Does audit quality moderate the ESG disclosure-firm performance nexus? Evidence from large-capitalisation Vietnamese listed firms

Abstract

 This study examines the impact of ESG disclosure on firm performance and investigates the moderating role of audit quality in shaping this relationship in an emerging market context. Using panel data from largecapitalisation Vietnamese listed firms, the study employs multiple estimation techniques, including dynamic system Generalized Method of Moments (GMM), to address unobserved heterogeneity, performance persistence, and potential endogeneity concerns. The results provide robust evidence that ESG disclosure is positively related with firm performance, suggesting that greater sustainability transparency enhances the informational environment and supports more efficient resource allocation. More importantly, the findings indicate that audit quality significantly strengthens the performance implications of ESG disclosure. Firms subject to higher-quality external assurance appear to derive greater economic benefits from sustainability reporting, highlighting the importance of governance mechanisms in enhancing the credibility and decision-usefulness of non-financial information. These results contribute to the literature by emphasising the informational and signalling role of ESG disclosure rather than sustainability engagement, and by demonstrating that the financial relevance of ESG transparency is conditional on institutional and governance factors. The study offers practical insights for managers, investors, and policymakers regarding the strategic value of credible sustainability disclosure in emerging capital markets.