ESG Performance on Corporate Financial Outcomes: Evidence from Indonesian Firms in the SRI-KEHATI Index

Anas Iswanto Anwar, Fakhrul Indra Hermansyah (), Naufal Muhammad Aksah and Ihya’ Ulumuddin
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Anas Iswanto Anwar: Hasanuddin University
Fakhrul Indra Hermansyah: Hasanuddin University
Naufal Muhammad Aksah: Hasanuddin University
Ihya’ Ulumuddin: Hasanuddin University

A chapter in Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), 2025, pp 2695-2706 from Springer

Abstract: Abstract This study explores the relationship between Environmental, Social, and Governance (ESG) performance and corporate financial performance in Indonesia, focusing on publicly listed companies included in the SRI-KEHATI Index. Using panel data from 10 firms over the period from 2015 to 2020, the research employs a multiple regression model to assess the impact of ESG performance on Return on Assets (RoA), with leverage, industry sector, and GDP growth as control variables. The findings reveal a statistically significant positive relationship between ESG performance and financial performance, indicating that firms with stronger ESG practices tend to achieve higher profitability. Additionally, leverage and industry sector are identified as important determinants of financial performance, with capital structure and sector-specific factors significantly influencing corporate profitability. Although the study provides meaningful insights, it acknowledges limitations such as the small sample size and the binary measure of ESG performance. Future research should focus on more granular ESG metrics and larger sample sizes to enhance the robustness of the findings. The results offer valuable implications for investors and policymakers, underscoring the importance of integrating ESG considerations into corporate strategy to drive financial success and promote sustainable development.

Keywords: ESG Performance; Corporate Financial Performance; Return on Assets; Sustainability; GDP Growth (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-758-8_218

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DOI: 10.2991/978-94-6463-758-8_218

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