Governance Pressure or Financial Performance? Debt Policy as a Moderator of ESG Disclosure in Indonesian Manufacturing Firms

MF Christiningrum; Aloysius Harry Mukti; Evy Roslita; Tiwi Herninta; Albert Budiyanto

doi:10.59261/inkubis.v8i2.407

Authors

MF Christiningrum Institut Bisnis Nusantara
Aloysius Harry Mukti Universitas Bhayangkara
Evy Roslita Institut Bisnis Nusantara
Tiwi Herninta Institut Bisnis Nusantara
Albert Budiyanto Institut Bisnis Nusantara

DOI:

https://doi.org/10.59261/inkubis.v8i2.407

Keywords:

Debt Policy, ESG Disclosure, Firm Size, Institutional Ownership, Profitability

Abstract

Background: ESG disclosure has become a central instrument of corporate accountability, yet reporting practice in emerging markets remains uneven despite the mandate of OJK Regulation No. 51/POJK.03/2017, leaving firm level determinants of disclosure unresolved.

Objective: This study examines the determinants of ESG disclosure by analyzing the roles of profitability, institutional ownership, and firm size, and evaluating whether debt policy moderates these relationships.

Methods: Using secondary data from manufacturing firms listed on the Indonesia Stock Exchange over the period 2021–2023, this study employs purposive sampling and analyses 108 firm year observations. ESG disclosure is measured by the Sustainability Report Disclosure Index (SRDI) based on the 91 item GRI G4 checklist, and the hypotheses are tested using multiple regression and moderated regression analysis.

Results: Profitability has a significant negative effect on ESG disclosure, institutional ownership a positive effect significant at the 5% level, and firm size a positive effect significant only at the 10% level. Debt policy does not significantly moderate any of the three relationships. Ownership based monitoring and firm visibility therefore explain disclosure better than financial performance or capital structure, although governance is proxied here by institutional ownership alone.

Conclusion: This study contributes to the ESG literature by providing evidence from an emerging market context and offers insights for regulators, investors, and corporate managers in enhancing sustainability practices. The findings support tighter item level reporting standards under the OJK sustainable finance framework, independent verification of sustainability reports, and stronger institutional investor engagement.

Downloads

Download data is not yet available.

References

Abdul Rahman, R., & Alsayegh, M. F. (2021). Determinants of Corporate Environment, Social and Governance (ESG) Reporting among Asian Firms. Journal of Risk and Financial Management, 14(4). https://doi.org/10.3390/jrfm14040167

Adhariani, D., & du Toit, E. (2020). Readability of sustainability reports: evidence from Indonesia. Journal of Accounting in Emerging Economies, 10(4). https://doi.org/10.1108/JAEE-10-2019-0194

Alsaeed, K. (2006). The association between firm-specific characteristics and disclosure: The case of Saudi Arabia. In Managerial Auditing Journal (Vol. 21, Number 5). https://doi.org/10.1108/02686900610667256

Amidjaya, P. G., & Widagdo, A. K. (2020). Sustainability reporting in Indonesian listed banks: Do corporate governance, ownership structure and digital banking matter? Journal of Applied Accounting Research, 21(2). https://doi.org/10.1108/JAAR-09-2018-0149

Arita, E., & Mukhtar, R. (2019). Pengaruh Profitabilitas, Leverage dan Likuiditas terhadap Corporate Social Responsibility (CSR) pada Perusahaan Makanan dan Minuman Terdaftar Terdaftar di BEI Periode 2014-2018. MENARA Ilmu, 13(10).

Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22, S119–S127. https://doi.org/10.1016/j.bir.2022.11.006

Baltagi, B. H. (2008). Econometric analysis of panel data. Rohn Wiley. https://doi.org/10.1007/978-3-030-53953-5

Basar, N. F., Hamzah, F., & Aisyah, N. (2023). PENERAPAN KONSEP TRIPLE BOTTOM LINE PADA USAHA AYAM POTONG UD. FIRMAN DI MAROS SULAWESI SELATAN. Jurnal Akuntansi Kompetif, 6(1). https://doi.org/10.35446/akuntansikompetif.v6i1.1181

Bhattacharyya, A., & Agbola, F. W. (2018). Social and environmental reporting and the co-creation of corporate legitimacy. Contemporary Management Research, 14(3). https://doi.org/10.7903/cmr.18247

Cerciello, M., Busato, F., & Taddeo, S. (2023). The effect of sustainable business practices on profitability. Accounting for strategic disclosure. Corporate Social Responsibility and Environmental Management, 30(2). https://doi.org/10.1002/csr.2389

Chih, H. L., Shen, C. H., & Kang, F. C. (2008). Corporate social responsibility, investor protection, and earnings management: Some international evidence. Journal of Business Ethics, 79(1–2). https://doi.org/10.1007/s10551-007-9383-7

Dewi, H. R., & Muhyarsyah, M. (2025). ESG disclosure, capital structure, and profitability in explaining firm value of Indonesia’s IDX ESG Leaders: Some notes from Islamic finance perspectives‎. Journal of Islamic Economics Lariba, 12(1). https://doi.org/10.20885/jielariba.vol12.iss1.art1

Dyck, A., Lins, K. V., Roth, L., & Wagner, H. F. (2019). Do institutional investors drive corporate social responsibility? International evidence. Journal of Financial Economics, 131(3). https://doi.org/10.1016/j.jfineco.2018.08.013

Elkington, J. (1994). Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Development. California Management Review, 36(2). https://doi.org/10.2307/41165746

Ellili, N. O. D. (2022). Impact of ESG disclosure and financial reporting quality on investment efficiency. Corporate Governance (Bingley), 22(5). https://doi.org/10.1108/CG-06-2021-0209

Freeman, R. E., Phillips, R., & Sisodia, R. (2020). Tensions in stakeholder theory. Business & Society, 59(2), 213–231.

Gholami, A., Sands, J., & Rahman, H. U. (2022). Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different? Sustainability (Switzerland), 14(5). https://doi.org/10.3390/su14052647

Global Reporting Initiative. (2021). GRI 1: Foundation 2021. Global Reporting Initiative

Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy. Journal of Business Ethics, 114(2). https://doi.org/10.1007/s10551-012-1336-0

Malik, N., & Kashiramka, S. (2025). “ESG disclosure and its impact on firm leverage: Moderating role of quality of financial reporting and financial constraints.” Global Finance Journal, 65. https://doi.org/10.1016/j.gfj.2025.101099

Memon, M. A., Cheah, J. H., Ramayah, T., Ting, H., Chuah, F., & Cham, T. H. (2019). Moderation analysis: Issues and guidelines. Journal of Applied Structural Equation Modeling, 3(1). https://doi.org/10.47263/jasem.3(1)01

Otoritas Jasa Keuangan. (2017). Peraturan Otoritas Jasa Keuangan Nomor 51/POJK.03/2017 tentang Penerapan Keuangan Berkelanjutan bagi Lembaga Jasa Keuangan, Emiten, dan Perusahaan Publik. Otoritas Jasa Keuangan.

Roestanto, A., Vivianita, A., & Nurkomalasari, N. (2022). PENGARUH UKURAN PERUSAHAAN, UMUR PERUSAHAAN, JENIS INDUSTRI, DAN STRUKTUR KEPEMILIKAN TERHADAP ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) DISCLOSURE (STUDI EMPIRIS PERUSAHAAN DI INDONESIA YANG TERDAFTAR DI IDX 2017-2020). Jurnal Akuntansi STIE Muhammadiyah Palopo, 8(1). https://doi.org/10.35906/jurakun.v8i1.958

Seow, R. Y. C. (2024). Determinants of environmental, social, and governance disclosure: A systematic literature review. Business Strategy and the Environment, 33(3). https://doi.org/10.1002/bse.3604

Seow, R. Y. C. (2025). The Dynamics of Performance Feedback and ESG Disclosure: A Behavioral Theory of the Firm Perspective. Corporate Social Responsibility and Environmental Management, 32(2). https://doi.org/10.1002/csr.3083

Spence, M. (1978). Job market signaling. In Uncertainty in economics (pp. 281–306). Elsevier.

Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4). https://doi.org/10.1002/(SICI)1097-0266(199704)18:4<303::AID-SMJ869>3.0.CO;2-G

Wahyuni, P. D., Marsyaf, M., & Fisher, B. (2024). The Role of Leverage in Moderating ESG Disclosure and Financial Slack on the Company’s Financial Performance. International Journal of Business and Applied Social Science. https://doi.org/10.33642/ijbass.v10n10p2

Wang, Y., Lin, Y., Fu, X., & Chen, S. (2023). Institutional ownership heterogeneity and ESG performance: Evidence from China. Finance Research Letters, 51. https://doi.org/10.1016/j.frl.2022.103448