The Effect of ESG, Cost of Capital, and Woman Board on Indonesia Firm Performance
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Apr 30, 2024
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Abstract
In this study, the primary objective is to examine the influence of ESG (Environmental, Social, and Governance), cost of capital, and woman board on firm performance of Indonesian companies. The OLS (Ordinary Least Square) approach is used in this study to examine how ESG, cost of capital and woman board affect firm performance, which is assessed through the measurement of Return on Assets (ROA). The companies listed in the Thomson Reuters database with an observation period between 2020 until 2022 make up this study's population, and sample data was acquired through the application of purposive sampling method, totaling 117 samples. According to the research results, it is inferred that ROA is impacted significantly negative by ESG; cost of capital and woman board give such a significant and positive influence toward ROA. The unique feature of this research is its focus on a developing country, particulary Indonesia, in contrast to prior research that primarily focused on developed countries like Hong Kong.
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References
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Wahyuni, I., Pasigai, M.A., & Adzim, F. (2019). Analisis Rasio Profitabilitas Sebagai Alat Untuk Mengukur Kinerja Keuangan Pada PT.Biringkassi Raya Semen Tonasa Group JL. Poros Tonasa 2 Bontoa Minasate’Ne Pangkep. Jurnal Profitability Fakultas Ekonomi Dan Bisnis, 3(1), 22–35. https://core.ac.uk/download/pdf/233601894.pdf
Zahid, M., Rahman, H. U., Ali, W., Khan, M., Alharthi, M., Qureshi, M.I., & Jan, A. (2020). Boardroom Gender Diversity: Implications for Corporate Sustainability Disclosures in Malaysia. Journal of Cleaner Production, 244, 118683. https://doi.org/10.1016/j.jclepro.2019.118683
Alsayegh, M. F., Rahman, R. A., & Homayoun, S. (2020). Corporate Economic, Environmental, and Social Sustainability Performance Transformation Through ESG Disclosure. Sustainability (Switzerland), 12(9), 3910–3929. https://doi.org/10.3390/su12093910
Ansoff, H. I. (1965). Corporate Strategy. McGraw Hill.
Bodhanwala, S., & Bodhanwala, R. (2022). Exploring Relationship Between Sustainability and Firm Performance in Travel and Tourism iIndustry: A Global Evidence. Social Responsibility Journal, 18(7), 1251–1269. https://doi.org/10.1108/SRJ-09-2020-0360
Brahma, S., Nwafor, C., & Boateng, A. (2021). Board Gender Diversity and Firm Performance: The UK evidence. International Journal of Finance and Economics, 26(4), 5704–5719. https://doi.org/10.1002/ijfe.2089
Buallay, A., Fadel, S. M., Alajmi, J., & Saudagaran, S. (2020). Sustainability Reporting and Bank Performance After Financial Crisis: Evidence From Developed and Developing Countries. Competitiveness Review, 31(4), 747–770. https://doi.org/10.1108/CR-04-2019-0040
Chung, R., Bayne, L., & Birt, J. (2023). The Impact of Environmental, Social and Governance (ESG) Disclosure on Firm Financial Performance: Evidence from Hong Kong. Asian Review of Accounting. https://doi.org/10.1108/ARA-07-2022-0165
Fama, E. F., & Jensen, M. C. (1983). Separation of Ownership and Control. Journal of Law and Economics, 26. https://dx.doi.org/10.2139/ssrn.94034
Ferriani, F., & Natoli, F. (2021). ESG Risks in Times of Covid-19. Applied Economics Letters, 28(18), 1537–1541. https://doi.org/10.1080/13504851.2020.1830932
Husada, E. V., & Handayani, S. (2021). Pengaruh Pengungkapan ESG Terhadap Kinerja Keuangan Perusahaan (Studi Empiris pada Perusahaan Sektor Keuangan yang Terdaftar di BEI Periode 2017-2019). Jurnal Bina Akuntansi, 8(2), 122–144. https://doi.org/10.52859/jba.v8i2.173
Ibrahim, M., Abdulkarim, H., Muktar, J., Gurama, Z., & Peter, Z. (2021). The Impact of Cost of Capital on Financial Performance: Evidence from Listed Non-Financial Firms in Nigeria. Global Business Management Review (GBMR), 13(2), 18–34. https://doi.org/10.32890/gbmr2021.13.2.2
Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics (Vol. 3). Q North-Holland Publishing Company
Junius, D., Mulya, U. P., Rijanto, Y. A., & Adelina, Y. E. (2020). The Impact of ESG Performance to Firm Performance and Market Value. Jurnal Aplikasi Akuntansi, 5(1), 21–41. https://doi.org/10.29303/jaa.v5i1.84
Mahyuni, S., & Rahmawati, W. (2022). Pengaruh Woman On Board Room Terhadap Kinerja Perusahaan. Jurnal Mutiara Akuntansi, 7(2), 151–162. https://doi.org/10.51544/jma.v7i2.3520
Mion, G., & Adaui, C. R. L. (2019). Mandatory Nonfinancial Disclosure and Its Consequences on The Sustainability Reporting Quality of Italian and German Companies. Sustainability (Switzerland), 11(17), 1–28. https://doi.org/10.3390/su11174612
Nations, U. (2015). 70/1. Transforming Our World: The 2030 Agenda for Sustainable Development.
Onwe, E. D., Mustapha, L. O., & Yahaya, O. A. (2020). Financial Structure and Financial Performance of Listed Firms in Nigeria. Research Journal of Finance and Accounting, 11(14), 120–136 https://doi.org/10.7176/rjfa/11-14-15
Porter, M. E., & Kramer, M. R. (2011). Creating Shared Value. Harvard Business Review, January-February, 62–77.
Ritonga, S. A., Effendi, I., & Prayudi, A. (2021). Pengaruh Struktur Modal Terhadap Kinerja Keuangan Perusahaan Consumer Goods di BEI. Jurnal Ilmiah Manajemen Dan Bisnis (JIMBI), 2(2), 86–95. https://doi.org/10.31289/jimbi.v2i1.383
Sattar, M., Biswas, P. K., & Roberts, H. (2022). Private Firm Performance: Do Women Directors Matter?. Meditari Accountancy Research, 31(3), 602–634 https://doi.org/10.1108/MEDAR-03-2021-1233
Taliento, M., Favino, C., & Netti, A. (2019). Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of A Corporate “Sustainability Advantage” From Europe. Sustainability (Switzerland), 11(6), 1738–1763. https://doi.org/10.3390/su11061738
Wahyuni, I., Pasigai, M.A., & Adzim, F. (2019). Analisis Rasio Profitabilitas Sebagai Alat Untuk Mengukur Kinerja Keuangan Pada PT.Biringkassi Raya Semen Tonasa Group JL. Poros Tonasa 2 Bontoa Minasate’Ne Pangkep. Jurnal Profitability Fakultas Ekonomi Dan Bisnis, 3(1), 22–35. https://core.ac.uk/download/pdf/233601894.pdf
Zahid, M., Rahman, H. U., Ali, W., Khan, M., Alharthi, M., Qureshi, M.I., & Jan, A. (2020). Boardroom Gender Diversity: Implications for Corporate Sustainability Disclosures in Malaysia. Journal of Cleaner Production, 244, 118683. https://doi.org/10.1016/j.jclepro.2019.118683