EXPLORING THE INFLUENCE OF ESG AND PROSPERITY DISCLOSURE SCORE ON FINANCIAL PERFORMANCE

Abstract

Almost all companies are starting to pay attention to the impact of en-
vironment, social, and governance (ESG) & and prosperity disclosure.
This research aims to analyze empirical evidence of the Exploring the
Financial Performance from ESG And Prosperity Disclosure Score.
The research was conducted using causality design, while the samples
of 84 companies listed on the IDX-IC (Indonesian Stock Exchange)
for the 2019 – 2021 period were selected using certain criteria. Data
analysis was carried out with balanced panel data regression. The re-
sults show that aggregate ESG & prosperity disclosure impaired the
increasing returns on company assets. Individually, environmental
and prosperity disclosure did not affect financial performance, while
social and governance disclosures affect financial performance. The
ESG and prosperity disclosures can undermine financial performance,
in part because a focus on ESG initiatives can divert management’s
attention from short-term financial goals to long- term sustainability
goals. This causes management to prioritize goals aligned with sus-
tainability and social responsibility over short-term financial gains. In
this study, financial performance is measured using ROA. This ratio
has a weakness in its use, namely that it does not take into account
differences in the company’s capital structure, and depreciated fixed
assets can affect ROA, providing a less accurate picture of actual fi-
nancial performance.