Determinants of Financial Performance, The Moderation Role of Sustainability Committees in Non-Financial Reporting Companies in Indonesia

Herman Paleni, Ridwan Nurazi, Dewi Rahmayanti, Berto Usman

Abstract


Research was conducted to examine ESG performance against accounting performance (ROA) and market performance (Tobin's Q) moderated by the CSR sustainability committee. Therefore, the control variables liquidity (CR), leverage (DER), firm size, and firm age are included to overcome the endogeneity problem. Data collection was obtained from the IDX, company websites, and CESGS, totaling 78 companies during 2015-2021. Next, using purposive sampling with the criteria for companies making ESG disclosures, we obtained 11 companies. Analysis was carried out using the Heckman, Chow, Lagrange multiplier and Hausman for panel data regression with unmoderated and after moderated models using STATA 14.00. The research results before moderation show that environmental and social performance has a positive and significant effect on ROA, but governance performance has a positive and insignificant effect, then after being moderated, environmental performance is negative and significant, social performance is positive and significant, while governance is positive and not significant on ROA. Furthermore, ESG performance before moderation has a negative and insignificant effect on Tobin's Q, but after moderation ESG performance is positive and not significant on Tobin's Q. These results show that energy sector companies focus more on asset returns than market performance. Thus, companies use social and environmental disclosures as a legitimizing tool to create the impression that the company is operating in the right way.

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References


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