Determinants of Environmental, Social and Governance (ESG) Disclosure and Its Effects on Financial Performance: Evidence from Agroindustry and Environmentally Sensitive Firms in Indonesia

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:This study adds to the ESG-financial performance literature with evidence from an emerging market and high-pollution sectors, offering a basis for comparative studies.

🏢実務担当者:Corporate sustainability teams in Indonesia and similar markets can use these findings to justify ESG disclosure investments, especially in high-pollution industries.

🏛政策担当者:Indonesian regulators may consider the financial benefits of ESG disclosure for high-pollution firms when designing sustainability reporting mandates.

Background: Companies with higher levels of Environmental, Social, and Governance (ESG) disclosure tend to exhibit better financial performance due to their ability to manage environmental and social risks effectively while enhancing their reputation among investors and consumers. Aims: This study examines the determinants of ESG disclosure and analyses its impact on financial performance in companies operating in Indonesia’s agroindustry and high-pollution sectors. Study Design: This research uses a quantitative explanatory research design. Place and Duration of Study: The study covers companies listed on the Indonesia Stock Exchange (IDX) from 2018 to 2022, using secondary data from financial reports, annual reports, and sustainability reports published through company websites. The observation period follows the availability of ESG and financial disclosure data during the study timeframe. Methodology: The study applies a quantitative approach using secondary data. The sample consists of 234 companies from agroindustry and other high-pollution sectors, including mining, fossil fuels, fashion, food retail, transportation, and construction. ESG disclosure is measured using an ESG Score. Three regression models are estimated. The first model analyses determinants of ESG disclosure. The second and third models test the impact of ESG disclosure on financial performance. Multiple linear regression is used to examine the relationships between ESG disclosure, company age, sales growth, and financial performance measured by Return on Assets (ROA). Results: The results show that ESG disclosure has a significant positive effect on ROA. Company age also shows a significant positive relationship with ROA, indicating that firms with longer operational histories tend to have better financial performance. Sales growth does not have a statistically significant effect on ROA. Overall, the findings indicate that higher ESG disclosure is associated with stronger financial performance, particularly among firms in high-pollution sectors. Conclusion: The study concludes that ESG disclosure plays an important role in enhancing financial performance in Indonesian agroindustry and high-pollution companies. Integrating ESG considerations into corporate strategy can support both sustainability objectives and financial outcomes. These findings highlight the relevance of ESG practices for companies facing higher environmental and social risks.

• semanticscholar https://doi.org/10.9734/ajeba/2026/v26i22159first seen 2026-05-15 18:08:45