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Dependent variable: LN1ZSCORE

(0.0596) (0.0592)
GDPG 0.0125 0.0040

(0.0115) (0.0118)

INFLATION 0.0319*** 0.0236***
(0.0090) (0.0091)

Constant 1.3317*** 1.9460***

(0.2527) (0.2505)

Wald chi2 257.40 179.47

Prob > chi2 0.0000 0.0000
Number of groups 143 143

Observations 562 562
Note: ***, **, and * indicate the significance at the 1%, 5%, and 10% level, respectively.
Source: Authors’ compilation from analysis data with Stata 17
The results remain broadly consistent with the baseline estimates. In column (1),
ESG continues to be positively and statistically significantly associated with bank stability,
with a coefficient of 0.1573 at the 1% level. The coefficient on CORRUPTION is also
positive and significant at the 1% level. Because CORRUPTION is proxied by the
Corruption Perceptions Index (CPI), where higher values indicate lower perceived
corruption, this result implies that better corruption control remains associated with
greater bank stability. EFFR also retains a negative and statistically significant coefficient,
confirming that higher cost inefficiency is associated with lower bank stability.
Column (2) replaces CORRUPTION with RULE_OF_LAW as an alternative proxy for
institutional quality. The coefficient on ESG remains positive and significant at the 1%
level, while RULE_OF_LAW also shows a positive and statistically significant relationship
with bank stability. EFFR remains negative and significant, consistent with the baseline
and the first robustness specification. Although some control variables change in sign or
significance, the main relationships remain qualitatively stable.
Overall, Table 4 provides additional support for the baseline findings. Across both
robustness specifications, ESG remains positively associated with bank stability,
institutional quality continues to show a positive relationship with bank stability whether
captured by CPI-based CORRUPTION or by RULE_OF_LAW, and EFFR remains negatively
associated with stability. Taken together, these results suggest that the main conclusions
are not driven by a specific estimation method or by a single proxy for institutional quality,
and should therefore be interpreted as robust statistical associations.
4.4. Discussion in the context of digital transformation
The empirical findings highlight the central role of governance in supporting bank
stability in Asia. The positive association between ESG performance and bank stability (H1)
suggests that ESG should be viewed not merely as a disclosure practice, but as a broader
governance mechanism linked to stronger transparency, stakeholder confidence, and risk

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