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All Journal Jurnal Management Risiko dan Keuangan
Hatiuran, Kezia Agustina
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Decision Sciences, Operations Research & Management

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The Cost Of Being Green: Does Financial Slack Pave The Way For Sustainable Profitability? Hatiuran, Kezia Agustina; Djazuli, Atim
Jurnal Management Risiko dan Keuangan Vol. 4 No. 4 (2025)
Publisher : Fakultas Ekonomi dan Bisnis Universitas Brawijaya

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21776/jmrk.2025.04.4.01

Abstract

Purpose –  This study aims to analyze the effect of Environmental, Social, and Governance (ESG) scores on the financial performance of non-financial companies listed in the Kompas 100 Index on the Indonesia Stock Exchange (IDX) during the 2020–2024 period, with financial slack as a moderating variable.    Design/methodology/approach – This quantitative study uses panel data regression analysis with the Fixed Effect Model (FEM) and Random Effect Model (REM). The sample consists of 21 non-financial companies listed in the Kompas 100 Index, resulting in 105 observations. ESG scores are used as the independent variable, financial performance is measured by Return on Assets (ROA), and financial slack is examined as a moderating variable.   Findings – The results show that the aggregate ESG score has a significant effect on financial performance. However, individual ESG dimensions, including environmental, social, and governance pillars, do not significantly influence financial performance. Furthermore, financial slack significantly moderates the relationship between aggregate ESG scores and financial performance.   Originality/value  – This study contributes to sustainability and corporate finance literature by highlighting the importance of financial flexibility as a strategic factor that enables companies to implement ESG initiatives while maintaining financial performance.
Co-Authors Atim Djazuli