investment (THSI) list in 2015. The THSI list comprises the stocks of publicly traded companies that exhibit a commitment to business sustainability. These commitments are evaluated based on their performance of ESG practices. The THSI list serves as a reference for investors seeking to make educated investment decisions. In 2023, the “Thailand Sustainability Investment (THSI) list” was renamed the “SET ESG Ratings.” This change was initiated by the SET. This year also marked the first time that the assessment results were published in the form of ESG ratings, further enhancing the information available to investors (The Stock Exchange of Thailand, 2024).

Companies that are listed in the SET are obligated to disclose sustainability initiatives that are in accordance with the Global Reporting Initiative (GRI) guidelines. Considering the ESG concept’s implementation in Thailand, the Securities and Exchange Commission (SEC) has assessed the GRI Standard Guideline and categorized eleven issues into three primary viewpoints: the “environmental” perspective refers to the management of issues related to water, energy, waste, and greenhouse gas emissions; the “social” viewpoint relates to matters involving employee management, taking responsibility for customers, and working toward community and social development; and the “governance” viewpoint refers to aspects related to supply chain management, innovation, and the minimization of sustainability risks (The Stock Exchange of Thailand, 2012).

2.3. ESG Performance and Corporate Value

For many years, academic research has been exploring the effect of ESG performance on company value. Multiple studies have demonstrated that ESG factors have a positive impact on company value. According to Friede et al. (2015), in the 1970s researchers initiated an investigation into the connection between company ESG practices and financial outcomes. After examining 2200 articles, they claimed that the data support ESG investment, with more than 90% of the research demonstrating a positive relationship between ESG standards and companies’ bottom lines.

Furthermore, Whelan et al. (2021) reported that the issue of how ESG practices relate to financial results was explored in over a thousand papers carried out between 2015 and 2020. Their results revealed that, in 58% of the articles, ESG was positively associated with financial performance, in 8% it was negatively associated, in 13% it was unrelated, and in 21% the results were mixed. Although the results demonstrate a favorable majority, the authors conclude that there is still disagreement on this issue (Aydoğmuş et al., 2022). According to Cornell and Shapiro (2021), implicit claims serve as an essential link between non-investor stakeholders and ESG factors, as well as shareholder value, including both its potential benefits and drawbacks. As stated by the authors, the process of creating firm value and financial policies is related to stakeholders who are not investors, as well as CSR and ESG issues. Implicit claims play a significant part in this process.

The way in which ESG factors relate to company value has been the subject of prior studies. Recently, predominantly positive outcomes have been reported; however, other publications present unfavorable results that endorse the shareholder theory (Aydoğmuş et al., 2022). Multiple studies have identified a favorable correlation between ESG performance and a company’s value or profitability. By examining non-financial publicly traded companies in A-shares in China from 2011 to 2020 and improvement initiatives from the stakeholders’ point of view, Zheng et al. (2022) investigated the degree to which EGS performance might enhance company value. According to the findings, the value of a business increases when it performs well in ESG metrics. According to the results of the single ESG performance dimension, whereas both environmental (E) and social (S) variables add to a company’s value, the effect of the social variable is less substantial. Additionally, the data does not demonstrate that governance (G) and business value are significantly related. Similarly, Fu et al. (2023) utilized A-share capital market sample companies to create a multiple linear regression model and investigated how ESG performance relates to enterprise value. There is a strong and positive relationship between enterprise value and ESG performance; on average, the enterprise value increases by 7.2% for each 1% enhancement in ESG performance. These findings are in line with the examination carried out by Yi and Yang (2024), which, using quarterly data, analyzed Chinese A-share listed sports enterprises’ valuation as a function of ESG performance from 2018 to 2022. The findings reveal that the ESG performance of sports firms has a positive effect on corporate value, with a higher ESG score being associated with increased corporate value.

Additionally, Wong et al. (2021) investigated how the value of Malaysian companies was affected by ESG certification. According to the analysis, a company’s cost of capital decreases with ESG certification, while Tobin’s Q significantly increases. The results demonstrate that companies in developing and emerging economies benefit from disclosing their corporate social responsibility initiatives, consistent with prior studies conducted in affluent areas. This investigation substantiates the benefits that enterprises that adhere to an ESG strategy provide to stakeholders. Furthermore, Aydoğmuş et al. (2022) employed the Bloomberg list of the top 5000 publicly traded firms from 2013 to 2021 with the purpose of studying the influence of ESG performance on the value and profitability of organizations. Empirical results reveal that a company’s total ESG composite score increases its value, illustrating that a company’s investment in a strong ESG performance can pay off in the form of increased value and profits.

In a global context, Bhaskaran et al. (2020) investigated how ESG practices affected the financial results of 4887 multinational corporations. According to the findings, ESG initiatives that promote internal stakeholders’ well-being and optimal corporate governance techniques enhance business performance. On the other hand, some academics contend that ESG investments negatively impact profits and company value, such as Brammer et al. (2006), who studied the connection between returns on stock and corporate social performance in the UK. They found that these companies’ good social performance in regard to the environment and, to a lesser degree, community variables makes up for their low financial return.

Furthermore, Nollet et al. (2016) used accounting and market variables to assess S&P 500 firms’ social and financial performance from 2007 to 2011. Return on capital and company social performance are adversely associated within a linear model. According to nonlinear models, CSR initiatives should have positive long-term effects since CSR and accounting-based financial performance indicators for corporations form a U-shaped relationship. In addition, Landi and Sciarelli (2019) evaluated how ESG ratings affected the abnormal returns of firms in Italy that were listed on public markets between 2007 and 2015. The authors found an adverse relationship between ESG scores and financial performance. During COVID-19, Folger-Laronde et al. (2022) assessed how Canadian ETFs’ financial performance correlated with their ESG ratings. They concluded that protection during a significant market downturn is not guaranteed by an excellent ESG performance in ETFs. Between 2011 and 2015, Duque-Grisales and Aguilera-Caracuel (2021) examined 104 MNCs across several countries with operations in Latin America. After conducting their investigation, a statistically significant negative correlation between ESG scores and financial success was identified. Examining ESG aspects separately to determine their relevance to financial performance also revealed a negative correlation. In addition, Garcia and Orsato (2020) conducted an analysis of 2165 enterprises from the period of 2007 to 2014 in order to compare developing and emerging nations. Emerging markets demonstrated an adverse relationship between financial performance and ESG scores.

By examining prior research, numerous academics have examined the process and effect of ESG performance on business value across both established and emerging markets. Thailand serves as an example of an emerging market, and, overall, there is still an inadequate amount of research on how the ESG performance affects company value via the in-depth examination of moderating variables. According to prior research conducted in Thailand, the country’s market reacts favorably to ESG disclosures. For example, Van Brecht et al. (2018) examined how the market perceives the disclosure of ESG operations based on 719 publicly traded Thai companies. In addition, Yordudom and Suttipun (2020) investigated how ESG disclosures affected the firm value of companies listed between 2015 and 2019 in the Thailand Sustainable Investment (THSI) group on the SET. This study found that governance disclosure adversely affected business value, whereas environmental and social disclosures positively influenced it.

From 2015 to 2019, Sook-aram (2022) studied 48 Thai companies listed on the Stock Exchange to assess how ESG reports affected their ROA, ROE, WACC, and Tobin’s Q value. The author claimed that ESG reporting transparency improved the firms’ ROA and valuation. Moreover, Apiwatphokinkul and Chaiyakul (2024) explored how ESG considerations affected the bottom lines of Thai Stock Exchange-listed sustainable firms. The results revealed that sustainability performances or ESG practices enhance a company’s success and positive image, especially at elevated levels of corporate governance. Furthermore, the effect of ESG reporting on the bottom line of 147 publicly traded Thai corporations from 2019 to 2021 was systematically examined by Treepongkaruna and Suttipun (2024). The authors found that company profitability in Thailand was positively affected by ESG reporting, and this influence was statistically significant, consistent with legitimacy, stakeholder, and signaling hypotheses.

In addition to studies within country-specific contexts, this research is also conducted on a regional basis, such as in the ASEAN region, of which Thailand is a member. Chairani and Siregar (2021) examined the ways in which environmental, social, and governance (ESG) factors modify the connection between ERM and the value and performance of businesses. This analysis included ASEAN-5 enterprises from Indonesia, Malaysia, the Philippines, Singapore, and Thailand from the period 2014–2018 and demonstrated that ESG significantly impacts ERM’s business value effect. After separating samples into sensitive and non-sensitive industries, the results demonstrate that in sensitive sectors ESG performance significantly affects financial results. In addition, Muninggar and Pangestuti (2024) examined the influence of ESG outcomes on corporate value across Indonesia, Malaysia, Thailand, Singapore, and the Philippines from 2018 to 2022. The results reveal that manufacturing enterprises’ ESG performance considerably increases the corporate value in these five countries. Corporate governance and environmental performance have an insignificant impact on firm value. Simultaneously, corporate values are affected by social performance. The value of a company can be enhanced by good corporate governance, control components, and social and environmental performance.

Previous studies have demonstrated that the ESG performance of Thai listed companies correlates with their value. Consequently, an interesting question could be “Does the composition of the board of directors moderate this relationship?” This is because the ESG policy and all other relevant policies are directed and managed by the board. The purpose of this research is to analyze the board structures of Thai listed companies and how they affect the correlation between the company valuation and ESG score.

2.4. The Moderating Roles of the Board of Director Structure

To moderate the relationship between sustainability and ESG criteria, past research has utilized the characteristics of the board of directors. Arayssi and Jizi (2024) discovered that independent boards moderate the link between royal family members’ involvement on corporate boards and ESG disclosures. Additional researchers who used board structure characteristics as moderating factors include Nekhili et al. (2021) and Hamza and Jarboui (2025). According to Hamza and Jarboui (2025), French companies should ensure that their board of directors is well-balanced, with the goal of improving the overall quality of their CSR reports. The existence of a sound board structure attenuates impression control efforts and restricts ESG benefits from abnormal tone regulation.

Very few studies in this field have used the qualities of the board of directors as a moderating variable; these studies are limited to Thailand. The corporate performance of SET-listed businesses was studied by Suttipun et al. (2023) in relation to ESG reporting and the presence of female board members. The sample consisted of companies that were listed on the SET between 2015 and 2019. These scholars found that, in addition to the benefits of ESG reporting, the presence of female board members also improved firm performance. Furthermore, a positive correlation between business success and ESG reporting was identified through an interaction component that included female board members. In addition, between 2017 and 2022, Chaisalee and Manapreechadeelert (2024) explored the relationship between the value of 105 listed corporations and their ESG performance scores. The researchers speculated that independent boards might play a mitigating role in this relationship. Enhanced stock prices were significantly associated with higher ESG performance scores. Independent boards moderated the connection between ESG ratings and stock prices.

Considering mediating effects, other Thai studies investigated the link between company valuation and ESG performance. For example, Jaeresukon (2024) examined 29 publicly listed firms from 2017 to 2023 and how ESG disclosures affected their value. The findings revealed that, through the cost of capital, which serves as a partial mediator, the value of a corporation is indirectly affected negatively by ESG disclosure scores. These results suggested that wealth creation and sustainable policies can be in conflict.

This study’s primary objective is to identify any correlation between the ESG performance and the firm value of publicly traded Thai corporations. To promote ESG policies that contribute to the sustainable growth of Thai enterprises, the SET established the THSI initiative in 2015. Thus, in the emerging Thai market, ESG performances and firm values should be examined. To ensure that a company is directed and managed in accordance with the appropriate policies, including the ESG policy, it is the responsibility of the board of directors to make sure that those policies are followed. Thus, the moderating influence of the board’s structure on this connection will also be analyzed.

The hypotheses that follow will be tested according to the relevant theories and literature review:

H₁. 

The ESG score has a significant positive impact on corporate value.

H₂. 

The board structure has a significant direct and moderating effect on corporate value.

H_2a. 

The board size has a significant positive impact on corporate value.

H_2b. 

The board size moderates the relationship between ESG score and corporate value.

H_2c. 

Board independence has a significant positive impact on corporate value.

H_2d. 

Board independence positively moderates the relationship between ESG score and corporate value.

3. Data and Methodology

3.1. Sample and Data Collection

This study examines Thai stock exchange-listed companies. Using the London Stock Exchange Group (LSEG), data from corporate annual reports are collected for 5-year periods from 2019 to 2023. During the study period, balanced samples of 94 organizations were included in the final sample based on the ESG score data that were available. Consequently, this study includes 470 firm-year observations. All data used is collected from LSEG Workspace database.

This study utilizes ESG performances as independent variables, quantified through the ESG score (combined ESG score). We utilize ESG score from LSEG Workspace, which defines ESG score as “a total company score derived from self-reported data within the environmental, social, and corporate governance domains.” LSEG Workspace assesses the ESG score by utilizing over 700 analysts who gather more than 630 data points, ratios, and analyses from annual reports, corporate websites, NGO websites, stock market filings, news outlets, and CSR reports. For the assurance of the data quality, they employ a combination of algorithmic and human procedures (LSEG Data and Analytics, 2023). The ESG score reflects a company’s aggregate rating derived from self-reported data on the ESG pillars. There is a range of 0 to 100 for this variable; when the score is close to 100, it implies that the organization is performing exceptionally well in terms of ESG issues (Agustina & Barokah, 2024). The dependent variable is company value, quantified by Tobin’s Q, represented as TOBIN. As a market-oriented measure, Tobin’s Q is useful for assessing corporate value. Drawing on prior literature (Abdi et al., 2022; Atan et al., 2018; Aydoğmuş et al., 2022; Saha & Khan, 2024; Wong et al., 2021; Zheng et al., 2022), this study uses Tobin’s Q as an indicator of corporate value in relation to fluctuations in market value.

Additionally, the moderating variable is the structure of the board of directors, which includes board size (BSZ) and board independence (BIN). Furthermore, corporate characteristics include firm size (SIZ) and firm leverage (LEV), which are employed as the control variables. Prior research in this field is used to select the proxies for all variables.

The variable notations and descriptions are provided in Table 1.

Table 1. Variable definitions.

Variable	Notation	Description	Source
Dependent Variable:
Tobin’s Q Ratio	TOBIN	(Market value of equity + book value of liabilities)/book value of total assets	LSEG
Independent Variable:
ESG Score	ESG	ESG combined score	LSEG
Moderating Variables:
Board Size	BSZ	Number of directors on the board	LSEG
Board Independence	BIN	Number of independent directors/number of directors	LSEG
Control Variables:
Firm Size	SIZ	The logarithm of total assets	LSEG
Firm Leverage	LEV	Liabilities/total assets	LSEG

3.2. Data Analysis

To achieve the study objectives, we employed the panel GMM regression, which addresses the endogeneity issue. The details of model specification and measurement validation are as follows.

3.2.1. Panel GMM Regression Specification

Panel GMM regression is employed to examine the Thai listed firms’ ESG score and corporate value and to address the endogeneity issue. Endogeneity refers to the situation in which a variable is correlated with the error term in a statistical model. This correlation can arise due to omitted variables, measurement errors, or simultaneity, leading to biased and inconsistent estimates of the model parameters. A possible endogeneity issue that might result in biased and inconsistent parameter estimations is caused by the possibility that the historical performance may influence the present financial performance, ESG score, and board structure (Roberts & Whited, 2013). We applied the instrumental variables technique and the dynamic GMM estimator to analyze the interaction between the board structure and ESG score to affect the firm’s value while mitigating endogeneity biases. In our context, the GMM is more relevant than other methods because board structures and ESG performance values today depend on past firm performances.

The direct effect of ESG score (ESG) on corporate value will be examined as well as the direct effect of board structure on corporate value, which is measured by Tobin’s Q ratio (TOBIN). Additionally, this study includes moderating variables to determine if the board structures of Thai listed businesses impact ESG performance and corporate value. Board size (BSZ) and board independence (BIN) are the board structure variables. By generating interaction terms between independent variables and moderators, the interaction variables—(ESGxBSZ) and (ESGxBIN)—are incorporated as independent variables in the models (Model (1) and Model (2)) to identify moderator effects, as shown below. These two models are employed to test the formulated hypotheses.

TOBIN_i,t = β₀ + β₁ESG_i,t + β₂BSZi,t + β₃(ESG_i,t × BSZ_i,t) + β₄SIZ_i,t + β₅LEV_i,t

(1)

TOBIN_i,t = β₀ + β₁ESG_i,t + β₄BIN_i,t + β₃(ESG_i,t × BIN_i,t) + β₄SIZ_i,t + β₅LEV_i,t

(2)

Model (1) focuses on board size attributes, while Model (2) examines board independence aspect. For Model (1), we used the lag of the dependent variable, lag of independent variables, which consist of ESG, board size, the interaction term between ESG and board size and lag of firm size and firm leverage as instruments. In addition, the instrument used in Model (2) is the lag of the dependent variable, lag of independent variables, which consist of ESG, board independence, the interaction term between ESG and board independence and lag of firm size and firm leverage.

3.2.2. Measurement Validation

To ensure the reliability of the estimated interaction effects and the overall structural integrity of the GMM framework, stringent measurement validation is performed. Due to the complexity of incorporating moderators into a dynamic panel data model, diagnostic tests include Hansen J-test and Arellano–Bond test, conducted to ensure the model is correctly described and devoid of endogeneity-related biases.

The reliability of the GMM estimator is fundamentally contingent upon the presumption that the instruments are valid, signifying that they are exogenous and uncorrelated with the error term. We utilize the Hansen J-test to assess the validity of the over-identifying limitations. A non-significant p-value (p > 0.05) is necessary to fail to reject the null hypothesis regarding instrument validity. This verifies that the chosen instruments are truly exogenous and have been appropriately omitted from the primary regression model, thus mitigating concerns about instrument-induced bias in our moderation analysis.

The validity of the GMM model depends on the assumption that the idiosyncratic error terms are not serially connected. We employ the Arellano–Bond test to assess first-order (AR(1)) and second-order (AR(2)) serial correlation. In a dynamic panel context, the AR(1) is anticipated to be significant according to the first-differencing of the data, whereas the AR(2) test should produce a non-significant p-value (p > 0.05). The lack of second-order autocorrelation implies that the lagged variables used as instruments are not correlated with the current error term, thereby ensuring the reliability of the regression parameters.

According to the literature, previous studies such as Makhija et al. (2025), Nekhili et al. (2021), and Shi et al. (2026) also employed Hansen J-test and Arellano–Bond test for measurement validation of GMM model in their studies.

4. Empirical Results

This section addresses the descriptive statistics, correlation coefficients, and empirical results from the panel regression analysis. The ESG performance, corporate value, and board structure in Thai listed corporations from 2019 to 2023 are examined here. Additionally, the results of the panel GMM are detailed.

4.1. Descriptive Statistics

All of the summary statistics of the analyzed variables are displayed in Table 2. The sample comprises a balanced panel dataset that contains 470 firm-year observations, collected from 94 distinct Thai listed companies over the period spanning from 2019 to 2023. The average Tobin’s Q ratio, a measure of corporate value, for the companies is 2.19. Regarding ESG performance, the mean ESG score for these companies is 54.85. Delving into board structure attributes, the average board size is approximately 11.92, while board independence stands at 43.51.

Table 2. Descriptive statistics.

Variables	Mean	Median	Maximum	Minimum	Std. Dev.
TOBIN	2.1932	1.3341	15.4570	0.7427	2.1206
ESG	54.8466	58.0145	92.0009	2.3843	18.0790
BSZ	11.9192	12.0000	20.0000	6.0000	2.8438
BIN	43.5132	41.1765	73.6842	20.0000	10.7402
SIZ	10.9085	10.8532	12.6546	9.5067	0.6843
LEV	0.5723	0.5990	0.9722	0.1209	0.1959

Note: Number of observations is 470 firm-years.

4.2. Correlation Coefficients

The research variable correlation coefficients are presented in Table 3. The firm size (SIZ) and firm leverage (LEV) have the greatest coefficient of 0.6020. No other variables demonstrate a strong association. Therefore, the results indicate that the models do not suffer from multicollinearity issues.

Table 3. Correlation coefficients.

	TOBIN	ESG	BSZ	BIN	WOB	SIZ
TOBIN	1
ESG	−0.0169	1
BSZ	−0.2122	0.2549	1
BIN	−0.0715	0.1266	0.0403	1
SIZ	−0.4583	0.4031	0.5315	0.1888	1
LEV	−0.2666	0.1870	0.2335	0.0307	0.6020	1

4.3. Panel GMM Regression Results

This study uses a panel GMM regression model to explore the relationship between ESG score and corporate value. The direct effects of the board structure and company value are also investigated, as well as the board structure components that act as moderators between the ESG score and corporate value. The panel GMM regression results are as follows.

Table 4 provides the panel GMM regression results. The test results in Table 4 clearly demonstrate that AR(1) indicates significant first-order autocorrelation; AR(2) shows no significant second-order autocorrelation. Additionally, the Hansen’s J-statistic (J Statistic) in Model (1) and Model (2) yield a p-value of 0.1347 and 0.2638, respectively, which confirms the validity of the instruments employed in the panel GMM estimation and the absence of over-identification bias.

Table 4. Moderating effect of BSZ and BIN on ESG score and corporate value.

Variables	(1) BSZ		(2) BIN
LTOBIN	0.6301	(1.5426)	0.4728	(1.3319)
ESG	0.0320	(0.0559)	0.4290 *	(1.8871)
BSZ	1.0204	(0.3693)	-	-
ESG*BSZ	−0.0062	(−0.1366)	-	-
BIN	-	-	0.6935 **	(2.1612)
ESG*BIN	-	-	−0.0097 **	(−2.0336)
SIZ	0.1994	(0.0277)	−6.5486	(−1.4227)
LEV	17.2657	(1.6359)	10.9687	(1.2377)
AR(1)	−2.9761		−2.3466
(p-value)	(0.0029) ***		(0.0189) **
AR(2)	0.9978		0.0770
(p-value)	(0.3184)		(0.9386)
J Statistic	8.3607		6.4624
Prob(J Statistic)	0.1374		0.2638

Notes: t-statistics in parentheses, ***, **, and * indicate significant at 1, 5, and 10%, respectively.

According to Table 4, the results for Model (2) indicate that the ESG score (ESG) is positively significant and related to Tobin’s Q ratio (TOBIN) at the significance level of 0.10, with a coefficient of 0.4290. This result supports Hypothesis H₁. However, there is no significant relationship between Tobin’s Q business value and its overall ESG performance in Model (1).

Additionally, we examine the direct influence of board structure attributes (board size and board independence) on corporate value, addressing Hypotheses H_2a and H_2c. Furthermore, we evaluate Hypotheses H_2b and H_2d by exploring the moderating effect of how the board structure influences the connection between ESG score and company value.

Addressing Hypotheses H_2a–H_2d, the results demonstrated that in Model (1) the board size (BSZ) is not related to the corporate value (TOBIN), both for direct and moderate effects. It should be noted that board size exhibits minimal variance across Thai firms, which may limit significant findings. This contrasts with the expectation according to Hypotheses H_2a and H_2b.

Considering board independence (BIN), with Model (2) we identified that the board independence (BIN) is positively and significantly related to corporate value (TOBIN) at the significant level of 0.05, with a coefficient of 0.6935. Moreover, the results for the interaction terms (ESG*BIN) indicate that board independence has a moderating effect on the relationship between ESG score and corporate value at the significant level of 0.05, with a coefficient of −0.0097. These results support Hypotheses H_2c, but the direction of the relationship found is in contrast to the expected direction identified in Hypothesis H_2d.

The empirical findings demonstrate the positive direct effect of board independence on corporate value. Nonetheless, board independence negatively moderates the association between ESG score and corporate value. This indicates that, although independent directors are regarded as a strategy for enhancing value, they could reduce the beneficial impact of ESG initiatives on firm valuation.

After accounting for firm size (SIZ) and leverage (LEV) as control variables, the empirical results do not demonstrate statistical significance in relation to the firm value.

5. Discussion

Utilizing a panel GMM regression model, our research identified a positive relationship between ESG performance and corporate value, which supports Hypothesis H₁. This is consistent with prior Thai studies. For example, Treepongkaruna and Suttipun (2024) identified positive links between ESG and firm value; this aligns with stakeholder theory. The positive direct influence of ESG score on corporate value supports stakeholder theory, indicating that proactive involvement in environmental and social matters generates shared value. By catering to the needs of diverse stakeholders, companies can improve their corporate reputation and long-term financial viability, resulting in increased market valuation. Also in accordance with stakeholder theory, ESG concepts are the primary concern in corporate management, as they have the potential to direct and strengthen businesses in order to accomplish sustainable growth. Moreover, as ESG investments reduce a company’s cost of capital, an increase in ESG will increase the firm value significantly (Makhija et al., 2025).

Additionally, board size is not significantly related to corporate value, so Hypothesis H_2a is rejected based on the results of this investigation. This indicates that board size does not exert a substantial direct influence on corporate value. According to agency theory, this indicates that the merits of small boards such as efficient communication and diminished free riding and the advantages of large boards such as improved monitoring capability do not prevail in this scenario. Furthermore, the moderating influence of board size is also absent, which does not support Hypothesis H_2b. This indicates that the efficacy of ESG as a value-driver is not contingent upon the size of the board. Based on stakeholder theory, the findings indicate that increasing the number of board seats does not inherently augment the firm’s capacity to leverage ESG activities for stakeholder engagement in a manner that elevates valuation. This highlights that it necessitates the functional quality of directors rather than the structural quantity of the boardroom to enhance corporate value in relation to ESG practices.

Furthermore, board independence has a significant positive relationship with corporate value, so Hypothesis H_2c is accepted based on the results of this investigation. However, we found negative moderating impact of board independence, which contrasts with the expectation regarding Hypothesis H_2d. These results indicate that, through the perspective of agency theory, positive direct impact substantiates that independent directors function as efficient overseers, diminishing agency costs. The adverse moderating impact indicates a monitoring-efficiency trade-off. Excessive scrutiny by independent boards on ESG expenditures frequently viewed as possible managerial embellishment may limit the strategic flexibility necessary for ESG projects to flourish, hence reducing their value relevance. Additionally, utilizing stakeholder theory, although ESG performance seeks to generate value for a diverse array of stakeholders, the adverse moderation by board independence suggests a contradiction in prioritizing. Independent directors, primarily concerned with their fiduciary responsibilities to shareholders, may perceive substantial ESG commitments as a misallocation of resources. This discord restricts the connection between sustainability initiatives and business valuation.

Based on the findings regarding board structure effects, it could be claimed that the size of the board is less significant than its composition and conduct of the board’s independence in the context of sustainable investing.

Furthermore, the analysis reveals that firm size and leverage have no significant effect on corporate value. It indicates that in the modern corporate landscape, the identification of board independence is more significant to investors than the size of the board, firm size or its capital structure.

6. Conclusions

This study examined how Tobin’s Q ratio, a market-based metric, relates to ESG performance as evaluated by ESG score using a panel GMM regression analysis. Additionally, board size and independence were some of the underlying factors that were investigated for their potential moderating effects in this type of relationship. The sample consisted of 94 listed firms in the SET, possessing complete data for 5-year periods from 2019 to 2023, resulting in 470 firm-year observations.

This study identified a statistically significant positive relationship between ESG score and corporate value. Similarly, a statistically significant positive relationship was identified between board independence and corporate value. However, board independence had a negative moderating effect on the relationship between ESG score and corporate value. The study’s findings indicate that policymakers and executives must acknowledge that company value stems from investments in non-financial capital (ESG). For ESG initiatives to genuinely enhance business value, companies must guarantee a balance between board independence and ESG knowledge. Policy makers and enterprises must transcend mere compliance for independence and cultivate a board culture that perceives sustainability not as a financial burden to be assessed but as a strategic asset to be developed.

Based on these findings, we suggest the following policy implications. First, regulatory authorities, such as the SEC, should contemplate raising or strictly enforcing ESG disclosure standards to ensure they are comprehensive and aligned with international benchmarks, thereby enabling investors to accurately compare and evaluate corporate value. Furthermore, the government or pertinent agencies should offer tax incentives or facilitate access to affordable financing (green finance) for companies demonstrating outstanding ESG performances, thereby incentivizing the business sector to increase investments in sustainability. Second, regulatory authorities should prioritize the composition of the board over merely dictating its size. The insignificance of board size indicates that increasing the number of directors does not ensure improved performance. Policies should promote board diversity, independence and abilities specific to ESG.

Finally, the adverse impact of board independence on the ESG and value relationship indicates a possible contradiction between conventional oversight and sustainability objectives. Policymakers ought to enhance corporate governance standards to expressly incorporate sustainability supervision as a fundamental fiduciary responsibility, ensuring that independent directors do not perceive ESG as merely a cost or an agency risk.

Considering the implications for investors, the findings of this study are highly significant for their decision-making processes and for long-term risk and return evaluations. The findings suggest that investors ought to transition from solely focusing on conventional financial metrics to assessing the overall character of companies by examining sustainability factors. Consequently, investors should construct a portfolio that emphasizes ESG considerations in stock selection and employs leverage as a screening tool to exclude companies with disproportionately high financial risks, thereby enhancing the likelihood of achieving stable and sustainable long-term returns.

In addition to these considerations, practical implications for corporate executives will arise from the integration of ESG into strategic planning. Specifically, management should regard the ESG agenda as a fundamental component of the core strategy, rather than solely as a matter of regulatory compliance. This is due to ESG being a vital mechanism for creating value. Management may also assess qualitative aspects of governance. Specifically, board performance may be assessed based on qualitative factors such as directors’ competence, strategic involvement, ethical governance, and the effectiveness of internal systems in integrating ESG considerations into core corporate strategies. Furthermore, organizations should provide ESG information transparently and consistently to demonstrate to investors that investing in ESG factors fosters long-term value creation rather than representing a cost burden.

This investigation is subject to some specific limitations. The relatively short time range of the ESG data (2019–2023) is a primary constraint. Financial gains from ESG programs can accrue over time, and a larger dataset may reveal different links. The availability of ESG score data, however, makes it impossible to address this constraint. Moreover, the limited time of the 5-year window (2019–2023) could distort the results, especially as it spans the COVID-19 period. Furthermore, this study used a total ESG score, which may relate to different consequences than specific ESG pillars. Future research could overcome these limitations by examining how different environmental, social, and governance scores individually affect business value, as their effects may vary. In addition, the industry sector should be included in future studies, as ESG disclosure and market valuation vary widely across industries. Finally, future studies may concentrate on qualitative board studies to better understand the actual functioning of boards, the expertise of directors, and how ESG issues are integrated into strategic decision-making beyond only structural attributes.

Conclusively, this study’s empirical results shed light on the dynamics of corporate sustainability and governance in an emerging market context. This work contributes to the corporate sustainability literature by highlighting the complexities of these relationships in the context of an emerging country, providing critical perceptions for Thai corporate managers and policymakers as they navigate the changing landscape of sustainable business practices.