The Moderating Role of Board Characteristics in the Relationship Between Firm Factors and ESG Performance in Indonesia
DOI:
https://doi.org/10.37385/ijedr.v6i6.9553Keywords:
Corporate Governence, ESG Performance, CharacteristicsAbstract
This study aims to analyze the influence of firm-specific characteristics namely firm size, firm age, profitability (ROA), and leverage (DAR)on Environmental, Social, and Governance (ESG) performance, with the Board Size of Commissioners (BSC) and Board Independence of Commissioners (BIC) as moderating variables. The research employs a quantitative causal approach using secondary data from 78 non-financial companies listed on the Indonesia Stock Exchange during 2019–2023, generating 390 firm-year observations. Data were analyzed using multiple linear regression with the Moderated Regression Analysis (MRA) method through SPSS 26. The results indicate that firm age positively and significantly affects ESG performance, while profitability (ROA) has a significant negative influence. Firm size and leverage show no significant effects. Furthermore, BSC strengthens the relationship between firm size and profitability with ESG, whereas BIC enhances the link between profitability and ESG performance. These findings highlight the critical role of corporate governance mechanisms in aligning financial objectives with sustainability goals, providing valuable insights for companies and policymakers to improve ESG governance practices in Indonesia.
References
Adeoye, O. A., Islam, S. M. N., & Adekunle, A. I. (2021). Optimal capital structure and the debtholder–manager conflicts of interests: A management decision model. Journal of Modelling in Management, 16(4), 1070–1095.
Al Amosh, H. (2025). Educational profiles of board members and their role in shaping ESG outcomes. Journal of Management and Governance, 1–25.
Alam, M. K., Miah, M. S., Siddiquii, M. N., & Hossain, M. I. (2020). The influences of board of directors and management in Shariah governance guidelines of the Islamic banks in Bangladesh. Journal of Islamic Accounting and Business Research, 11(9), 1633–1647.
Albitar, K., Hussainey, K., Kolade, N., & Gerged, A. M. (2020). ESG disclosure and firm performance before and after IR: The moderating role of governance mechanisms. International Journal of Accounting and Information Management, 28(3), 429–444.
Alsayegh, M. F., Abdul Rahman, R., & Homayoun, S. (2020). Corporate economic, environmental, and social sustainability performance transformation through ESG disclosure. Sustainability, 12(9), 3910.
Annesi, N., Battaglia, M., Ceglia, I., & Mercuri, F. (2025). Navigating paradoxes: Building a sustainable strategy for an integrated ESG corporate governance. Management Decision, 63(2), 531–559.
Aydogmus, M., Gulay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(Suppl. 1), S119–S127.
Bernard, S., Singal, M., Dias, A., Ho, J. A., & Zizka, L. (2025). Sustainable horizons: Navigating ESG reporting challenges in the hospitality and tourism industry. Journal of Hospitality and Tourism Research, 49(6), 1141–1158.
BS, A., & Banerjee, J. (2025). The role of independent directors in corporate governance. [Journal name not specified].
Cesarone, F., Martino, M. L., & Carleo, A. (2022). Does ESG impact really enhance portfolio profitability? Sustainability, 14(4), 2050.
Crossley, R. M., Elmagrhi, M. H., & Ntim, C. G. (2021). Sustainability and legitimacy theory: The case of sustainable social and environmental practices of small and medium-sized enterprises. Business Strategy and the Environment, 30(8), 3740–3762.
D’Amato, A., & Falivena, C. (2020). Corporate social responsibility and firm value: Do firm size and age matter? Empirical evidence from European listed companies. Corporate Social Responsibility and Environmental Management, 27(2), 909–924.
D’Amato, V., D’Ecclesia, R., & Levantesi, S. (2024). Firms’ profitability and ESG score: A machine learning approach. Applied Stochastic Models in Business and Industry, 40(2), 243–261.
D’Costa, C. R., Prabhudesai, R., Naik, S. P., Prasad, C. V., & Mishra, M. (2025). When bigger is not always better: Exploring the size-dependent nature of the sustainability reporting–firm valuation relationship. International Journal of Productivity and Performance Management, 74(6), 1953–1970.
Ding, H., Wang, Z., Xu, H., & Lin, Z. (2024). A study on the impact of board characteristics on the environmental, social, and governance responsibilities of listed companies: Evidence from Chinese listings. Sustainability, 16(23), 10490.
Ding, X., Appolloni, A., & Shahzad, M. (2022). Environmental administrative penalty, corporate environmental disclosures, and the cost of debt. Journal of Cleaner Production, 332, 129919.
Drempetic, S., Klein, C., & Zwergel, B. (2020). The influence of firm size on the ESG score: Corporate sustainability ratings under review. Journal of Business Ethics, 333–360.
Elamer, A. A., & Boulhaga, M. (2024). ESG controversies and corporate performance: The moderating effect of governance mechanisms and ESG practices. Corporate Social Responsibility and Environmental Management, 31(4), 3312–3327.
Finke, D. (2020). Turf wars in government administration: Interdepartmental cooperation in the European Commission. Public Administration, 98(2), 498–514.
Hoppmann, J., Naegele, F., & Girod, B. (2019). Boards as a source of inertia: Examining the internal challenges and dynamics of boards of directors in times of environmental discontinuities. Academy of Management Journal, 62(2), 437–468.
Jeyhunov, A., Kim, J. D., & Bae, S. M. (2025). The effects of board diversity on Korean companies’ ESG performance. Sustainability, 17(2), 787.
Kuruppu, S. C., Milne, M. J., & Tilt, C. A. (2019). Gaining, maintaining, and repairing organizational legitimacy: When to report and when not to report. Accounting, Auditing and Accountability Journal, 32(7), 2062–2087.
Lajnef, K., & Ellouz, S. (2025). The impact of Hofstede’s dimensions on the CSR–firm performance relationship in common law countries before and during the COVID-19 crisis. Global Knowledge, Memory and Communication.
Latip, M., Sharkawi, I., Mohamed, Z., & Kasron, N. (2022). The impact of external stakeholders’ pressures on the intention to adopt environmental management practices and the moderating effects of firm size. Journal of Small Business Strategy, 32(3), 45–66.
Lewellyn, K., & Muller-Kahle, M. (2024). ESG leaders or laggards? A configurational analysis of ESG performance. Business and Society, 63(5), 1149–1202.
Maneenop, S., Padungsaksawasdi, C., & Treepongkaruna, S. (2024). Co-opted board, environment, social, and governance. Business Strategy and the Environment, 33(2), 1161–1172.
Manning, B., Braam, G., & Reimsbach, D. (2019). Corporate governance and sustainable business conduct: Effects of board monitoring effectiveness and stakeholder engagement on corporate sustainability performance and disclosure choices. Corporate Social Responsibility and Environmental Management, 26(2), 351–366.
Maroun, W. (2022). Corporate governance and the use of external assurance for integrated reports. Corporate Governance: An International Review, 30(5), 584–607.
Mishra, P., & Pandey, V. K. (2025). Triple bottom line and environmental sustainability: Evolution of global ESG research—a bibliometric analysis. Environmental Sciences Europe, 37(1), 136.
Naciti, V. (2019). Corporate governance and board of directors: The effect of board composition on firm sustainability performance. Journal of Cleaner Production, 237, 117727.
Ridwan, M., & Alghifari, E. S. (2025). Evaluating the impact of ESG on financial risk: The moderating effects of operational ability and profitability in Indonesian infrastructure firms. Journal of Accounting and Organizational Change.
Schoenmaker, D., & Schramade, W. (2019). Investing for long-term value creation. Journal of Sustainable Finance and Investment, 9(4), 356–377.
Senninger, R., Finke, D., & Blom-Hansen, J. (2021). Coordination inside government administrations: Lessons from the EU Commission. Governance, 34(3), 707–726.
Shabbir, M. S., & Wisdom, O. (2020). The relationship between corporate social responsibility, environmental investments, and financial performance: Evidence from manufacturing companies. Environmental Science and Pollution Research, 27(32), 39946–39957.
Tabesh, P., & Vera, D. M. (2020). Top managers’ improvisational decision-making in crisis: A paradox perspective. Management Decision, 58(10), 2235–2256.
Wong, C. W. Y., Wong, C. Y., Boon-Itt, S., & Tang, A. K. Y. (2021). Strategies for building environmental transparency and accountability. Sustainability, 13(16), 9116.
Zhao, Y., Gao, Y., & Hong, D. (2025). Sustainable innovation and economic resilience: Deciphering ESG ratings’ role in lowering debt financing costs. Journal of the Knowledge Economy, 16(1), 4309–4343.
