ESG Performance and Governance: Implications for Conservatism and Cost of Equity
Abstract
This study examines the effects of Environmental, Social, and Governance (ESG) performance, managerial ownership, and profitability on the cost of equity and accounting conservatism among manufacturing firms listed on the Indonesia Stock Exchange during 2020–2024. Using purposive sampling, this study analyzes 98 firm year observations through panel data regression. The findings show that ESG performance positively affects accounting conservatism, indicating that firms with stronger sustainability practices tend to adopt more prudent financial reporting. In addition, managerial ownership negatively influences the cost of equity, suggesting that greater managerial shareholding reduces agency conflicts and investor risk perceptions. However, managerial ownership and profitability do not significantly affect accounting conservatism, while ESG performance, profitability, and accounting conservatism do not significantly influence the cost of equity. The findings suggest that sustainability practices and governance mechanisms play complementary roles in shaping reporting quality and financing decisions.
Keywords
References
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DOI: https://doi.org/10.17509/jrak.v14i2.102062
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