The findings arrive at a time when many Indonesian companies are investing heavily in environmental sustainability while also adapting to changing consumer behavior after the COVID-19 pandemic. Although Indonesia's economy recovered steadily between 2021 and 2024, many companies in the consumer cyclicals sector—including businesses selling discretionary goods and services—continued to experience declining profitability. The research suggests that economic recovery alone is insufficient to improve corporate performance without effective business strategies and governance.
Why This Research Matters
The consumer cyclicals sector is particularly vulnerable to shifts in consumer purchasing power. Following the pandemic, Indonesian households increasingly prioritized essential goods over discretionary spending, making it more difficult for companies in sectors such as retail, automotive, consumer services, and lifestyle products to maintain profitability.
In response, many businesses have invested in green innovation, including environmentally friendly production methods and sustainable product development. At the same time, stronger corporate governance has become an important strategy for improving decision-making and investor confidence. However, previous international studies reported inconsistent findings regarding whether these initiatives actually improve financial performance.
The research by Putri Nur Indahsyah and Dr. Yuyun Isbanah addresses this gap by examining both environmental innovation and governance mechanisms simultaneously within Indonesia's consumer cyclicals industry.
How the Research Was Conducted
The researchers used a quantitative research design based on publicly available corporate information.
They analyzed:
- Annual reports and sustainability reports of companies listed on the Indonesia Stock Exchange (IDX).
- 89 consumer cyclicals companies observed during 2021–2024.
- 345 firm-year observations after removing statistical outliers.
Financial performance was measured using Return on Assets (ROA), while environmental innovation was evaluated through corporate disclosures regarding green production practices and green product development. Corporate governance was assessed by examining the annual frequency of audit committee meetings and board of commissioners' meetings. The data were analyzed using panel regression techniques to identify which factors significantly influenced company performance.
Key Findings
The study identifies two factors that significantly improve financial performance and two that do not.
Positive contributors
- Green product innovation significantly improves financial performance.
- Board meetings have a positive and statistically significant effect on financial performance.
No significant financial impact
- Green process innovation does not significantly affect financial performance.
- Audit committee meetings do not significantly influence financial performance.
These results indicate that companies gain greater financial benefits from developing environmentally friendly products that customers can directly recognize than from investing solely in greener production processes.
Similarly, active boards of commissioners appear to strengthen strategic oversight and decision-making, contributing to improved organizational performance.
Why Green Products Matter More
According to the research, consumers can directly perceive environmentally friendly products through features such as sustainable materials, eco-friendly packaging, or energy-efficient product design. These visible characteristics help companies differentiate themselves in increasingly competitive markets.
By contrast, green production processes largely occur behind the scenes. Although cleaner manufacturing methods may improve operational efficiency and reduce environmental impacts, they often require substantial investment and may generate financial returns only over a longer period.
The researchers therefore conclude that product-oriented sustainability strategies provide more immediate financial advantages for companies operating in consumer-driven industries.
Governance Quality Matters More Than Meeting Frequency
The study also highlights an important distinction between different corporate governance mechanisms.
Frequent board of commissioners' meetings were associated with stronger financial performance because they improve strategic supervision, business evaluation, and organizational responsiveness to changing market conditions.
In contrast, the number of audit committee meetings alone did not improve profitability. The researchers explain that simply holding more meetings does not guarantee better oversight. The effectiveness of governance depends more on the quality of discussions, the expertise of committee members, and the implementation of recommendations than on meeting frequency itself.
Implications for Businesses and Policymakers
The findings provide practical guidance for companies seeking sustainable growth.
Businesses may achieve stronger financial outcomes by:
- Prioritizing environmentally friendly product development.
- Investing in innovations that customers can clearly recognize.
- Strengthening the effectiveness of board oversight.
- Focusing on governance quality rather than simply increasing meeting frequency.
For investors, the study suggests that evaluating a company's commitment to green product innovation and effective corporate governance may provide valuable insights into long-term financial potential.
The findings may also inform policymakers promoting sustainable business practices by demonstrating that environmental innovation can contribute to economic performance when it is closely aligned with market demand.
Academic Perspective
Putri Nur Indahsyah and Yuyun Isbanah of Universitas Negeri Surabaya conclude that environmentally friendly product innovation and effective board oversight play a more important role in improving financial performance than green production initiatives or increasing the number of audit committee meetings alone. Their findings suggest that sustainability strategies generate stronger financial value when they are visible to consumers and supported by effective corporate governance.
Author Profiles
Putri Nur Indahsyah is a researcher in the Department of Management, Faculty of Economics and Business, Universitas Negeri Surabaya (UNESA). Her research focuses on corporate finance, green innovation, sustainability, and corporate governance.
Yuyun Isbanah is a faculty member in the Department of Management, Faculty of Economics and Business, Universitas Negeri Surabaya (UNESA). Her expertise includes financial management, corporate governance, capital markets, and corporate financial performance.
Source
Article Title: The Effect of Green Process Innovation, Green Product Innovation, Audit Committee Meetings, and Board Meetings on the Financial Performance of Consumer Cyclicals Sector Companies on the Indonesia Stock Exchange in 2021–2024
Authors: Putri Nur Indahsyah & Yuyun Isbanah
Journal: Formosa Journal of Multidisciplinary Research (FJMR)
Publication Year: 2026
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