How ESG and Gender Diversity Affect Firm Performance

This study investigates the impact of Environmental, Social, and Governance (ESG) disclosure and gender diversity on the board of commissioners on operating and market performance in Indonesia from 2018 to 2022. The sample for this study consisted of 218 listed companies in Indonesia with ESG disclosures. Ordinary least‐squares regression was used to test this affiliation. The generalized moment method was also applied to address the endogeneity problem. This empirical research found that ESG disclosure and gender diversity on the board of commissioners have a positive and statistically significant effect on company performance in a patriarchal society where women experience negative stereotypes regarding their leadership and managerial skills. The results remained consistent after endogeneity testing. The findings of this study have practical implications for academics and policymakers interested in the role of ESG and gender diversity in improving company performance in developing countries, such as mobilizing resources to support ESG and increasing the percentage of women on corporate boards of commissioners. The findings of this study can also help investors decide whether to invest in companies that have implemented ESG in developing countries. This study differs from previous research in that it was conducted in Indonesia, a developing country. Most previous studies have been conducted in developed countries, such as China and Europe. This study examines the associations in Indonesia, which has a distinct corporate governance mechanism called the dual‐board system, and where the patriarchal system still influences corporate governance in Indonesia.