Does ESG Transparency Improve Financial Performance? Evidence from an Emerging Market

Authors

  • Daifa Fatmasari Department of Accounting, Faculty of Economics and Business, University of Muhammadiyah Malang, Indonesia
  • Ahmad Juanda Department of Accounting, Faculty of Economics and Business, University of Muhammadiyah Malang, Indonesia
  • Agung Prasetyo Nugroho Wicaksono Department of Accounting, Faculty of Economics and Business, University of Muhammadiyah Malang, Indonesia

Keywords:

ESG Disclosure, Corporate Financial Performance, Corporate Sustainability

Abstract

Study’s aims: This study aims to examine the effect of Environmental, Social, and Governance (ESG) disclosure on the financial performance of Indonesian non-financial firms. It seeks to analyze whether corporate transparency in ESG reporting enhances profitability and supports sustainable business practices. Design/Methodology/Approach: This research employs a quantitative approach using a purposive sampling method. The sample consists of Indonesian Stock Exchange-listed non-financial companies that publish both annual and sustainability reports. Financial performance is measured using Return on Assets (ROA), Return on Equity (ROE), and Return on Invested Capital (ROIC). Statistical analysis is conducted to evaluate the relationship between ESG disclosure and financial performance. Findings: The findings indicate that ESG disclosure significantly affects financial performance. ESG disclosure shows a negative association with ROA, suggesting short-term cost pressures. However, ESG disclosure positively and significantly influences ROE and ROIC, indicating enhanced shareholder value and long-term capital efficiency. Firms with higher ESG transparency tend to strengthen stakeholder trust, reduce regulatory risks, and improve corporate reputation. Theoretical contribution/Originality: This study contributes to stakeholder theory by demonstrating how ESG transparency serves as a strategic mechanism that influences financial outcomes differently across profitability measures in an emerging market context. Practitioner/Policy implication: The results highlight the importance of integrating ESG practices with sound financial strategies and encourage regulators to strengthen ESG disclosure frameworks. Limitation/Implication: This study focuses only on Indonesian non-financial firms. Future research should include broader sectors and methodological refinements, including additional robustness tests.

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Published

2026-02-18

How to Cite

Fatmasari, D., Juanda, A., & Wicaksono, A. P. N. (2026). Does ESG Transparency Improve Financial Performance? Evidence from an Emerging Market. Journal of Ethics and ESG, 1(1), 1–11. Retrieved from https://journal.ets-institute.com/index.php/JEE/article/view/2

Issue

Vol. 1 No. 1 (2026): Journal of Ethics and ESG (in progress)

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Articles

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Copyright (c) 2026 Daifa Fatmasari, Ahmad Juanda, Agung Prasetyo Nugroho Wicaksono

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