The Influence of Environmental, Social, and Governance (ESG) Disclosure on Financial Performance

Nyoman Cantika DEWI; Ida Ayu  SURASMI; Komang Adi Kurniawan   SAPUTRA

doi:10.38142/ijesss.v6i1.1315

Authors

Nyoman Cantika DEWI Warmadewa University, Indonesia
Ida Ayu SURASMI Warmadewa University, Indonesia
Komang Adi Kurniawan SAPUTRA Warmadewa University, Indonesia

DOI:

https://doi.org/10.38142/ijesss.v6i1.1315

Keywords:

Environmental, Social, Governance, Financial performance

Abstract

The banking sector plays an instrumental role in maintaining the stability of the financial system through its crucial intermediary function between corporate entities and borrowers. Consequently, companies that actively engage in ESG disclosure tend to exhibit superior financial performance due to their ability to mitigate risks, enhance operational efficiency, and bolster their reputation. This study empirically examines the effect of environmental, social, and governance (ESG) disclosure on the financial performance of banking companies listed on the IDX for 2020–2023. Using purposive sampling, 96 companies were selected. Multiple linear regression analysis was applied. The results indicate that Environmental Disclosure has a positive and significant effect on Financial Performance, with a significance value of 0.000 < 0.05 and a positive regression coefficient of 4.134. Similarly, Social Disclosure positively and significantly affects Financial Performance, with a significant value of 0.0008 < 0.05 and a positive regression coefficient of 4.233. Governance Disclosure also has a positive and significant impact on Financial Performance, with a significance value of 0.0001 < 0.05 and a positive regression coefficient of 4.021. The Adjusted R² value of 0.568 indicates that 56.8% of financial performance is influenced by Environmental, Social, and Governance Disclosure, the remaining 43.2% is explained by external factors outside of this research.

Downloads

Download data is not yet available.

References

Anggreni, N. K. D. A., Sara, I. M., & Saputra, K. A. K. (2023). The Effect of Sustainability Accounting, Work Environment, and Leadership on Employee Performance. Journal of Entrepreneurial and Business Diversity, 1(1), 72–77. https://doi.org/10.38142/jebd.v1i1.73

Atmadja, A. T., Adi, K., Saputra, K., Manurung, D. T. H., & Wulandari, R. (2021). Factors That Influence Financial Management : A Case Study in Indonesia. Journal of Asian Finance, Economics and Business, 8(6), 1203–1211. https://doi.org/10.13106/jafeb.2021.vol8.no6.1203

Bao Ngo, T. N., & Tick, A. (2021). Cyber-security Risks Assessments by External Auditors. Interdisciplinary Description of Complex Systems, 19(3), 375–390. https://doi.org/10.7906/indecs.19.3.3

Dewi, R. O. C., Saputra, K. A. K., & Pramartha, I. M. A. (2024). The Effect Of Internal Control System, Information Asymmetry, And Suitability Of Compensation On The Tendency Of Accounting Fraud (Fraud) In Denpasar City (OPD). Journal of Governance, Taxation and Auditing, 2(4), 246–252.

Ding, X., & Tseng, C. J. (2023). Relationship between ESG strategies and financial performance of hotel industry in China: An empirical study. Nurture, 17(3), 439–454. https://doi.org/10.55951/NURTURE.V17I3.366

Eliwa, Y., Aboud, A., & Saleh, A. (2021). ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting, 79(xxxx), 102097. https://doi.org/10.1016/j.cpa.2019.102097

Escrig-Olmedo, E., Fernández-Izquierdo, M. ángeles, Ferrero-Ferrero, I., Rivera-Lirio, J. M., & Muñoz-Torres, M. J. (2019). Rating the raters: Evaluating how ESG rating agencies integrate sustainability principles. Sustainability (Switzerland), 11(3). https://doi.org/10.3390/su11030915

Hidayah, N., Hapsari, D. W., Saputra, K. A. K., Dharmawan, N. A. S., & Yadiati, W. (2023). Can Institutional Good Governance and Intellectual Capital Affect University Quality ? International Journal of Economics and Management, 17(July), 251–261.

Homayoun, S., Mashayekhi, B., Jahangard, A., Samavat, M., & Rezaee, Z. (2023). The Controversial Link between CSR and Financial Performance: The Mediating Role of Green Innovation. Sustainability (Switzerland), 15(13). https://doi.org/10.3390/su151310650

Jachi, M., & Yona, L. (2019). The Impact of Professional Competence & Staffing of Internal Audit Function on Transparency and Accountability Case of Zimbabwe. Research Journal of Finance and Accounting, 10(8), 149–164. https://doi.org/10.7176/RJFA

Jayawarsa, A. . K., Purnami, A. A. S., & Saputra, K. A. K. (2021). Pentahelix To Build Sustainable Village and Tourism : a Theoretical Study. American Research Journal of Humanities & Social Science (ARJHSS), 04(11), 20–27.

Kiesel, F., & Lücke, F. (2019). ESG in credit ratings and the impact on financial markets. Financial Markets, Institutions and Instruments, 28(3), 263–290. https://doi.org/10.1111/fmii.12114

Kumalasari, Y., Dimyati, M., & Rachmawati, R. (2020). The Effect Of Competency, Independence, Ethics Auditor And Professionalism To The Audit Quality And Emotional Intelligence As A Variable Of Moderation. ABM : International Journal of Administration, Business and Management, 1(1), 36–50. https://doi.org/10.31967/abm.v1i1.383

Kumar, S. (2022). Strategic management of carbon footprint using carbon collectible nonfungible tokens (NFTS) on blockchain. Academy of Strategic Management Journal, 21, 1–9. https://doi.org/https://doi.org/10.1111/1744-7941.12321

Manurung, D. T. H., Hidayah, N., Setiany, E., Saputra, K. A. K., & Hapsari, D. W. (2022). Does Carbon Performance and Green Investment Affect Carbon Emissions Disclosure? Journal of Environmental Accounting and Management, 10(4), 335–344. https://doi.org/10.5890/JEAM.2022.12.001

Ni, Y., Cheng, Y. R., & Huang, P. (2020). Do intellectual capitals matter to firm value enhancement? Evidences from Taiwan. Journal of Intellectual Capital, 22(4), 725–743. https://doi.org/10.1108/JIC-10-2019-0235

Putri, P. Y. A., & Saputra, K. A. K. (2021). Writing of Scientific Works in a Dissertation Context and the Difference with Thesis. International Journal of Business, Economics and Law, 24(4), 1–7.

Sancaya, I. W. W., & Saputra, K. A. K. (2024). VillageWaste Management Strategy as an Economic Asset: Accounting Evaluation and Implementation of Sustainable Practices in Bongkasa Village, Abiansemal District, Badung Regency. Community Service: Sustainability Development, 1(3), 83–89.

Saputra, K. A. K. (2023). Introduction to Energy Accounting in Higher Education: A Theoretical Discussion. International Journal of Social Science and Education Research Studies, 03(04), 594–599. https://doi.org/10.55677/ijssers/v03i4y2023-09

Saputra, K. A. K., & Laksmi, P. A. S. (2024). The Influence of Green Governance, Implementation of Energy Accounting, and GreenHuman Resource Management on Sustainability Performance: An Empirical Study in theHospitality Industry in Bali. Jurnal Ilmiah Akuntansi, 9(1), 113–136. https://doi.org/DOI: 10.23887/jia.v9i1.66630

Saputra, K. A. K., Laksmi, P. A. S., Smark, C., & Bareto, C. A. (2024). The Influence Of Accounting Digitalisation Transformation And Sustainable Management On ESG Performance To Achieve Environmental Sustainability. Journal of Sustainability Science and Management, 19(7), 120–135. https://doi.org/http://doi.org/10.46754/jssm.2024.07.007

Saputra, K. A. K., Manurung, D. T. H., Rachmawati, L., Siskawati, E., & Genta, F. K. (2021). Combining the concept of green accounting with the regulation of prohibition of disposable plastic use. International Journal of Energy Economics and Policy, 11(4), 84–90. https://doi.org/10.32479/ijeep.10087

Saputra, K. A. K., & Paranoan, S. (2024). Do Cyber security, Digitalisation and Data Visualisation Affect the Quality of Internal Environmental Audits? Australasian Accounting, Business and Finance Journal, 18(2), 158–174. https://doi.org/10.14453/aabfj.v18i2.10

Saputra, K. A. K. S., & Anggiriawan, P. B. (2021). Accounting, Auditing and Corruption in Kautilya’S Arthasastra Perspective and Psychogenetic Hindu: a Theoritical Review. South East Asia Journal of Contemporary Business, Economics and Law, 24(2), 67–72.

Saputra, K. A. K., Subroto, B., Rahman, A. F., & Saraswati, E. (2022). Eco-Efficiency and Energy Audit to Improve Environmental Performance: An Empirical Study of Hotels in Bali-Indonesia. International Journal of Energy Economics and Policy, 12(6), 175–182. https://doi.org/10.32479/ijeep.13565

Sara, I. M., Saputra, K. A. K., & Jayawarsa, A. A. K. (2020). Regulatory Impact Assessment Analysis In Traditional Village Regulations As Strengthening Culture In Bali. International Journal of Environmental, Sustainability, and Social Sciences, 1(3), 16–23.

Tolliver, C., Fujii, H., Keeley, A. R., & Managi, S. (2021). Green Innovation and Finance in Asia. Asian Economic Policy Review, 16(1), 67–87. https://doi.org/10.1111/aepr.12320

Toscano, A., Balzarotti, M., & Re, I. (2022). Sustainability Practices and Greenwashing Risk in the Italian Poultry Sector: A Grounded Theory Study. Sustainability (Switzerland), 14(21), 1–16. https://doi.org/10.3390/su142114088

Tóth, B., Lippai-Makra, E., Szládek, D., & Kiss, G. D. (2021). The contribution of ESG information to the financial stability of European banks. Public Finance Quarterly, 66(3), 429–450. https://doi.org/10.35551/PFQ_2021_3_7

Tran, N. P., & Vo, D. H. (2020). Human capital efficiency and firm performance across sectors in an emerging market. Cogent Business and Management, 7(1). https://doi.org/10.1080/23311975.2020.1738832

Watto, W. A., Manurung, D. T. H., Saputra, K. A. K., & Mustafa, S. G. (2020). Corporate Social Responsibility and Firm Financial Performance: A Case of SME’s Sector in Pakistan. International Journal of Environmental, Sustainability, and Social Science, 1(2), 62–74. https://doi.org/10.38142/ijesss.v1i2.30

Widjayanti, P. F. S., Saputra, K. A. K., & Larasdiputra, D. (2024). The influence of profitability, company size, and growth opportunity on the quality of profits in property and real estate companies listed on the indonesian stock exchange (bei) year 2019-2022. Journal of Governance, Taxation and Auditing, 2(4), 239–245.