Despite a substantial body of research investigating the relationship between environmental, social and governance (ESG) disclosure and corporate performance, the literature remains inconclusive due to highly varied findings. To address this significant gap, this study aims to explore the strength of the relationship between ESG disclosure and corporate performance among nonfinancial firms in Indonesia across 10 industries, classifying firms into high and low pollution categories.
The study examines a sample of 293 companies over the period from 2017 to 2022. In addition, it classifies firms into high and low pollution categories as a moderating variable. Using various analytical techniques – including moderated regression analysis, subgroup analysis and cross-industry analysis.
The results reveal that ESG disclosure positively impacts corporate performance. However, this positive effect is observed only in firms with high pollution levels (e.g. basic materials, consumer cyclicals, consumer noncyclicals, energy, industrials and transportation and logistics), whereas the impact is not significant for firms with low pollution levels (e.g. health care, infrastructure, property and real estate and technology). These findings are robust using different statistical methods.
This research can be used as a consideration for companies, regulators and policymakers who are considering requiring ESG practices in their respective contexts.
This research contributes to the ESG literature by providing empirical evidence of the influence of ESG disclosure on corporate performance using high and low pollution industries as a moderating variable.
