Analysis of Environmental, Social, and Governance Disclosure Effects on Net Profit Margin and Price to Earnings Ratio in Indonesian Banking

Nelly Venyningtias Basuki (Department of Business Administration, Universitas Pembangunan Nasional “Veteran” Jawa Timur, Surabaya, Indonesia)
Rusdi Hidayat Nugroho (Department of Business Administration, Universitas Pembangunan Nasional “Veteran” Jawa Timur, Surabaya, Indonesia)

Jurnal Ekonomi, Manajemen, dan Bisnis
Vol. 4 No. 3 (2026): Jurnal Ekonomi, Manajemen dan Bisnis

This study examines how Environmental, Social, and Governance (ESG) Disclosure shapes two distinct performance outcomes among Indonesian banks — internal profitability, captured through Net Profit Margin (NPM), and external market valuation, captured through Price Earning Ratio (PER) — for the 2019–2025 window on the Indonesia Stock Exchange (IDX). A purposive sample of 25 listed banks was tracked across seven years, producing 175 firm-year observations that were tested with covariance-based Structural Equation Modeling (CB-SEM) in AMOS. Both the measurement and structural models met the required validity, reliability, and fit thresholds. All six proposed paths (H1–H6) were supported: each ESG pillar exerted a positive, statistically significant influence on NPM and PER alike. Among the three, Environmental disclosure carried the strongest pull on market valuation, whereas Social and Governance contributed more evenly across both outcomes. Taken together, the results lend empirical weight to Stakeholder, Legitimacy, Agency, and Signaling Theory as complementary lenses for understanding how sustainability reporting translates into corporate performance within an emerging-market banking context, and they point to practical steps regulators and bank managers can take to turn ESG disclosure into a lever for stronger profitability and investor appeal.