The Impact of ESG on Financial Performance: The Moderating Role of Financial Constraints and CEO Characteristics

Auria Revi Marisa, Dyah Febriantina Istiqomah

Abstract


This research empirically investigates the ways in which CEO characteristics and financial constraints impact the correlation between ESG and financial performance. Strong ESG disclosure can attract investors, enhance capital access, and boost profitability. However, high financial constraints may limit ESG-related investments, thereby weakening financial performance. CEO characteristics also influence managerial direction, with female leaders often perceived as more prudent in ESG management, potentially benefiting financial performance. Utilizing 138 observations from energy firms registered on the Indonesia Stock Exchange (IDX) from 2021 to 2023, this quantitative research applied moderated panel regression analysis via Eviews 12. The results show that financial performance is improved by ESG, while financial constraints negatively moderate this relationship. In addition, it was found that CEO characteristics cannot moderate the influence of ESG on financial performance.  The conclusions of this research highlight the significant impact of ESG disclosures in improving a company’s financial performance, which impact on the development of long-term value for the company that can attract investors.


Full Text:

PDF

References


Ali, M., Razak, L. A., Besar, M. H. A., & Abidin, S. (2023). Board Gender Diversity And Esg Disclosure: Does Board Meeting Attendance Matters? Proceedings of the International Conference in Technology, Humanities and Management (ICTHM 2023), 12-13 June, 2023, Istanbul, Turkey, 131, 1230–1250. https://doi.org/10.15405/epsbs.2023.11.98

Almaqtari, F. A., Elmashtawy, A., Farhan, N. H. S., Almasria, N. A., & Alhajri, A. (2024). The moderating effect of board gender diversity in the environmental sustainability and financial performance nexus. Discover Sustainability, 5(1). https://doi.org/10.1007/s43621-024-00517-7

Almulhim, A. A., & Aljughaiman, A. A. (2023). Corporate Sustainability and Financial Performance: The Moderating Effect of CEO Characteristics. Sustainability (Switzerland), 15(16). https://doi.org/10.3390/su151612664

Anshari, M. A. F., & Prihandini, W. (2024). Pengaruh Pengungkapan Environmental,Social,Governance (ESG) dan Kinerja Keuangan terhadap Nilai Perusahaan pada Sektor Energy dan Basic Material yang Terdaftar di Bursa Efek Indonesia Periode Tahun 2021-2023. 08(04), 1–23.

Atan, R., Alam, M. M., Said, J., & Zamri, M. (2018). The impacts of environmental, social, and governance factors on firm performance: Panel study of Malaysian companies. Management of Environmental Quality: An International Journal, 29(2), 182–194. https://doi.org/10.1108/MEQ-03-2017-0033

Chininga, E., Alhassan, A. L., & Zeka, B. (2024). ESG ratings and corporate financial performance in South Africa. Journal of Accounting in Emerging Economies, 14(3), 692–713. https://doi.org/10.1108/JAEE-03-2023-0072

Chu, H.-L., Liu, N.-Y., & Chiu, S.-C. (2023). CEO power and CSR: the moderating role of CEO characteristics. China Accounting and Finance Review, 25(1), 101–121. https://doi.org/10.1108/cafr-03-2022-0027

Dura, J. (2022). View of Pengungkapan Sustainability Kinerja Ekonomi Terhadap Nilai Perusahaan Melalui Kinerja Keuangan Perusahaan Manufaktur.pdf.

El-Deeb, M. S., Ismail, T. H., & Banna, A. A. El. (2023). Does audit quality moderate the impact of environmental, social and governance disclosure on firm value? Further evidence from Egypt. Journal of Humanities and Applied Social Sciences, 5(4), 293–322. https://doi.org/10.1108/jhass-11-2022-0155

Fitriani, A. (2024). Buku Ajar Analisis Laporan Keuangan. In Akademi Keuangan & Perbankan Riau (AKBAR) Pekanbaru (Issue July).

Fu, T., & Li, J. (2023). An empirical analysis of the impact of ESG on financial performance: the moderating role of digital transformation. Frontiers in Environmental Science, 11(August), 1–11. https://doi.org/10.3389/fenvs.2023.1256052

Ghardallou, W. (2022). Corporate Sustainability and Firm Performance: The Moderating Role of CEO Education and Tenure. Sustainability (Switzerland), 14(6). https://doi.org/10.3390/su14063513

Ghazali, A., & Zulmaita. (2020). Pengaruh pengungkapan environmental, social, and governance (ESG) terhadap tingkat profitabilitas perusahaan (studi empiris pada perusahaan sektor infrastruktur yang terdaftar di bursa efek Indoneisa. Prosiding SNAM PNJ, 1–13.

Hira, N. U., Ahmad, W., Amanat, A., Khattak, S. H., Khan, M. T., Khan, S., Abdullah, F., Shoaib, S., & Ahmad, A. (2023). The Impact Of Environmental, Social And Governance Factors (ESG) On Firms’ Financial Performance: Evidence From Pakistan. Journal of Positive School Psychology, 7(2), 89–111. https://journalppw.com/index.php/jpsp/article/view/15178%0Ahttps://journalppw.com/index.php/jpsp/article/download/15178/9805

Ho, L., Nguyen, V. H., & Dang, T. L. (2024). ESG and firm performance: do stakeholder engagement, financial constraints and religiosity matter? Journal of Asian Business and Economic Studies, 31(4), 263–276. https://doi.org/10.1108/JABES-08-2023-0306

Inawati, W. A., & Rahmawati, R. (2023). Dampak Environmental, Social, Dan Governance (ESG) Terhadap Kinerja Keuangan. Jurnal Akademi Akuntansi, 6(2), 225–241. https://doi.org/10.22219/jaa.v6i2.26674

Khairunnisa, D. P., & Widiastuty, E. (2023). Pengaruh Kinerja Esg Terhadap Kinerja Keuangan Perusahaan. Jurnal Riset Akuntansi Aksioma, 22(2), 16–27. https://doi.org/10.29303/aksioma.v22i2.218

Kurnia, E. (2024). Penurunan Harga Batubara Masih Menjadi Tantangan Emiten Tambang. Kompas. https://www.kompas.id/baca/ekonomi/2024/05/01/penurunan-harga-batubara-masih-jadi-tantangan-emiten-tambang

Lee, S. P., & Isa, M. (2023). Environmental, social and governance (ESG) practices and financial performance of Shariah-compliant companies in Malaysia. Journal of Islamic Accounting and Business Research, 14(2), 295–314. https://doi.org/10.1108/JIABR-06-2020-0183

Liandy, V. A., Mahfirah, T. F., & Lajuni, N. (2024). Do CEO characteristics moderate the link between CEO power and firm performance ? Global Advances in Business Studies (GABS), 3(1), 26–37. https://doi.org/10.55584/Gabs.003.01.3

Mahrani, M., & Soewarno, N. (2018). The effect of good corporate governance mechanism and corporate social responsibility on financial performance with earnings management as mediating variable. Asian Journal of Accounting Research, 3(1), 41–60. https://doi.org/10.1108/AJAR-06-2018-0008

Pramisti, A. A., & Istiqomah, D. F. (2024). the Influence of Environmental Social Governance (Esg) on Company Value With Financial Performance As a Mediation Variable. Jurnal Aplikasi Akuntansi, 9(1), 34–45. https://doi.org/10.29303/jaa.v9i1.423

Pratiwi, L. R. B., & Hersugondo. (2023). Pengaruh Kinerja Environmental,Social,Governance (ESG) Terhadap Kinerja Perusahaan dengan Kendala Keuangan sebagai Variabel Moderasi (Studi pada Perusahaan Manufaktur yang terdaftar di Bursa Efek Indonesia tahun 2016-2020). Diponegoro Journal of Management, 12(1), 1. http://ejournal-s1.undip.ac.id/index.php/dbr

Purwanti, D. (2021). Determinasi Kinerja Keuangan Perusahaan : Analisis Likuiditas, Leverage Dan Ukuran Perusahaan (Literature Review Manajemen Keuangan). Jurnal Ilmu Manajemen Terapan, 2(5), 692–698. https://doi.org/10.31933/jimt.v2i5.593

Putri, N. A., & Istiqomah, D. F. (2024). The Influence of Company Characteristics on Audit Report Lag: Auditor Characteristics as a Moderating Variable. Accounting and Finance Studies, 4(3), 201–223. https://doi.org/10.47153/afs43.10152024

Radinda, A. S., & Hasnawati. (2023). View of Pengaruh Kepemilikan Manajerial, Kepemilikan Institusional, Karakteristik CEO (Gender,Tingkat Pendidikan, Pengalaman) dan Ukuran Perusahaan terhadap Teratasinya Financial Distress.

Rahmansyah, M. F., & Mutmainah, S. (2024). Pengaruh Kinerja Pengungkapan Esg Terhadap Kinerja Keuangan Dengan Kepatuhan Syariah Sebagai Variabel Moderasi. Diponegoro Journal of Accounting, 13(3), 1–15. http://ejournal-s1.undip.ac.id/index.php/accounting

Rahmawati, I., & Juliarto, A. (2024). Pengaruh Keberlanjutan Perusahaan Terhadap Kinerja Perusahaan dengan Karakteristik CEO sebagai Variabel Moderasi (Studi Empiris pada Perusahaan Non Keuangan yang Terdaftar di Bursa Efek Indonesia Tahun 2018-2021). Diponegoro Journal of Accounting, 13(1), 1–15. http://ejournal-s1.undip.ac.id/index.php/accounting

Rhamadanty, S. (2024). Kinerja Perusahaan Tambang dan Energi Merosot di 2023, Cermati Pemicunya. Https://Industri.Kontan.Co.Id. https://industri.kontan.co.id/news/kinerja-perusahaan-tambang-dan-energi-merosot-di-2023-cermati-pemicunya

Rizqi, M. A. (2023). Effect ESG on Financial Performance. 7, 2537–2546.

Safriani, M. N., & Utomo, D. C. (2020). Pengaruh Environmental, Social dan Governance (ESG) Disclosure terhadap Kinerja Perusahaan. Bandung Conference Series: Accountancy, 4(1), 300–306. https://doi.org/10.29313/bcsa.v4i1.11584

Salam, A. (2021). Jurnal Ilmu Manajemen. Jurnal Ilmu Manajemen, 11(1), 48–56.

Sandberg, H., Alnoor, A., & Tiberius, V. (2023). Environmental, social, and governance ratings and financial performance: Evidence from the European food industry. Business Strategy and the Environment, 32(4), 2471–2489. https://doi.org/10.1002/bse.3259

Sari, P. S., & Widiatmoko, J. (2023). Pengaruh Environmental, Social, and Governance (ESG) Disclosure terhadap Kinerja Keuangan dengan Gender Diversity sebagai Variabel Moderasi. Jurnal Ilmiah Akuntansi Dan Keuangan, 5(9)(9), 3634–3642. https://journal.ikopin.ac.id/index.php/fairvalue

Shakil, M. H. (2021a). Environmental, social and governance performance and financial risk: Moderating role of ESG controversies and board gender diversity. Resources Policy, 72(May 2020). https://doi.org/10.1016/j.resourpol.2021.102144

Shakil, M. H. (2021b). Environmental, social and governance performance and financial risk: Moderating role of ESG controversies and board gender diversity. Resources Policy, 72(May), 102144. https://doi.org/10.1016/j.resourpol.2021.102144

Suchman, M. C. (1995). Managing Legitimacy: Strategic and Institutional Approaches. The Academy of Management Review, 20(3), 571. https://doi.org/10.2307/258788

Sukmawan, G., & Khomsiyah, K. (2024). Does Eco-Feminism Affect the Quality of ESG Disclosures and Banking Performance? Golden Ratio of Finance Management, 4(2), 190–199. https://doi.org/10.52970/grfm.v4i2.496

Triyani, A., & Setyahuni, S. W. (2020). Pengaruh Karakteristik Ceo Terhadap Pengungkapan Informasi Environmental, Social, and Governance (Esg). Jurnal Ekonomi Dan Bisnis, 21(2), 72. https://doi.org/10.30659/ekobis.21.2.72-83

Velte, P. (2020). Does CEO power moderate the link between ESG performance and financial performance?: A focus on the German two-tier system. Management Research Review, 43(5), 497–520. https://doi.org/10.1108/MRR-04-2019-0182

Wijaya, D. H., & Dwijayanti, S. P. F. (2023). Pengaruh Esg Disclosure Terhadap Kinerja Keuangan Dimoderasi Dengan Gender Diversity. Jurnal Ilmiah Mahasiswa Akuntansi, 12(2), 124–133. https://doi.org/10.33508/jima.v12i2.5353

Wisanggeni, N. U. B., & Rahmawati, I. Y. (2024). The Effect of ESG Risk Ratings, Board Size and Gender Diversity on Financial Performance: Econometric Case Study Indonesia 90 Companies 2020-2023. South Asian Journal of Social Studies and Economics, 21(7), 129–145. https://doi.org/10.9734/sajsse/2024/v21i7850

Xu, Y., & Zhu, N. (2024). The Effect of Environmental, Social, and Governance (ESG) Performance on Corporate Financial Performance in China: Based on the Perspective of Innovation and Financial Constraints. Sustainability (Switzerland) , 16(8). https://doi.org/10.3390/su16083329

Yulista, V., & Herawaty, V. (2024). Peran Karakteristik CEO dalam Memoderasi Pengaruh antara ESG dan Penghindaran Pajak Terhadap Kinerja Keuangan. Jurnal Ilmiah Indonesai, 9(10).




DOI: https://doi.org/10.17509/jrak.v13i1.82343

Refbacks

  • There are currently no refbacks.


Creative Commons License

Jurnal Riset Akuntansi dan Keuangan  is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

View My Stats