How Firm Size and the COVID-19 Pandemic Shape the ESG-Performance Relationship in Vietnam's Manufacturing Sector

This study investigates the relationship between environmental, social, and governance (ESG) practices and firm performance in the Vietnamese manufacturing sector, with a focus on the moderating effects of firm size and the COVID-19 pandemic. Based on a balanced panel dataset of 63 listed manufacturing firms over the period 2014–2023, this study employs feasible generalized least squares (FGLS) estimation to address heteroscedasticity and autocorrelation concerns commonly found in firm-level data. The empirical findings demonstrate a significantly negative association between ESG engagement and return on equity (ROE), suggesting that ESG investments may result in short-term performance trade-offs in emerging markets. Notably, this negative relationship is attenuated for larger firms and during the COVID-19 crisis, suggesting that organizational size and crisis conditions enhance firms’ ability to absorb costs and leverage the strategic benefits of ESG initiatives. By contrast, ESG engagement appears to have a negligible impact on firm performance in stable macroeconomic environments. These results underscore the contingent nature of ESG performance, which is shaped by not only internal firm characteristics but also broader economic conditions. This study contributes to the growing body of literature on ESG in emerging economies by highlighting the subtle interplay among ESG activities, firm capabilities, and external shocks. The practical implications point to the need for companies to calibrate ESG strategies according to their resources and prevailing economic conditions to optimize value creation.