TY - JOUR
T1 - Analysis of Environmental, Social, and Governance Performance in Indonesia
T2 - 27th International Conference on Knowledge Based and Intelligent Information and Engineering Sytems, KES 2023
AU - Nareswari, Ninditya
AU - Tarczynska-Luniewska, Malgorzata
AU - Al Hashfi, Rizqi Umar
N1 - Publisher Copyright:
© 2023 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0)
PY - 2023
Y1 - 2023
N2 - Issues regarding environmental, social, and governance have a positive role in corporate performance, especially in developed countries. Unlike accounting performance which only considers business performance, the ESG score reflects long-term performance because it considers environmental, social, and governance factors. Firms in Indonesia cannot improve their ESG score due to the limited resource and shareholders' reactions. This study compares the investment performance between the top 9 ESG constituents and the LQ45 index. Further, this study examines the impact of the ESG score on financial performance. This research used non-financial companies listed on Indonesia Stock Exchange as a sample. Modified Sharpe ratio and panel data regression were used as a method. The result showed that the ESG portfolio has a better Sharpe ratio than LQ45. However, the regression shows a negative effect on the ESG score on financial performance. Increasing the ESG score decreases financial performance because it requires higher investment and opportunity costs. This study has several recommendations related to implementing ESG at the corporate level.
AB - Issues regarding environmental, social, and governance have a positive role in corporate performance, especially in developed countries. Unlike accounting performance which only considers business performance, the ESG score reflects long-term performance because it considers environmental, social, and governance factors. Firms in Indonesia cannot improve their ESG score due to the limited resource and shareholders' reactions. This study compares the investment performance between the top 9 ESG constituents and the LQ45 index. Further, this study examines the impact of the ESG score on financial performance. This research used non-financial companies listed on Indonesia Stock Exchange as a sample. Modified Sharpe ratio and panel data regression were used as a method. The result showed that the ESG portfolio has a better Sharpe ratio than LQ45. However, the regression shows a negative effect on the ESG score on financial performance. Increasing the ESG score decreases financial performance because it requires higher investment and opportunity costs. This study has several recommendations related to implementing ESG at the corporate level.
KW - ESG
KW - Financial Performance
KW - Indonesia
KW - Sharpe Ratio
UR - http://www.scopus.com/inward/record.url?scp=85183549397&partnerID=8YFLogxK
U2 - 10.1016/j.procs.2023.10.164
DO - 10.1016/j.procs.2023.10.164
M3 - Conference article
AN - SCOPUS:85183549397
SN - 1877-0509
VL - 225
SP - 1748
EP - 1756
JO - Procedia Computer Science
JF - Procedia Computer Science
Y2 - 6 September 2023 through 8 September 2023
ER -