The effect of environmental, social, governance performance on the financial performance of Indonesian with foreign ownership as moderation
DOI:
https://doi.org/10.15282/jgi.8.1.2025.11625Keywords:
Corporate financial performance, Z-score, Foreign ownership, ESG performanceAbstract
This study examines the impact of Environmental, Social, and Governance (ESG) performance on the financial performance of Indonesian companies, with foreign ownership as a moderating factor. Using a quantitative approach, this study analyzed data from 46 companies listed on the Indonesia Stock Exchange from 2020 to 2022 using panel data regression and processed using STATA software. The findings show that environmental performance has a significant effect on financial performance, while social performance and governance do not. Foreign ownership moderates but weakens the link between environmental performance and financial performance. Control variables such as leverage, profitability, and fixed assets also have a significant effect on financial performance. The results of this study can provide valuable insights for policymakers, investors, and corporate managers in understanding the dynamics between ESG performance, foreign ownership, and financial performance, as well as contributing to readers' knowledge and becoming a source of information and reference for companies. Further research is warranted to delve deeper into these dynamics and explore their broader implications for sustainable business practices and regulatory frameworks.
References
Abu Qa’dan, M. B., & Suwaidan, M. S. (2019). Board composition, ownership structure and corporate social responsibility disclosure: the case of Jordan. Social Responsibility Journal, 15(1), 28–46.
Alhazaimeh, A., Palaniappan, R., & Almsafir, M. (2014). The Impact of Corporate Governance and Ownership Structure on Voluntary Disclosure in Annual Reports among Listed Jordanian Companies. Procedia - Social and Behavioral Sciences, 129, 341–348.
Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589–609.
Altman, E. I., Haldeman, R. G., & Narayanan, P. (1977). ZETA™ analysis: A new model to identify bankruptcy risk of corporations. Journal of Banking & Finance, 1(1), 29-54.
Annither, M., Kester, J., Hidayat, A. A., & Farhana, S. (2020). The impact of ownership structure on the indicator of financial distress in Indonesian companies. Jurnal Akuntansi dan Bisnis, 20(2), 223–236.
Aslan, A., Poppe, L., & Posch, P. (2021). Are sustainable companies more likely to default? Evidence from the dynamics between credit and ESG ratings. Sustainability, 13(15), 8568.
Badayi, S. A., Matemilola, B. T., A.N, B., & Wei Theng, L. (2021). Does corporate social responsibility influence firm probability of default? International Journal of Finance & Economics, 26(3), 3377–3395.
Boubaker, S., Cellier, A., Manita, R., & Saeed, A. (2020). Does corporate social responsibility reduce financial distress risk? Economic Modelling, 91, 835–851.
Citterio, A., & King, T. (2023). The role of Environmental, Social, and Governance (ESG) in predicting bank financial distress. Finance Research Letters, 51, 103411.
Cohen, G. (2023). ESG risks and corporate survival. Environment Systems and Decisions, 43(1), 16–21.
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: A review and assessment. Journal of Management, 37(1), 39–67.
Deegan, C. (2019). Financial Accounting 9e. McGraw-Hill Education.
Fadhilah, A. T., Suharman, H., & Handoyo, S. (2021). The determinants of environmental performance: A study on Indonesia listed firms. Journal of Accounting Auditing and Business, 4(2).
Festiana, D., Saputro, H., & Hapsari, D. I. (2022). Dampak pandemi corona terhadap kinerja keuangan perusahaan pertambangan dan perkebunan. Proceeding of National Conference on Accounting & Finance, 4, 66–72.
Freeman, R. E. (2010). Strategic Management. Cambridge University Press.
Guo, M., & Zheng, C. (2021). Foreign ownership and corporate social responsibility: Evidence from China. Sustainability, 13(2), 508.
Inawati, W. A., & Rahmawati. (2023). Dampak Environmental, Social, dan Governance (ESG) terhadap kinerja keuangan. Jurnal Akademi Akuntansi, 6(2), 225–241.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
Kemenkeu. (2020). Pengaruh COVID-19 atas kondisi sosial ekonomi global 2020. Kementrian Keuangan Republik Indonesia.
Li, H., Zhang, X., & Zhao, Y. (2022). ESG and firm’s default risk. Finance Research Letters, 47, 102713.
Lisin, A., Kushnir, A., Koryakov, A. G., Fomenko, N., & Shchukina, T. (2022). Financial stability in companies with high ESG scores: Evidence from North America using the Ohlson O-Score. Sustainability, 14(1), 479.
Maquieira, C. P., Arias, J. T., & Espinosa-Méndez, C. (2024). The impact of ESG on the default risk of family firms: International evidence. Research in International Business and Finance, 67, 102136.
Montenegro, M. (2023). ESG Performance drives Corporate Performance. Wolters Kluwer.
Palmieri, E., Ferilli, G. B., Stefanelli, V., Geretto, E. F., & Polato, M. (2023). Assessing the influence of ESG score, industry, and stock index on firm default risk: A sustainable bank lending perspective. Finance Research Letters, 57, 104274.
Pardede, P. G. W., & Syafruddin, M. (2022). Pengaruh struktur kepemilikan terhadap kemungkinan terjadinya financial distress. Diponegoro Journal of Accounting, 11(2), 1–14.
Putra, I. G. C., Santosa, M. E. S., & Juliantari, N. K. D. P. (2023). Pengaruh ukuran perusahaan, karakteristik perusahaan, kepemilikan asing dan komisaris independen terhadap sustainability reporting pada perusahaan manufaktur yang terdaftar di BEI. WACANA EKONOMI (Jurnal Ekonomi, Bisnis dan Akuntansi), 22(1), 18–29.
Putri, A. M. H. (2023, March 12). Bukan Menakut-Nakuti, 10 Krisis Ini Buat Dunia Hancur Lebur. CNBC Indonesia. https://www.cnbcindonesia.com/research/20230321054437-128-423359/bukan-menakut-nakuti-10-krisis-ini-buat-dunia-hancur-lebur
Refinitiv. (2022). Environmental, Social and Governance (ESG) Scores from Refinitiv. https://www.refinitiv.com
Saini, N., & Singhania, M. (2019). Performance relevance of environmental and social disclosures. Benchmarking: An International Journal, 26(6), 1845–1873.
Sari, H. Q., & Rahman, A. (2021). Analisis pengaruh pandemi COVID 19 terhadap emiten properti (Studi Kasus Emiten Properti Dalam LQ-45). Jurnal Ekonomi, Manajemen, Bisnis dan Sosial, 1(3), 250–254.
Sharma, P., Panday, P., & Dangwal, R. C. (2020). Determinants of environmental, social and corporate governance (ESG) disclosure: a study of Indian companies. International Journal of Disclosure and Governance, 17(4), 208–217.
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737–783.
Sidik, S. (2020). Emiten dari Sektor Ini Paling Sengsara Hadapi Efek COVID-19. CNBC Indonesia.
Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355.
Suryadi, A., & Serly, V. (2022). Pengaruh struktur kepemilikan terhadap financial distress: Studi empiris pada perusahaan BUMN di Indonesia tahun 2015–2019. Jurnal Eksplorasi Akuntansi, 4(2), 349-362.
Syafrullah, S., & Muharam, H. (2017). Analisis pengaruh kinerja environmental, social, dan governance (ESG) terhadap abnormal return (studi pada perusahaan indonesia dan malaysia yang mengungkapkan ESG score dan terdaftar pada bursa efek Indonesia dan bursa Malaysia tahun 2010-2015). Diponegoro Journal of Management, 6, 222–235.
Tania, S., Pratiwi, L. N., & Laksana, B. (2021). Prediksi kebangkrutan menggunakan metode Altman Z-Score modifikasi pada PT Inti (Persero). Indonesian Journal of Economics and Management, 1(3), 628–633.
Tarighi, H., Appolloni, A., Shirzad, A., & Azad, A. (2022). Corporate Social Responsibility Disclosure (CSRD) and Financial Distressed Risk (FDR): Does institutional ownership matter? Sustainability, 14(2), 742.
Yuni Pramitha, I. A., & Sudana, I. P. (2021). Pengungkapan Corporate Social Responsibility, kinerja lingkungan dan nilai perusahaan. E-Jurnal Akuntansi, 31(3), 615.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 The Author(s)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
