FORMOSA NEWS - Aceh - Firm Age and Size Shape How ESG Disclosure Affects Financial Performance in Consumer Companies. These findings were revealed in the latest research written by Ibrahim, Fazli Syam BZ, and Nadirsyah from Syiah Kuala University and published in 2026 in the Formosa Journal of Applied Sciences.
The study analyzes publicly listed consumer goods companies on the Indonesia Stock Exchange (IDX) over the 2020–2024 period. It finds that ESG disclosure generally improves firm value and profitability, but the strength and direction of this impact depend heavily on how long a company has operated and how large it is. The results offer practical insights for corporate managers, investors, and policymakers navigating the rapid expansion of sustainability reporting in emerging markets.
Why ESG Performance Has Become a Business Issue
Over the past decade, ESG disclosure has shifted from a voluntary public relations exercise into a central element of corporate strategy. Investors increasingly use ESG information to evaluate risk, transparency, and long-term value creation. Consumers and regulators also expect companies to demonstrate environmental responsibility, fair social practices, and sound governance.
In
Indonesia, the push for ESG has intensified alongside regulatory encouragement
for sustainability reporting and growing interest from institutional investors.
However, previous studies have produced mixed conclusions about whether ESG
actually improves financial outcomes. Some companies appear to benefit through
higher market valuation and stronger profitability, while others see little or
no impact.
This uncertainty raises an important question: under what conditions does ESG disclosure truly pay off? The research team from Universitas Syiah Kuala addresses this question by examining whether firm age and firm size change how ESG affects financial performance.
How the Study Was Conducted
The researchers examined consumer goods companies that consistently published annual reports and financial statements between 2020 and 2024. This sector was chosen because consumer-facing firms are often under greater public scrutiny for environmental impact, labor practices, and ethical conduct.
Financial performance was measured using three widely recognized indicators:
- Tobin’s Q, which reflects how the stock market values a company relative to its assets.
- Return on Assets (ROA), which shows how efficiently a company uses its assets to generate profit.
- Return on Equity (ROE), which measures returns delivered to shareholders.
ESG
performance was assessed through the quality and extent of disclosure related
to environmental initiatives, social responsibility, and corporate governance.
The researchers then applied panel data analysis and moderation testing to see
how firm age and firm size influence the ESG–performance relationship.
Key Findings at a Glance
The
results show that ESG disclosure does matter, but its financial impact is not
uniform.
Key findings include:
Environmental and social disclosure increases firm value, as reflected in higher Tobin’s Q. Companies that are transparent about environmental protection and social responsibility tend to receive more favorable market valuation.
Governance disclosure shows the most consistent positive effect, improving firm value as well as ROA and ROE. Strong governance signals efficiency, accountability, and lower risk to investors.
Firm age strengthens the positive impact of ESG, particularly on firm value and asset efficiency. Older companies benefit more from ESG disclosure than younger firms.
Firm size can weaken certain ESG effects, especially for environmental and social disclosure. In large companies, ESG reporting does not always translate into higher profitability and may be perceived as a cost burden if not supported by real performance improvements.
According
to the authors, older firms often have more established systems, experience,
and reputational capital. This allows them to implement ESG practices more
effectively and convert sustainability disclosure into economic value. Larger
firms, by contrast, face higher public expectations and operational complexity,
making superficial ESG disclosure less convincing to the market.
Implications for Policy and Regulation
The research also carries implications for regulators and policymakers. As ESG reporting standards expand, a one-size-fits-all approach may not be effective. Smaller or younger firms may require guidance and capacity building, while larger firms may need stricter evaluation of ESG substance rather than disclosure volume.
The
strong and consistent role of governance suggests that policy efforts to
improve transparency, board accountability, and ethical management could
deliver tangible financial benefits while supporting market stability.
Author Profiles
brahim,
S.E., M.Si.
Lecturer and researcher at Universitas Syiah Kuala. His expertise includes
accounting, corporate sustainability, and ESG reporting.
Fazli
Syam BZ, S.E., M.Si.
Academic at Universitas Syiah Kuala specializing in financial performance
analysis and corporate governance.
Nadirsyah,
S.E., M.Si., Ak., CA.
Professor of Accounting at Universitas Syiah Kuala with a research focus on
financial reporting, auditing, and sustainability accounting.
Sumber Penelitian
Ibrahim, Fazli Syam
BZ, & Nadirsyah. (2026). The Impact of Environmental, Social, and
Governance (ESG) on Financial Performance Moderated by Firm Age and Firm Size.
Asian Journal of Management Analytics, Vol. 5 No. 1, hlm.
121–140. 2026
DOI prefix: https://doi.org/10.55927/ajma.v5i1.16015
Official URL:https://journal.formosapublisher.org/index.php/ajma
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