Corporate Governance, Profitability, and ESG Disclosure Quality: Evidence from Indonesian Consumer Non-Cyclical Companies

Abstract

This study aims to analyse the effect of profitability on ESG disclosure quality using the share of independent commissioners as a moderating variable in Consumer Non-Cyclicals manufacturing companies listed on the Indonesia Stock Exchange (IDX). A quantitative explanatory approach was conducted utilising secondary panel data from 42 companies in the period 2021–2024, with a total of 167 observations from annual and sustainability reports. The analysis was performed using EViews 13, with a Moderated Regression Analysis (MRA) and a Random Effect Model (REM). The quality of ESG disclosure was examined using the GRI G4 index (91 items), profitability was measured using the Return on Assets (ROA), and corporate governance was measured using the proportion of independent commissioners. At 10% significance level, profitability has a substantial negative effect on ESG disclosure quality (β = −11,955.52; p = 0.073) and the proportion of independent commissioners also has a significant negative effect (β = −3,265.58; p = 0.068). The interaction variable has a positive quasi-moderating effect (β = 24,836.27; p = 0.051), which implies that corporate governance has a partial weakening effect on the negative influence of profitability on ESG disclosure quality. The low explanatory power of the model (Adj. R2 = 0.73%) indicates that other factors are also at play. Future research could extend the observation period, include more control variables such as business size, leverage and institutional ownership, and adopt more thorough governance proxies. Regulators are advised to enhance the substantive effectiveness of governance structures to achieve better quality ESG reporting in emerging markets.