ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) ON COMPANY^S FINANCIAL PERFORMANCE WITH CEO POWER AS A MODERATION VARIABLE
Nabilla Aisyah Nurdi and Dr. Rahmat Setiawan, SE., MM., CFP

Universitas Airlangga

Abstract

This study aims to determine the effect of Environmental, Social, and Governance (ESG) on corporate financial performance (ROA) moderated by CEO power ( Tenure & Ownership ). The sample used in this study was 43 manufacturing companies listed on the Indonesia Stock Exchange in the 2017-2021 period and published sustainability reports (SR) in the years in that period. This study uses a multiple linear regression model to determine the effect of ESG on company financial performance as measured using return on assets (ROA) and moderated regression analysis (MRA) to determine the moderating effect of CEO power on the effect of ESG on company financial performance. Based on the results of this study it can be concluded that ESG has a significant positive effect on the company^s financial performance. CEO tenure weakens the positive influence of ESG on the company^s financial performance. Meanwhile, CEO ownership does not significantly moderate the effect of ESG on the company^s financial performance. In this study there are also control variables, namely firm size which has a significant positive effect on the company^s financial performance and leverage which has a significant negative effect on the company^s financial performance.

Keywords: environmental, social, and governance - return on assets- CEO tenure- CEO ownership.

Topic: Financial management