THE ROLE OF SUSTAINABILITY REPORTING IN DRIVING FINANCIAL PERFOMANCE: EVIDENCE FROM ESG STAR LISTED COMPANIES

Abstract

This study aims to examine the effect of Environmental, Social, and Governance (ESG) disclosure on firms’ financial performance measured by Return on Assets (ROA) and to test the moderating roles of firm size and firm age. A quantitative approach was employed with a population comprising all companies listed in the ESG Star Index of the Indonesia Stock Exchange (IDX) for the 2020–2024 period. Using purposive sampling, eight companies consistently included in the index and possessing complete sustainability and financial reports were selected. ESG data were collected through content analysis based on Global Reporting Initiative (GRI) indicators, while ROA, size, and age data were obtained from annual reports. Panel data regression using the Fixed Effect Model and Moderated Regression Analysis (MRA) was applied for hypothesis testing. The findings reveal that none of the ESG dimension such as environmental, social, or governance significantly affect ROA. Moreover, firm size and age do not moderate the relationship between ESG and ROA. These results suggest that ESG practices primarily serve as tools for legitimacy and corporate reputation rather than short-term profitability drivers. The study recommends that companies integrate ESG principles more deeply into operational strategies to enhance long-term value creation.