The Impact of ESG Disclosure, Audit Quality, Institutional Ownership, and Independent Commissioners on Firm Performance in Basic Materials Companies in Indonesia

Abstract

This study examines the effects of ESG disclosure and corporate governance mechanisms on firm performance in Indonesian Basic Materials firms. Using 153 firm-year observations from 51 companies listed on the Indonesia Stock Exchange during 20232025, the study employs a quantitative approach and multiple linear regression. ESG disclosure is measured using a disclosure index based on the GRI Standards 2021, while audit quality is proxied by Big Four auditor affiliation. Institutional ownership and independent commissioners are measured by their respective ownership and board proportions. Firm performance is measured by return on assets (ROA), with firm age, leverage, and firm size included as control variables. The results show that ESG disclosure, Audit quaity, and independent commissioners have positive and significant effects on ROA. In contrast, institutional ownership has a negative and significant effect on firm performance. Simultaneously, the independent variables significantly explain firm performance. The findings suggest that sustainability, transparency and selected corporate governance mechanisms are relevant to the financial performance of Basic Materials firms. However, institutional ownership does not necessarily translate into improved profitability, indicating that the effectiveness of institutional monitoring may depend on the characteristics and engagement of institutional investors. The study contributes empirical evidence from an environmental ensitive industry in Indonesia during a period of increasing sustainability reporting practices.