Does the effect of good corporate governance on sustainability reporting strengthen by the presence of women on corporate boards?

The presence of women is considered to provide added value to the company’s board. They can strengthen the relationship between Good Corporate Governance (GCG) and sustainability reporting (SR) because women often bring different perspectives (Bennouri et al., 2018), are more careful (Tran, 2022), ethical values (Mensah and Onumah, 2022) and care about desires (García-Sánchez et al., 2019; Rodríguez-ariza et al., 2017). In the decision-making process, women play a role in providing considerations from perspectives that are not accessible to male directors with adequate analytical skills (Meah et al., 2021; Nyeadi et al., 2021). They provide valuable insights in integrating GCG practices and permit applications. Furthermore, the presence of women on the board is linear with transparency, accountability and compliance with applicable regulations and ethical standards (Faysal et al., 2020; Lee, 2021; Salehi et al., 2024a; Salehi and Hassanzadeh, 2024). Therefore, the effectiveness of the implementation of GCG principles is getting better in improving the sustainability of reporting incompetence (Aluchna et al., 2023; Gerwing et al., 2022; Miloud, 2024).

Female directors generally have a higher level of concern regarding sustainability issues so they are more proactive in campaigning for the company’s involvement in implementing sustainability practices such as workforce diversity, waste management and carbon emissions (Lu, 2021; Rodríguez-ariza et al., 2017). In addition, women tend to care more about long-term strategies including sustainability compared to the focus of SR supported by the company’s board will have a good reputation as an entity that cares about social and environmental issues (Quesada et al., 2025). Companies with women on the board will gain trust from the community and other stakeholders (Fatma and Chouaibi, 2021; Nyarko et al., 2025).

Several studies have examined the effect of corporate governance on SR, such as Correa-Garcia et al. (2020), Erin et al. (2022), Kouaib et al. (2022), López-González et al. (2019), Sharma and Khanna (2014) and So et al. (2021). In the Indonesian context, research on the relationship between these two variables has also been conducted, including by Rudyanto and Siregar (2018), Nasih et al. (2019), Suharyono et al. (2023) and Zarefar et al. (2023). However, these studies have rarely discussed the role of female directors in the relationship between corporate governance and SR. Therefore, this study is expected to fill that research gap.

Female directors are a serious concern to be explored further in Indonesia. There are at least two reasons, first, in Indonesia there are still very few women holding key roles in companies. Only 11% of the ratio of women who are leaders in State-Owned Enterprises (BUMN), and research results from the Indonesia Business Coalition for Women Empowerment (IBCWE) and Chief Executive Women Australia (CEW) on the top 200 companies on the Indonesia Stock Exchange (IDX) revealed that only 15% of women are on company boards (IDX, 2021). This is thought to be due to the absence of regulations requiring a minimum quota for women like in developed countries. Developed countries such as Norway, the Netherlands, Germany, Spain, France, Iceland, Italy, Belgium and Finland have set a minimum quota for the percentage of women on company boards ranging from 30 to 40%. Second, this culture and stigma are deeply embedded in Indonesian society. Of course, this will be a big obstacle for women to become leaders (Tran, 2022).

The purpose of this study is to empirically test the moderating role of female directors on the relationship between GCG and SR in Indonesian companies. The reason behind the moderating role of female directors is because previous studies generally tested the direct effect of CG on SR and resulted in inconsistent findings. Therefore, it can be assumed there is a moderating variable between the GCG and SR variables. In addition, several studies have also used female directors as moderators, as done by Farooq et al. (2025), Garcia-Meca et al. (2024), Giannarou and Tzeremes (2025), Marzouki and Ben Amar (2025) and Mendes et al. (2025). Furthermore, female directors are a field of research that remains urgently needed in Indonesia. This research will complete the gap in previous research by using the ASEAN CG Score Card (ACG-SC) instrument developed by Utama et al. (2017) as a more comprehensive measurement. This study is a pioneering study of this type of research model in Indonesia. This study makes a valuable contribution by examining the distinctive aspects of corporate governance in Indonesia – such as varied ownership structures, limited ESG awareness and regulatory inconsistencies – while emphasizing the importance of board gender diversity in enhancing SR. It provides practical guidance for companies to improve their reporting practices through stronger corporate governance and gender inclusivity, as well as for policymakers to develop more effective ESG-related regulations and incentives.

Indonesia presents a unique context shaped by its cultural, political and corporate governance characteristics. As part of the broader Asian cultural landscape, Indonesia still faces societal norms that limit women’s roles in professional leadership. Women are often perceived as more suitable for domestic responsibilities rather than taking on executive roles in organizations. Although awareness of gender equality in leadership has begun to grow, the Indonesian government has yet to implement concrete regulations – such as mandatory quotas – to ensure female representation on corporate boards. Moreover, Indonesia is still in the developmental stage of fully embracing Good Corporate Governance (GCG) practices (Utama et al., 2017). The implementation of GCG principles remains inconsistent, highlighting the need for continued improvement to foster transparency, accountability and inclusivity in corporate management. The underrepresentation of women in boardrooms further reflects the limited progress in achieving diversity and inclusive governance in Indonesian companies. Importantly, Indonesia plays a critical role in the global economy. As a member of the G20 and one of the largest economies in Southeast Asia, the practices of Indonesian companies have a considerable impact on global sustainability efforts. The integration of gender diversity in corporate leadership and the strengthening of GCG are therefore essential not only for improving firm performance but also for supporting Indonesia’s contribution to sustainable development goals.

The rest of the paper is organized as follows: Section 2 contains the literature review and hypothesis development; Section 3 describes the methodology and data; Section 4 presents the analysis and discussions and Section 5 includes conclusions and implications.

GCG contributes crucially to the improvement of SR. Strong GCG has five principles, including fairness, accountability, responsibility, transparency and independence (Güner et al., 2008; Tjahjadi et al., 2021; Salehi et al., 2024b). Transparency, responsibility and accountability are the main foundations of SR. Companies are encouraged to report on the social, environmental and economic impacts of their operations when strong GCG exists in the company. Furthermore, GCG principles applied by companies lead them to comply with external regulations and standards related to SR. Companies will be more aware of the importance of complying with these standards to maintain public trust and their reputation. SR will be a signal from companies to stakeholders of their commitment to broader social, environmental and governance issues (Suhartini et al., 2024).

Additionally, the signaling theory observes how companies with GCG implementation will tend to gain a positive reputation as the public capture good signals from the company’s activities. Stakeholders perceive companies with a concern for sustainability as having a long-term vision and hence have a special appeal (Bagherpasandi et al., 2024; Presley et al., 2018). This signal also has other positive impacts such as investor interest in investing their funds in these companies. Investors recognize the company’s high standards of environmental and social management (Bae et al., 2018). Thus, the implementation of GCG will encourage companies to disclose sustainability reports as well as provide a competitive advantage for companies making them better prepared to face sustainability challenges in the future.

The implementation of Good Corporate Governance encourages companies to undertake sustainability disclosures. The principles of GCG directly lead companies to engage in sustainability disclosure as a form of accountability. This situation will be further strengthened by the presence of female directors. Directors, who are essentially the key role holders for the implementation of GCG, become crucial in SR (Tjahjadi et al., 2021). Female directorships contribute to promoting sustainability more widely (Rodríguez-ariza et al., 2017). Female directors on the board of the company are considered to be able to better consider sustainability aspects. This is due to the fact that women have a higher sensitivity compared to men. Women have more attention to humanitarian issues, a higher environment so as to encourage companies to make higher disclosures (Hussain et al., 2018; Colakoglu et al., 2020; García-Meca and Martinez-Ferrero, 2025; Hoch et al., 2025).

Upper echelons theory recognizes the characteristics of leaders will largely determine the way they think, act and be reflected in the decisions they make for the company (Hambrick and Mason, 1984; Lestari and Soewarno, 2023; Wang et al., 2016). Females have a different character from males. Female directors tend to be more compliant with regulations and more sensitive to ethical issues (Lee, 2021). As such, they are likely to encourage the implementation of GCG and the disclosure of SR. They are also less economically oriented and driven by philanthropic activities (Mahmood et al., 2018; Yasin, 2025). Female’s leadership tends to have a positive impact on sustainability issues (Githaiga and Kosgei, 2022; Disli et al., 2022; Khan et al., 2019). Given their nature, they will support the strengthening of the influence of GCG implementation on SR.

This study is conducted on non-financial companies listed on the Indonesia Stock Exchange (IDX) for the period 2014–2020. The initial sample of companies consisted of 185 companies. This number was reduced by companies that did not have complete data for this study, which amounted to 36 companies. Thus, the research sample consisted of 149 companies. After selecting the research sample, a final sample of 1,150 total firm-years observations were obtained.

The hypotheses of this study were tested using panel data regression. In addition, robustness testing is conducted by changing the proxy of the dependent variable. Finally, one additional test was conducted by dividing the sample into young and aged companies. The following is the empirical model used:

SR is sustainability reporting, GCG is good corporate governance, FEMBOARD is female directors on the board, LEV is leverage, REG is regulation, SIZE is size, AGE is company age.

Prior to conducting regression analysis, we perform several diagnostic tests to ensure that the data met the assumptions required for parametric statistical techniques. First, the normality of residuals was tested using the Jarque-Bera test, confirming no significant deviation from normal distribution. Second, multicollinearity among independent variables was assessed using the Variance Inflation Factor (VIF), with all values below the conservative threshold of 5, indicating no severe multicollinearity. Third, we test heteroskedasticity using the Breusch-Pagan test, and serial correlation was assessed using the Wooldridge test for autocorrelation in panel data. Where heteroskedasticity or autocorrelation was present, robust standard errors were employed to ensure the reliability of the coefficient estimates. Finally, we run a Hausman test to determine the appropriate model specification between fixed-effects and random-effects models. The results supported the use of the fixed-effects.

Table 1 presents the definitions and measurements of the variables used in this study. This study uses SR as the dependent variable. SR is measured using a content analysis approach which follows the method used by (Hussain, 2015; Zarefar et al., 2023). GRI indicators G3, G3.1, G4 and GRI standards are references for conducting content analysis with adjustments every year. The following is the measurement for the SR variable:

The independent variable in this study is Good Corporate Governance (GCG). GCG measurement was conducted using the ASEAN CG Score Card (ACG-SC) index, which refers to research (Utama et al., 2017). ACG-SC data were collected using content analysis methods from annual reports, sustainability reports or integrated reports. This CG instrument consists of 130 questions and two levels. Five sections referring to the five OECD CG principles with a total of 117 items for the first level. Meanwhile, the second level consists of two parts, that is penalties and bonuses. The first lever has a maximum score of 100%. However, the presence of bonuses and penalties allows companies to score above 100 or below 100. ACG-SC data were collected using content analysis methods from annual reports, sustainability reports or integrated reports. ACG-SC data were collected using content analysis methods from annual reports, sustainability reports or integrated reports. Besides authors, a content analysis of the various reports used in the study was also carried out by some independent researchers (doctoral scholars from Riau University, Indonesia) and four researchers assistants (students from Riau University, Indonesia) Krippendorff’s alpha test was also used to analyze the intercoder reliability in order to assess the consistency of the content analysis procedure. The result was 0.918, indicating high intercoder reliability (Hayes and Krippendorff, 2007).

The moderating variable of this study is the female director of the company (FEMBOARD). FEMBOARD refers to the presence of women on the company board (Amin et al., 2022; Nyeadi et al., 2021; Lefley and Janecek, 2025) measured using a dummy variable, 1 for boards with women on the board, 0 otherwise.

The leverage control variable (LEV) refers to the ratio of debt to corporate assets (Ibrahim, 2020; Naimah and Mukti, 2019; Shaban and Barakat, 2023). Leverage is controlled due to its influence on corporate decision-making. Firms with high leverage ratios often experience stronger monitoring pressures from creditors, which may restrict managerial flexibility in allocating resources toward sustainability initiatives. Consequently, highly leveraged firms tend to prioritize creditor-oriented policies over broader SR practices. Regulation, on the other hand, captures differences in environmental accountability requirements across industries (Suharyono et al., 2023; Zarefar et al., 2023). In Indonesia, sectors differ substantially in the stringency of environmental obligations imposed upon them, particularly those operating in resource-intensive or environmentally sensitive industries. These sectoral differences in regulatory pressure typically lead firms subject to more demanding environmental oversight to disclose sustainability information more extensively. Thus, both leverage and regulation are essential control variables to ensure that the model isolates the true effect of good corporate governance on SR. Company size (SIZE) is the total assets owned by the company (Mensah and Onumah, 2023; Fatma and Chouaibi, 2021; Rahman and Chen, 2022). Company size needs to be controlled because it will affect their financial capabilities and resources. Larger companies generally have greater financial and human resources, so they are better able to allocate funds for SR. Company age (AGE) refers to the age of the company since its establishment (Brahma et al., 2021; Zarefar and Armadani, 2024). Company age needs to be controlled as companies that have been established for a long time will tend to have a lot more experience in running their operations, including in terms of SR and management.

Table 2 presents the summary of each variable used in this study. The SR of Indonesian non-financial companies during the study period was generally low. The number of SR in Indonesian companies. The implementation of GCG is quite good as there are companies reaching the implementation level of 72%. This means the company observed in this study has implemented GCG principles well. This implementation will provide protection to investors, information disclosure and responsibility including for SR. The average disclosure of sustainability and GCG implementation is also realistically not that different throughout the study period (Table 3).

The FEMBOARD variable indicates an interesting figure, the average number of companies that have women on their board is 20% and this is still low. The Indonesian government should take note of this as this could be due to the absence of regulations on minimum quotas. The presence of women on company boards is important in the development and implementation of sustainability principles. In addition to their nature of being able to promote the company’s sustainability actions, the presence of women in leadership positions is a form of implementing sustainability development itself. The presence of women in leadership positions is an effort to support gender equality in the business world.

Before conducting the regression test, a pairwise correlation test was performed to ensure this model does not have a multicollinearity problem. A research model is said to have a multicollinearity problem when there is a correlation between independent variables with a coefficient greater than 0.8 (Gujarati, 2003). Based on the pairwise correlation test results in Table 4, it can be concluded that this research model is free from muliticollinearity problems.

The study’s regression results can be found in Table 5, GCG has a positive effect on SR, H1 is accepted. The findings of this study indicate that companies implementing good corporate governance (GCG) tend to increase their SR. This positive effect is due to the implementation of GCG principles – transparency, accountability, responsibility, independence and fairness – which reduce actions that may cause harm to the company (Tjahjadi et al., 2021). These principles act as a foundation to ensure companies operate ethically and responsibly, especially in reporting their sustainability activities. The study emphasizes that GCG does not merely refer to abstract ideals, but to concrete mechanisms such as disclosure and transparency, the responsibility of the board and the equitable treatment of shareholders, as also outlined by the OECD.

The principle of transparency, for example, refers to the provision of valid, clear and easily accessible information to stakeholders including the public, government and investors. This principle encourages companies to deliver up-to-date sustainability reports, as transparency builds stakeholders’ trust by showing that the company is proactive in environmental and social responsibility. Meanwhile, the principle of accountability requires companies to be answerable for their actions and performance, including sustainability performance. Reporting on sustainability serves as evidence of a company’s commitment to addressing the social and environmental consequences of its operations. It also functions as an internal evaluation system, helping the company to assess the effectiveness of its sustainability strategies and comply with ethical standards and environmental regulations.

Further, the principle of responsibility ensures that companies conduct their business not just to pursue profits, but also to be aware of their impact on society and the environment. Through SR, companies can demonstrate responsible practices, such as reducing carbon emissions, managing waste responsibly and supporting community welfare. In addition, the implementation of GCG helps mitigate agency costs – the conflict between management and shareholders – by upholding key principles such as shareholder rights, stakeholder roles and board accountability. These mechanisms ensure that the interests of shareholders and other stakeholders are protected and represented, thereby motivating companies to report sustainability activities transparently and consistently.

Thus, by detailing the specific principles and mechanisms within corporate governance – such as board responsibility, disclosure transparency and stakeholder engagement – this study affirms that the implementation of GCG directly strengthens the quality and frequency of SR in companies.

The regression results also indicate a positive effect of FEMBOARD on relationship between GCG and SR, H2 is accepted. This finding indicates by having female company leaders, it will strengthen the influence of GCG on SR. This finding confirms the upper echelons theory which perceives that the characteristics of the company’s top leaders will determine the actions they take in running the company. Females who are more sensitive to ethical issues, tend to be more compliant with regulations, and have a strong drive for philanthropic activities will strengthen the increase in SR by GCG. Females often have a higher level of empathy and concern for social and environmental issues than males. Female directors tend to be more supportive of policies promoting sustainability, whether in the social, environmental or governance spheres. By bringing this sensitivity to the board, female directors can encourage more long-term impact-oriented decisions, strengthening the company’s commitment to SR.

The presence of women at the board level increases the diversity of perspectives and outlooks within the board, resulting in more inclusive and comprehensive decision-making. This broader perspective allows them to evaluate sustainability risks and opportunities in a more holistic way, ultimately improving the quality of SR and alignment with GCG principles. It means the nature of their role will encourage stronger GCG in improving SR.

Furthermore, robustness tests were conducted by removing control variables from the regression model. This was done to test whether the variables of interest used had the same effect without the control variables. Table 5, panels 4–6, show that the variables of interest used still had the same effect on the dependent variable even without the control variables, meaning that the regression model used was robust.

The dimensions of EQUALITY, DISC and RESPONS have a positive influence on SR because all three reflect the core aspects of good corporate governance in the context of accountability and transparency (Table 6). EQUALITY ensures that all shareholders, including minority shareholders, are treated fairly, which encourages companies to engage in more ethical business practices and be more open to the public. DISC plays a crucial role in providing clear, accurate and timely information to all stakeholders, including information regarding the company’s social and environmental performance. Meanwhile, RESPONS emphasizes the importance of the board’s responsibility in overseeing and directing company strategy, including its commitment to sustainability. When these three dimensions are consistently applied, companies are more likely to be motivated to prepare sustainability reports as a form of accountability to the public and regulators.

In line with this, the presence of female directors strengthens the influence of these three dimensions on SR because women on the board of directors often bring more inclusive, collaborative and sensitive leadership values to social and environmental issues. Women tend to have higher moral and ethical orientations and greater attention to transparency and accountability, thereby supporting the strengthening of Equality and Disclosure practices at the strategic level. Additionally, female directors are also considered more committed to fulfilling their oversight responsibilities (the Responsibility dimension) and often encourage organizations to take social responsibility more seriously. Their presence on the board sends a positive signal to stakeholders and encourages companies to communicate sustainability information more honestly and comprehensively.

Table 7 menyajikan hasil analisis tambahan. Analisis tambahan penelitian ini membagi sampel penelitian menjadi perusahaan berusia muda dan berusia tua. The basis for this division is the average age of the companies in this study, which is 37 years old. In addition, companies beyond three decades since their establishment are considered old as they have had various experiences facing the business world. Based on the regression results in Table 7, this study found the tendency to report corporate sustainability activities was significantly influenced by GCG and strengthened by FEMBOARD in younger companies. This is due to the fact that younger companies are relatively easy to adapt to trends in the business world, including the demand to report on corporate sustainability practices.

The increasing attention of the global community to sustainability issues makes SR by companies very important. The purpose of this study is to empirically examine the moderating role of the presence of women on corporate boards on the relationship between GCG and SR. Using a panel data regression approach, this study suggests GCG enhances SR. In addition, the presence of females on corporate boards strengthens the effect of GCG on SR.

The findings of this study offer several practical implications for corporate governance and sustainability practices, particularly in the context of emerging markets. First, companies are advised to strengthen the implementation of Good Corporate Governance (GCG) principles – such as transparency, accountability, responsibility, independence and fairness – as these are shown to positively influence the quality of SR. Robust governance mechanisms ensure that sustainability initiatives are not only well-documented but also genuinely integrated into the company’s strategic objectives. Second, the study highlights the significant role of women on corporate boards in amplifying the positive relationship between GCG and SR. This underscores the value of gender diversity in leadership, as female directors may bring unique perspectives, ethical sensitivity and a stronger inclination toward social and environmental concerns. Therefore, companies should actively promote the inclusion of women in board-level decision-making by fostering inclusive recruitment policies, offering leadership development programs for women and eliminating systemic barriers to advancement.

Furthermore, companies need to strengthen the implementation of the principles of Equality, Disclosure and Responsibility as part of their governance strategy to improve the quality of SR. This can be done through internal policies that ensure fair treatment of shareholders, transparency of information and accountability of the board of directors. Additionally, companies are encouraged to increase female representation on the board as part of efforts to create more inclusive and ethical leadership. In this way, sustainability reports are not merely a formal obligation but also reflect a genuine commitment to sustainable business practices.

Moreover, these findings provide valuable insights for policymakers and regulators, suggesting the need to support gender diversity through formal guidelines or incentive-based policies, such as gender quotas or disclosure requirements. Encouraging greater female representation can help create more balanced and forward-thinking governance structures, which are essential for addressing complex sustainability challenges. For investors and stakeholders, the presence of women in governance and the quality of GCG can serve as key indicators of a company’s commitment to Environmental, Social, and Governance (ESG) performance. In the long run, organizations that adopt inclusive governance practices and prioritize SR are more likely to build stronger reputations, gain stakeholder trust and achieve sustainable financial performance. Ultimately, these practices position companies not only as responsible corporate citizens but also as leaders in driving sustainable development and resilience in the global economy. Finally, this study provides empirical evidence that strong GCG implementation has a positive correlation with improved SR. This finding strengthens the literature discussing the importance of GCG in promoting corporate transparency and accountability regarding sustainability issues. In addition, the results of this study support the view that sustainability is not just an obligation or external demand, but an integral part of good governance practices.

This study has several limitations and suggestions for future endeavors. This study only measures the presence of female on the board as a dummy variable which may not be able to capture their role on the board. Future research is suggested to develop multilevel measurements such as small, medium or large number of women that may be better able to describe the role of women as corporate leaders. In addition, this study is limited to the 2014–2020 period, there have been many changes and dynamics in business so that future research can explore a wider and longer time period.