Indonesian Journal of Law and Economics Review
Vol 19 No 3 (2024): August
Social Accounting

Unmasking the Illusion of ESG Impact on Company Performance
Menguak Tabir Ilusi Dampak ESG terhadap Kinerja Perusahaan


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  • Dinny Drastistya Amanda,
  • Aisha Hanif*
Dinny Drastistya Amanda
Universitas Muhammadiyah Sidoarjo, Indonesia
Aisha Hanif
Universitas Muhammadiyah Sidoarjo, Indonesia *

(*) Corresponding Author
Picture in here are illustration from public domain image or provided by the author, as part of their works
DOI: https://doi.org/10.21070/ijler.v19i3.1243
Published August 25, 2024
Keywords
  • ESG disclosures,
  • company performance,
  • Indonesia Stock Exchange,
  • Price to Book Value,
  • corporate sustainability
How to Cite
Amanda, D. D., & Hanif, A. (2024). Unmasking the Illusion of ESG Impact on Company Performance. Indonesian Journal of Law and Economics Review, 19(3), 10.21070/ijler.v19i3.1243. https://doi.org/10.21070/ijler.v19i3.1243

Copyright (c) 2024 Dinny Drastistya Amanda, Aisha Hanif

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

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Abstract

General Background: Environmental, social, and governance (ESG) disclosures are increasingly recognized as critical components of corporate responsibility, yet their impact on financial performance remains contentious in the literature. Specific Background: In Indonesia, companies listed on the Indonesia Stock Exchange (IDX) are progressively adopting ESG frameworks, raising questions about the actual effects of such disclosures on their financial outcomes, specifically in terms of Price to Book Value (PBV). Knowledge Gap: While prior research emphasizes the importance of ESG factors, empirical studies demonstrating their impact on corporate performance, particularly within emerging markets like Indonesia, are limited and inconclusive. Aims: The study analyzes ESG Star Companies in Indonesia from 2017-2023, examining their impact on company performance through multiple linear regression analysis of annual and sustainability reports. Results: The findings reveal that ESG disclosures, including environmental, social, and governance factors, do not significantly affect company performance as measured by PBV. Novelty: This study contributes to the existing literature by providing empirical evidence from the Indonesian context, highlighting the paradox of strong ESG commitments with no corresponding financial performance benefits. Implications: ESG disclosures are crucial for corporate sustainability, but may not yield immediate financial gains, highlighting the need for companies to reassess their ESG strategies for increased accountability and investor value. Highlights:
  1. Minimal ESG impact on company performance via Price to Book Value.
  2. Focus on Indonesia fills knowledge gap in ESG research.
  3. Reevaluate strategies to enhance ESG value perception among stakeholders.
Keywords: ESG disclosures, company performance, Indonesia Stock Exchange, Price to Book Value, corporate sustainability
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