ESG COMBINED SCORE AND CORPORATE FINANCIAL PERFORMANCE: THE MODERATING ROLE OF FEMALE DIRECTORS IN INDONESIAN LISTED FIRMS
Keywords:
ESG Combined Score, financial performance, female directors, gender diversity, corporate governanceAbstract
This study investigates the relationship between Environmental, Social, and Governance Combined Score (ESGC) and corporate financial performance, as well as the moderating role of female directors in Indonesian listed firms. While prior studies predominantly rely on conventional ESG measures, limited evidence exists on whether a controversy-adjusted sustainability measure generates similar financial benefits and how board gender diversity influences this relationship. Using an unbalanced panel of 419 firm-year observations from 101 financial and non-financial firms over the 2020–2024 period, this study employs a one-way firm fixed-effects model with one-year lagged explanatory variables and firm-clustered standard errors. The results show that ESGC is positively associated with corporate financial performance. Furthermore, female directors positively moderate this relationship, indicating that firms with greater female board representation derive stronger financial benefits from sustainability performance. A robustness analysis using the conventional ESG Score yields qualitatively similar evidence for the moderating effect. These findings contribute to the ESG and corporate governance literature by demonstrating that the financial value of sustainability depends not only on sustainability performance itself but also on board gender diversity. The study further highlights the relevance of controversy-adjusted ESG measures for evaluating corporate sustainability in emerging markets.
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