The Influence of Environmental Performance, Social Performance, and Governance Performance on the Financial Performance of Banking Companies Listed on the Indonesia Stock Exchange
Published:
2026-08-10Downloads
Abstract
This study aims to analyze the influence of environmental performance , social performance , and governance performance on the financial performance of banking companies listed on the Indonesia Stock Exchange for the period 2013–2022. This study uses a quantitative approach with secondary data obtained from company annual reports, financial reports, and the Thomson Reuters Refinitiv Asset4 database. The research sample was determined using a purposive sampling technique , while data analysis was carried out using a panel data regression method using the EViews 10 application. The results showed that environmental performance did not have a significant effect on financial performance as proxied by financial performance with the Return on Assets (ROA) approach with a probability value of 0.2978. Social performance also did not have a significant effect on financial performance with a probability value of 0.8998. Similarly, governance performance did not have a significant effect on financial performance with a probability value of 0.4320. These findings indicate that the implementation of environmental, social, and governance aspects in banking companies has not been able to directly increase profitability during the study period. The benefits of implementing these three aspects tend to be long-term, through improved corporate reputation, stakeholder trust, and enhanced business sustainability. Therefore, they are not yet fully reflected in improved financial performance. This research implies that banking companies need to continue strengthening the implementation of sustainability practices as a long-term strategy, while investors need to consider ESG aspects in addition to profitability indicators when evaluating company performance.
Keywords:
Environmental Performance Social Performance Corporate Governance Financial Performance BankingReferences
Atan, R., Alam, MM, Said, J., & Zamri, M. (2018). The impacts of environmental, social, and governance factors on firm performance. Management of Environmental Quality: An International Journal, 29 (2), 182–194.
Bătae, O.M., Dragomir, V.D., & Feleagă, L. (2021). The relationship between environmental, social, and financial performance in the banking sector: A European study. Journal of Cleaner Production, 290 , 125791.
Bhattacharya, S. (1979). Imperfect information, dividend policy, and the bird in the hand fallacy. The Bell Journal of Economics, 10 (1), 259–270.
Buallay, A. (2019). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality: An International Journal, 30 (1), 98–115.
Connelly, B.L., Certo, S.T., Ireland, R.D., & Reutzel, C.R. (2011). Signaling theory: A review and assessment. Journal of Management, 37 (1), 39–67.
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach . Boston: Pitman Publishing.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2,000 empirical studies. Journal of Sustainable Finance & Investment, 5 (4), 210–233.
Kim, S., & Li, Z. (2021). Understanding the impact of ESG practices on firm performance: Evidence from the banking industry. Sustainability, 13 (7), 3746.
Menicucci, E., & Paolucci, G. (2023). ESG dimensions and bank performance: Evidence from European banks. Corporate Social Responsibility and Environmental Management, 30 (2), 809–824.
Nollet, J., Filis, G., & Mitrokostas, E. (2015). Corporate social responsibility and financial performance: A non-linear and disaggregated approach. Economic Modelling, 52 , 400–407.
Financial Services Authority. (2017). Financial Services Authority Regulation Number 51/POJK.03/2017 concerning the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies . Jakarta: Financial Services Authority.
Qiu, Y., Shaukat, A., & Tharyan, R. (2016). Environmental and social disclosures: Link with corporate financial performance. The British Accounting Review, 48 (1), 102–116.
Refinitiv. (2022). Refinitiv ESG Scores Methodology . London: Refinitiv.
Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. The Bell Journal of Economics, 8 (1), 23–40.
Ruan, L., & Liu, H. (2021). Environmental, social, governance activities and firm performance: Evidence from China. Sustainability, 13 (2), 767.
Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87 (3), 355–374.
Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8 (2), 169–178.
Velte, P., & Stawinoga, M. (2017). Integrated reporting: The current state of empirical research, limitations and future research implications. Journal of Management Control, 28 (3), 275–320.
Wang, Z., & Sarkis, J. (2017). Corporate social responsibility governance, outcomes, and financial performance. Journal of Cleaner Production, 162 , 1607–1616.
License
Copyright (c) 2026 Dewi Anggraini, Ridwan Nurazi, Fitri Santi, Berto Usman
This work is licensed under a Creative Commons Attribution 4.0 International License.
