QUALITY OF SUSTAINABILITY REPORTING AND BANK STABILITY: EMPIRICAL EVIDENCE FROM VIETNAMESE COMMERCIAL BANKS

Abstract

The purpose of this study is twofold. First, we attempt to quantify the quality of bank sustainability reporting (QSR) since the 2016 mandatory sustainability disclosure in Vietnam. Content analysis of banks’ annual reports is performed to assess 11 QSR items that are used to build the QSR index. Second, we investigate whether the quality of sustainability reporting influences banks’ financial stability. Employing a sample of 159 banking firm observations over the period 2016–2021, we document that the quality of sustainability reporting in Vietnamese commercial banks increased from year to year. Importantly, our empirical evidence shows that a higher level of QSR contributes to better bank stability. This result is robust to various estimation methods, different components of QSR, an alternative measure of bank stability, and controlling for reverse causality. Our findings provide important implications for bank managers by highlighting that the enhancement of QSR increases bank stability.