How Is Environmental, Social, and Governance Performance Scores Related to Financial Performance of Corporations in Indonesia

The relationship between environmental, social, and governance (ESG) performance and financial performance (FP) has been widely debated, with prior studies yielding mixed outcomes. This research investigates the connection between ESG and FP in Indonesia during 2015–2021, examining aggregate and individual ESG dimensions. Additionally, it explores the moderating role of slack resources in the ESG-FP relationship. Using a sample of 32 Indonesian corporations consistently implementing ESG principles and attaining ESG ratings over five years, the study employs panel regression analysis through pooled OLS, fixed effects (FE), and random effects (RE) models. The findings reveal that aggregate ESG scores do not significantly impact FP. Environmental performance scores at the individual dimension level demonstrate a slightly negative relationship with FP. Furthermore, slack resources positively moderate the aggregate ESG-FP relationship. This study contributes to ESG literature by offering a dual-level examination (aggregate and individual) and integrating slack resources as a moderating variable. Despite the limited sample size, the findings provide valuable insights into the ESG-FP relationship in Indonesia. Future research should expand the dataset to include firms from diverse regions and industries to enhance the generalisability of results and offer a global perspective.