Does ESG Disclosure Matter for Financial Performance? The Role of Firm Age

Dany Nurahman and Hersugondo Hersugondo

Economic Studies journal, 2026, issue 3, 106-127

Abstract: Corporate sustainability has become an increasingly important global issue, including in developing countries such as Indonesia, alongside growing investor and stakeholder awareness of Environmental, Social, and Governance (ESG) practices. This study examines the effect of ESG disclosure on the financial performance of non-financial firms listed on the Indonesia Stock Exchange (IDX) during the 2020-2023 period. ESG data are obtained from Bloomberg Terminal, while financial performance is measured using Return On Assets (ROA) and Return On Equity (ROE). Firm size and leverage are included as control variables. Using a quantitative approach with multiple linear regression and purposive sampling, the final sample consists of 44 firms with consistent ESG and financial data throughout the observation period. The results show that ESG disclosure has a positive and statistically significant effect on ROA and ROE in the baseline model. After controlling for firm size and leverage, the positive effect on ROA remains significant, whereas the effect on ROE becomes marginally significant. Further analysis indicates that firm age moderates the relationship between ESG disclosure and financial performance, exhibiting a marginal effect on ROA and a statistically significant effect on ROE. These findings support the relevance of signalling theory, stakeholder theory, agency theory, legitimacy theory, and institutional theory within emerging market contexts. Overall, the study contributes to the ESG literature in Indonesia and provides practical insights for managers and policymakers in promoting more transparent and comprehensive sustainability reporting.

JEL-codes: G32 M14 Q56 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2026:i:3:p:106-127

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