The Relationship of Corporate Governance, ESG Practices, and Profitability of Philippine Universal and Commercial Banks

Corporate governance and Environmental, Social, and Governance (ESG) practices have become increasingly important in promoting organizational sustainability, accountability, and financial performance. Despite growing regulatory emphasis on governance and sustainability reporting in the Philippines, empirical evidence on how these practices relate to bank profitability remains limited and inconclusive. This study examined the relationship among corporate governance practices, ESG practices, and the profitability of Philippine universal and commercial banks listed on the Philippine Stock Exchange from 2020 to 2024.
The study employed a descriptive-correlational research design using panel data analysis. Secondary data were collected from annual reports, Integrated Annual Corporate Governance Reports (I-ACGR), sustainability reports, and audited financial statements of thirteen (13) selected Philippine universal and commercial banks covering a five-year period, resulting in sixty-five (65) bank-year observations. Descriptive statistics, Pearson correlation, Welch t-test, and two-way fixed-effects panel regression were used to analyze the data.
The findings revealed that traditional governance mechanisms, such as audit and risk committees, were highly adopted among the selected banks, while ESG practices varied across institutions. Profitability indicators generally improved from 2020 to 2024. CEO-chair separation emerged as a consistent positive predictor of profitability, whereas director tenure policy and financial inclusion programs demonstrated negative relationships in selected regression models. Environmental sustainability practices, including green financing products and environmental disclosures, were positively associated with profitability. However, composite corporate governance and ESG scores did not demonstrate strong predictive power, suggesting that individual governance and ESG mechanisms provide more meaningful insights than broad aggregate measures.
The study concluded that the relationship among corporate governance practices, ESG practices, and profitability is complex and multidimensional. The findings highlight the importance of evaluating governance and ESG practices individually and contribute local empirical evidence that may support governance, sustainability, and financial performance assessments within the Philippine banking sector.

Business Administration, Corporate Governance, ESG Practices, Descriptive-Correlational Design, Philippines

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