Credit risk management, ESG, and bank performance: Survey evidence on mediating and moderating effects from Vietnam

Abstract

Although the link between credit risk management (CRM) and bank performance is well documented, the mediating role of CRM and the moderating role of Environmental, Social, and Governance (ESG) practices remain underexplored in emerging-market banking. Drawing on agency theory and stakeholder theory, this study develops an integrated model in which five determinants (organizational structure, operational efficiency, environmental risk, credit appraisal measurement, and market risk analysis) shape CRM, which, in turn, transmits their effects to bank performance, with ESG practices as a boundary condition. The model was tested using partial least squares structural equation modeling (PLS-SEM) on survey data collected from 311 banking professionals at Vietnamese commercial banks. The results show that all five determinants positively and significantly influence CRM, and the model explains a substantial share of the variance in CRM and bank performance. CRM significantly mediates the effects of the five determinants on performance, whereas its direct effect on performance is statistically significant but practically negligible. ESG practices positively moderate the CRM–performance relationship, indicating that ESG integration amplifies the performance payoff of credit risk management. The findings suggest that Vietnamese bank managers should strengthen operational efficiency and embed ESG criteria in credit processes, while regulators should reinforce ESG disclosure and green-credit frameworks to support a sustainable financial service distribution system.