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Exploring the Influence of ESG and Prosperity Disclosure Score on Financial Performance

Author

Listed:
  • Aryati Titik

    (Faculty of Economics and Business, Universitas Trisakti, Indonesia)

  • Susilawati Susi

    (Faculty of Economics and Business, Universitas Trisakti, Indonesia)

Abstract

Almost all companies are starting to pay attention to the impact of environment, social, and governance (ESG) & and prosperity disclosure. This research aims to analyze empirical evidence of the Exploring the Financial Performance from ESG And Prosperity Disclosure Score. The research was conducted using causality design, while the samples of 84 companies listed on the IDX-IC (Indonesian Stock Exchange) for the 2019 – 2021 period were selected using certain criteria. Data analysis was carried out with balanced panel data regression. The results show that aggregate ESG & prosperity disclosure impaired the increasing returns on company assets. Individually, environmental and prosperity disclosure did not affect financial performance, while social and governance disclosures affect financial performance. The ESG and prosperity disclosures can undermine financial performance, in part because a focus on ESG initiatives can divert management’s attention from short-term financial goals to long- term sustainability goals. This causes management to prioritize goals aligned with sustainability and social responsibility over short-term financial gains. In this study, financial performance is measured using ROA. This ratio has a weakness in its use, namely that it does not take into account differences in the company’s capital structure, and depreciated fixed assets can affect ROA, providing a less accurate picture of actual financial performance.

Suggested Citation

  • Aryati Titik & Susilawati Susi, 2025. "Exploring the Influence of ESG and Prosperity Disclosure Score on Financial Performance," Economics, Sciendo, vol. 13(1), pages 467-486.
    • Handle: RePEc:vrs:econom:v:13:y:2025:i:1:p:467-486:n:1016
    DOI: 10.2478/eoik-2025-0017
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    References listed on IDEAS

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    1. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2022. "Exploring the impact of sustainability (ESG) disclosure on firm value and financial performance (FP) in airline industry: the moderating role of size and age," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(4), pages 5052-5079, April.
    2. Paolo Esposito & Zubair Ahmad & Vincenzo Riso & Noman Mustafa, 2024. "Beyond the business case? Retracing the walk of Corporate social responsibility and financial performance relationship in the Oil and Gas sector," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 2211-2224, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ESG; prosperity disclosure; financial performance;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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