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ESG Performance on Corporate Financial Outcomes: Evidence from Indonesian Firms in the SRI-KEHATI Index

In: Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024)

Author

Listed:
  • Anas Iswanto Anwar

    (Hasanuddin University)

  • Fakhrul Indra Hermansyah

    (Hasanuddin University)

  • Naufal Muhammad Aksah

    (Hasanuddin University)

  • Ihya’ Ulumuddin

    (Hasanuddin University)

Abstract

This study explores the relationship between Environmental, Social, and Governance (ESG) performance and corporate financial performance in Indonesia, focusing on publicly listed companies included in the SRI-KEHATI Index. Using panel data from 10 firms over the period from 2015 to 2020, the research employs a multiple regression model to assess the impact of ESG performance on Return on Assets (RoA), with leverage, industry sector, and GDP growth as control variables. The findings reveal a statistically significant positive relationship between ESG performance and financial performance, indicating that firms with stronger ESG practices tend to achieve higher profitability. Additionally, leverage and industry sector are identified as important determinants of financial performance, with capital structure and sector-specific factors significantly influencing corporate profitability. Although the study provides meaningful insights, it acknowledges limitations such as the small sample size and the binary measure of ESG performance. Future research should focus on more granular ESG metrics and larger sample sizes to enhance the robustness of the findings. The results offer valuable implications for investors and policymakers, underscoring the importance of integrating ESG considerations into corporate strategy to drive financial success and promote sustainable development.

Suggested Citation

  • Anas Iswanto Anwar & Fakhrul Indra Hermansyah & Naufal Muhammad Aksah & Ihya’ Ulumuddin, 2025. "ESG Performance on Corporate Financial Outcomes: Evidence from Indonesian Firms in the SRI-KEHATI Index," Advances in Economics, Business and Management Research, in: Mursalim Nohong & Fitra Roman Cahaya & Phung Minh Tuan & Arifuddin Mannan & Anas Iswanto Anwar & Ria (ed.), Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), pages 2695-2706, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-758-8_218
    DOI: 10.2991/978-94-6463-758-8_218
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