Financial Performance Analysis of Companies Listed in the Environmental, Social, and Governance Leaders Index
Keywords:
ESG Leaders Index, Financial Performance, Liquidity, Solvency, Profitability, Indonesia Stock ExchangeAbstract
Study’s aim: This study aims to analyze the financial performance of companies consistently included in the ESG Leaders Index on the Indonesia Stock Exchange (IDX) during the period 2021–2023. The study focuses on evaluating whether ESG-oriented firms demonstrate strong financial performance across different sectors. Design/Methodology/Approach: This study employs a quantitative descriptive approach using secondary data obtained from published financial statements. The sample consists of 16 companies selected through purposive sampling. Financial performance is analyzed using financial ratio analysis, covering liquidity, solvency, and profitability ratios. Findings: The results indicate that financial performance among ESG Leaders companies is heterogeneous. Most companies demonstrate adequate liquidity, reflecting their ability to meet short-term obligations. In terms of solvency, companies, particularly in the financial sector, tend to rely on debt financing, although leverage levels remain within acceptable limits. Profitability shows the greatest variation across sectors, indicating that not all ESG-oriented firms achieve consistent financial outcomes. Theoretical Contribution/Originality: This study contributes to the literature by providing empirical evidence from an emerging market context, highlighting that ESG inclusion does not necessarily lead to uniform financial performance. It also supports the argument that the relationship between ESG practices and financial performance remains complex and context-dependent. Practitioner/Policy Implication: The findings provide insights for investors and managers in evaluating ESG-based investments, emphasizing the importance of balancing sustainability initiatives with effective financial and operational strategies. Limitation/Implication: This study is limited to a descriptive analysis of 16 ESG Leaders Index companies and does not capture causal relationships or broader market conditions. The findings imply that ESG inclusion alone is not sufficient to ensure strong financial performance, highlighting the need to consider firm-specific and industry factors.
References
Adzhari, R., & Oktaviani, D. (2024). Analysis of capital structure using debt to equity ratio in corporate finance. Journal of Financial Studies, 12(1), 45–58.
Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & Society, 38(3), 268–295. https://doi.org/10.1177/000765039903800303
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Capstone Publishing.
Febriyani, R. (2021). Financial ratio analysis in measuring company performance. Indonesian Accounting Review, 5(2), 112–120.
Fadila, N., Rahmawati, D., & Sari, M. (2023). Financial ratio analysis and firm performance evaluation. Journal of Accounting and Finance Research, 8(1), 23–35.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
Goss, A., & Roberts, G. S. (2011). The impact of corporate social responsibility on the cost of bank loans. Journal of Banking & Finance, 35(7), 1794–1810. https://doi.org/10.1016/j.jbankfin.2010.12.002
Hutabarat, F. (2020). Financial performance measurement in corporate management. Journal of Business Research, 7(1), 55–63.
Hutabarat, F. (2021). Analysis of financial performance using financial ratios. International Journal of Accounting Studies, 9(2), 88–97.
Iqbal, M., Santoso, B., & Pratama, A. (2020). Financial performance analysis across sectors in Indonesia. Journal of Economic Studies, 14(2), 134–145.
Jayanti, D., Lestari, R., & Putri, A. (2024). ESG implementation and corporate sustainability performance. Journal of Sustainability Accounting, 6(1), 15–27.
Kurniasari, D., Wibowo, A., & Sari, L. (2023). The role of financial statements in decision-making. Journal of Accounting Perspectives, 10(2), 77–89.
Margolis, J. D., Elfenbein, H. A., & Walsh, J. P. (2009). Does it pay to be good… and does it matter? A meta-analysis of the relationship between corporate social and financial performance. Harvard Business School Working Paper, 10-006.
Mimung, M., Rahman, F., & Yusuf, H. (2023). Comparative analysis of financial performance in retail companies. Journal of Business and Management, 11(1), 66–75.
Nathan, R. (2024). Financial reporting and corporate transparency. Journal of Accounting Practice, 13(1), 1–10.
Oktavia, S. (2023). Debt to asset ratio analysis in corporate financial structure. Journal of Finance and Economics, 9(3), 201–210.
Permana, A., Suryani, E., & Dewi, K. (2022). Financial statement analysis and company performance. Indonesian Journal of Accounting, 7(2), 101–110.
Shabrina, N. (2019). Financial ratio analysis for corporate performance evaluation. Journal of Accounting and Business, 4(1), 33–42.
Suhendro, S. (2019). Profitability ratio analysis in business performance. Journal of Economic Analysis, 6(1), 12–20.
Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Europe. Journal of Global Responsibility, 8(2), 169–178. https://doi.org/10.1108/JGR-11-2016-0029
Warsini, S. (2024). ESG Leaders Index and sustainable investment in Indonesia. Journal of Sustainable Finance, 5(1), 45–56.
Wynadla, E., & Jati, H. (2024). Liquidity and solvency analysis in corporate finance. Journal of Financial Management, 10(1), 25–37.
Yusnita, R. (2022). Profitability ratio as a measure of financial performance. Journal of Accounting and Economics, 8(2), 59–68.
