ESG Factors, Corporate Governance, and Financial Performance: Exploring their Impact on Sustainability Reporting and Investment Decisions
Abstract
This study aims to examine the influence of Environmental, Social, and Governance (ESG) factors, corporate governance quality, and financial performance on sustainability reporting and corporate investment decisions. As ESG criteria gain prominence among investors and stakeholders, they are increasingly recognized as critical indicators of long-term corporate performance and sustainability. Using a quantitative approach, this research employs multiple regression analysis to examine data from annual and sustainability reports of companies listed on the Indonesia Stock Exchange from 2018 to 2022. The independent variables include ESG scores, corporate governance quality, and key financial performance ratios. The dependent variables are sustainability reporting indices and investment decisions, proxied by equity investment flows. Results indicate that ESG factors exert a positive and significant effect on sustainability reporting, which in turn influences corporate investment behavior. Furthermore, both corporate governance quality and financial performance are found to significantly impact sustainability disclosure and investment outcomes. These findings offer valuable insights for firms and investors seeking to integrate ESG considerations into strategic decision-making. By highlighting the role of ESG in enhancing transparency, accountability, and investor confidence, this study contributes to the literature on sustainable finance and corporate governance.
Keywords: Environmental, Social, and Governance (ESG), corporate governance, financial performance, sustainability reporting, investment decisions, multiple regression alignment.
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