The Effect of Environmental, Social, Governance (ESG) Disclosure on Company Performance
Abstract
This study discusses ESG disclosure on company performance. This study aimed to see the effect of ESG disclosure on company performances, namely ROA, ROE, Tobin's Q, and Sales Growth. This study uses a population of all basic material and industrial sector companies from the IDX-IC category. Then a purposive sampling method was used: companies that published annual and sustainability reports in 2019-2020 to obtain a sample of 70 and 140 research observations. The ESG disclosure variable in this study uses observations in 2019 and 2020, while the company's performance variables use the time lag method in 2020 and 2021. This research method uses secondary data sources. And uses data collection methods through literature and documentation. In addition, researchers also use content analysis methods to measure ESG values and collect data through annual reports and sustainability reports. This study uses the panel data method using common, fixed, and random effect models, then uses the classic assumption test method, panel data regression analysis, regression model testing, and hypothesis testing. The result of this study is that ESG disclosure does not affect company performance ROA, ROE, and Sales Growth. However, ESG disclosure affects Tobin's Q. The implication in this study is that the effect of ESG disclosure on company operational performance can benefit several parties, such as stakeholders and regulators or the government. It can be concluded that ESG disclosure will have a long-term impact on the company, while financial information is a short-term measurement of company performance.
Keywords: ESG Disclosure, Return on Asset, Return on Equity, Tobin’s Q, Sales Growth
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