Can ESG Policy Become the Sustainability Catalyst of Company Performance During Covid-19 Pandemic?

Nora Hendriyeni - Business Accounting Study Program, Sekolah Tinggi Manajemen PPM
Benediktus Pinasthika - Bachelor of Business Accounting, Sekolah Tinggi Manajemen PPM
Ilham Akbar - Bachelor of Business Accounting, Sekolah Tinggi Manajemen PPM

Abstract


This study is conducted to discover the influence of environmental, social, and governance (ESG) policy on company performance during the Covid-19 pandemic. Both the company principal and agent are expected to consider the impact of developing a policy during the pandemic, especially concerning ESG policy. The ESG disclosure study aims to verify whether the policy, which is proxied with standard Global Reporting Initiative (GRI) disclosure in the sustainability report, influences company performance, which is proxied with Tobin’s Q ratio as a measure to discover the market response. It is founded on the urgency that the pandemic alters investors’ views about the company. This research failed to verify H1 or the influence of ESG disclosure on company performance. On the other hand, H2 and H3, including control variables, significantly influence company performance, as well as the Independence of the board of directors (BoD) and board of commissioners (BoC), which also have a significant but negative influence. This study has practical implications in which disclosure of ESG policy does not significantly influence company performance due to the management mindset, which still focuses on short-term conditions. It is thus necessary to develop a long-term strategic plan while taking sustainability into account.

Keywords


Environment; Social; Good Corporate Governance; Covid-19 Pandemic; Company Performance

Full Text:

PDF

References


Adji, M. F. P. (2020, April 21). Cleaner air gives Jakartans rare view on nearby mountains. The Jakarta Post. https://www.thejakartapost.com/news/2020/04/21/cleaner-air-gives-jakartans-rare-view-on-nearby-mountains.html

Angelia, D., & Suryaningsih, R. (2015). The Effect of Environmental Performance And Corporate Social Responsibility Disclosure Towards Financial Performance (Case Study to Manufacture, Infrastructure, And Service Companies That Listed At Indonesia Stock Exchange). Procedia - Social and Behavioral Sciences, 211(September), 348–355. https://doi.org/10.1016/j.sbspro.2015.11.045

Arayssi, M., Dah, M. and Jizi, M. (2016). Women on boards, sustainability reporting and firm performance. Sustainability Accounting, Management and Policy Journal, Vol. 7 No. 3, pp. 376-401. https://doi.org/10.1108/SAMPJ-07-2015-0055

Assensoh-Kodua, A. (2019). The resource-based view: a tool of key competency for competitive advantage. Problems and Perspectives in Management. https://doi.org/http://dx.doi.org/10.21511/ppm.17(3).2019.12

Atan, R., Alam, M.M., Said, J. and Zamri, M. (2018). The impacts of environmental, social, and governance factors on firm performance: Panel study of Malaysian companies. Management of Environmental Quality, Vol. 29 No. 2, pp. 182-194. https://doi.org/10.1108/MEQ-03-2017-0033

Balakrishnan, J., Malhotra, A., & Falkenberg, L. (2015). Multi-level corporate responsibility: A comparison of Gandhi’s trusteeship with stakeholder and stewardship frameworks. Journal of Business Ethics, 141(1), 133–150. https://doi.org/10.1007/s10551-015-2687-0

Byrd, M. Y. (2018). Diversity branding strategy: Concealing implicit stereotypes and biased behaviors. Advances in Developing Human Resources, 20(3), 299–312. https://doi.org/10.1177/1523422318778006

Contrafatto, M. (2014), Stewardship Theory: Approaches and Perspectives, Accountability and Social Accounting for Social and Non-Profit Organizations. Advances in Public Interest Accounting, Vol. 17 Emerald Group Publishing Limited, Bingley, pp. 177-196. https://doi.org/10.1108/S1041-706020140000017007

Croci, E., Hertig, G., Khoja, L., & Lan, L. L. (2020). The Advisory and Monitoring Roles of the Board-Evidence from Disruptive Events. SSRN Electronic Journal, April. https://doi.org/10.2139/ssrn.3581712

Devi, Sunitha, Ni Made Sindy Warasniasih, Putu Riesty Masdiantini & Lucy Sri Musmini. (2020). The Impact of Covid-19 Pandemic on the Financial Performance of Firms on the Indonesia Stock Exchange. Journal of Economics, Business, and Accountancy Ventura Vol. 23, No. 2, August – November 2020, pages 226 – 242.

Dirgantara, H. (2021, August 15). Investor kini semakin melirik reksadana global berbasis ESG. Kontan. https://investasi.kontan.co.id/news/investor-kini-semakin-melirik-reksadana-global-berbasis-esg

Fadilah, Adil Ridlo. (2017). Analisis Pengaruh Dewan Komisaris Independen, Kepemilikan Manajerial Dan Kepemilikan Institusional Terhadap Kinerja Perusahaan Yang Terdaftar Di LQ45. Jurnal Akuntansi Jurusan Akuntansi Fakultas Ekonomi Universitas Siliwangi.

Flammer, C. (2015). Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), 2549–2568. https://doi.org/10.1287/mnsc.2014.2038

Foss, N. J. (2020). The Impact of the Covid-19 Pandemic on Firms’ Organizational Designs. Journal of Management Studies. https://doi.org/10.1111/joms.12643

Hadjielias, E., Christofi, M., Vrontis, D., & Khan, H. (2022). Social impact through family firms’ interorganizational relationships within a community and a cooperative: An embedded view of stewardship. Journal of Business Research, 139, 584–601. https://doi.org/10.1016/j.jbusres.2021.10.005

Hitt, M. A., Xu, K., & Carnes, C. M. (2015). Resource based theory in Operations Management Research. Journal of Operations Management, 41(1), 77–94. https://doi.org/10.1016/j.jom.2015.11.002

Huang, W.-B., Liu, J., Bai, H., & Zhang, P. (2020). Value assessment of companies by using an enterprise value assessment system based on their public transfer specification. Information Processing & Management, 57(5), 102254. https://doi.org/10.1016/j.ipm.2020.102254

Isil, O., & Hernke, M. T. (2017). The triple bottom line: A critical review from a transdisciplinary perspective. Business Strategy and the Environment, 26(8), 1235–1251. https://doi.org/10.1002/bse.1982

Jeremiah Barasa Kabeyi, M. (2020). Corporate governance in manufacturing and management with analysis of governance failures at Enron and Volkswagen Corporations. American Journal of Operations Management and Information Systems, 4(4). https://doi.org/10.11648/j.ajomis.20190404.11

J.P.Morgan. (2020). Why COVID-19 Could Prove to Be a Major Turning Point for ESG Investing. https://www.jpmorgan.com/insights/research/covid-19-esg-investing

Keay, A. (2017). Stewardship theory: Is board accountability necessary? International Journal of Law and Management, 59(6), 1292–1314. https://doi.org/10.1108/ijlma-11-2016-0118

Kell, G. (2018, June 11). The Remarkable Rise of ESG. Forbes. https://www.forbes.com/sites/georgkell/2018/07/11/the-remarkable-rise-of-esg/?sh=2972aedb1695

KNKG. (2006). Indonesia’s Code of Good Corporate Governance. http://arikamayanti.lecture.ub.ac.id/files/2015/02/GCG-Indonesia-Bapepam.pdf

Lambertini, M., Mrema, E. M., & Neira, M. (2020, June 17). Coronavirus is a warning to us to mend our broken relationship with nature. The Guardian. https://www.theguardian.com/commentisfree/2020/jun/17/coronavirus-warning-broken-relationship-nature

Liang, L., Lin, T., Yu, H., & Li, Y. (2021). The impact of political connection and board diversity on Company Performance: Evidence from China. Managerial and Decision Economics, 43(6), 2347–2357. https://doi.org/10.1002/mde.3529

Luthan, E., Rizki, S. A., & Edmawati, S. D. (2018). Pengaruh Pengungkapan Tanggung Jawab Sosial Perusahaan Terhadap Kinerja Keuangan. EKUITAS (Jurnal Ekonomi Dan Keuangan), 1(2), 204–219. https://doi.org/10.24034/j25485024.y2017.v1.i2.2754

McKinsey & Company. (2020a). Reduced dividends on natural capital? https://www.mckinsey.com/~/media/mckinsey/business functions/sustainability/our insights/reduced dividends on natural capital/mgi-reduced-dividends-on-natural-capital.pdf?shouldIndex=false

McKinsey & Company. (2020b). The ESG premium: New perspectives on value and performance. https://www.mckinsey.com/~/media/mckinsey/business functions/sustainability/our insights/the esg premium new perspectives on value and performance/the-esg-premium-new-perspectives-on-value-and-performance.pdf?shouldIndex=false

Naciti, V. (2019). Corporate governance and board of directors: The effect of a board composition on firm Sustainability Performance. Journal of Cleaner Production, 237. https://doi.org/10.1016/j.jclepro.2019.117727

Neubaum, D. O., Thomas, C. H., Dibrell, C., & Craig, J. B. (2016). Stewardship climate scale. Family Business Review, 30(1), 37–60. https://doi.org/10.1177/0894486516673701

Nguyen, L.-T. and Thanh, C.-L. (2022), The influence of board characteristics on environmental performance: evidence from East Asian manufacturing industries. International Journal of Emerging Markets, Vol. 17 No. 10, pp. 2702-2720. https://doi.org/10.1108/IJOEM-07-2020-0744

Nurdiana, T. (2021, August 19). Hidup Dengan Covid-19. Kontan. https://insight.kontan.co.id/news/hidup-dengan-covid-19

OECD. (1999). OECD Principles of Corporate Governance. https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=C/MIN(99)6&docLanguage=En

OECD. (2015). G20/OECD Principles of Corporate Governance. https://www.oecd.org/daf/ca/Corporate-Governance-Principles-ENG.pdf

OECD. (2021). OECD Corporate Governance Factbook 2021. https://www.oecd.org/corporate/Corporate-Governance-Factbook.pdf

Otoritas Jasa Keuangan. (2021). Roadmap Keuangan Berkelanjutan TAHAP II (2021 – 2025). https://www.ojk.go.id/id/berita-dan-kegiatan/publikasi/Documents/Pages/Roadmap-Keuangan-Berkelanjutan-Tahap-II-%282021-2025%29/Roadmap Keuangan Berkelanjutan Tahap II %282021-2025%29.pdf

Otoritas Jasa Keuangan, & International Finance Corporation. (2014). The Indonesia Corporate Governance Manual First Edition. https://www.ojk.go.id/Files/box/The-Indonesia-Corporate-Governance-Manual-First-Edition.pdf

Otoritas Jasa Keuangan, & International Finance Corporation. (2018). Indonesia Corporate Governance Manual Second Edition. https://www.ifc.org/wps/wcm/connect/e66bacdc-07c6-40f3b0948d3ca96a77a0/Indonesia_CG+Manual_2nd_Edition.pdf?MOD=AJPERES&CVID =mf8483z

Pillai, R., & Al-Malkawi, H. A. N. (2018). On the relationship between corporate governance and firm performance: Evidence from GCC countries. Research in International Business and Finance, 44, 394–410. https://doi.org/10.1016/j.ribaf.2017.07.110

Pratama, A. (2021, July 27). Ini Pentingnya Penerapan ESG untuk Investasi Berkelanjutan. INews IDX Channel. https://www.idxchannel.com/economics/ini-pentingnya-penerapan-esg-untuk-investasi-berkelanjutan

Pucheta-Martínez, M. C., & Gallego-Ãlvarez, I. (2019). Do board characteristics drive firm performance? an international perspective. Review of Managerial Science, 14(6), 1251–1297. https://doi.org/10.1007/s11846-019-00330-x

Ramlan, H. (2020). The Effect of Leverage and Liquidity on the Companies’ Performance. Global Business and Management Research: An International Journal, 12(4).

Rosenberg, L. (2020, June 23). World health leaders: “Human activity to blame for diseases like COVID-19.†World Economic Forum Green Matters. https://www.weforum.org/agenda/2020/06/the-un-who-and-wwf-believe-emerging-infectious-diseases-are-driven-by-human-activities/

Shen, H., Fu, M., Pan, H., Yu, Z., & Chen, Y. (2020). The impact of the COVID-19 pandemic on firm performance. Emerging Markets Finance and Trade, 56(10), 2213-2230.

Stanway, D. (2021, January 15). China air quality improved in 2020 on lockdowns, tougher quality control. Reuters. https://www.reuters.com/article/us-china-pollution-idUKKBN29K0E4

Supadi, Y. M., & Sudana, I. P. (2018). Pengaruh Kinerja Lingkungan dan Corporate Social Responsibility pada Perusahaan Sektor Pertambangan. E-Jurnal Ekonomi Dan Bisnis Universitas Udayana, 4, 1165. https://doi.org/10.24843/eeb.2018.v07.i04.p09

Thakur, R., Workman, L. (2016), Customer portfolio management (CPM) for improved customer relationship management (CRM): Are your customers platinum, gold, silver, or bronze? Journal of Business Research, 69(10), 4095-4102.

Vani Tanggamani, Azlan Amran, & T. Ramayah. (2022). CSR practices disclosure’s impact on corporate financial performance and market performance: Evidence of malaysian public listed companies. International Journal of Business and Society, 23(1), 604–613. https://doi.org/10.33736/ijbs.4632.2022

World Economic Forum. (2020). COVID-19 Risks Outlook A Preliminary Mapping and Its Implications. Http://www3.weforum.org/docs/WEF_COVID_19_Risks_Outlook_Special_ Edition_Pages.pdf

Xinghui, K. (2021, July 20). Singapore’s ‘living with Covid-19’ road map suffers setback as restrictions retur. SCMP. https://www.scmp.com/week-asia/health-environment/article/3141796/singapores-living-covid-19-road-map-suffers-setback

Yuen-C, T. (2021, June 24). Singapore preparing road map for living with Covid-19. The Straits Times. https://www.straitstimes.com/singapore/singapore-preparing-road-map-for-living-with-covid-19

Zhou, M., Li, K., & Chen, Z. (2021). Corporate Governance Quality and financial leverage: Evidence from China. International Review of Financial Analysis, 73, 101652. https://doi.org/10.1016/j.irfa.2020.101652

Zona, F., Zattoni, A., & Minichilli, A. (2013). A Contingency Model of Boards of Directors and Firm Innovation: The Moderating Role of Firm Size. British Journal of Management, 24(3), 299–315. https://doi.org/10.1111/j.1467-8551.2011.00805.x




DOI: https://doi.org/10.34149/jmbr.v20i2.501

Citation Format:


Indexing

 

JMBR Editorial Office: PPM School of Management, Jl. Menteng Raya 9-19 Jakarta 10340 Phone: 021-2300313 ext 2354

View My Stats

License

JMBR is using CC BY License

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.