ESG Disclosure and Financial Performance: Does Financial Slack Matter? A DuPont Analysis Approach

Varra Nur Ramadhani; Nujmatul Laily; Rizky Firmansyah; Ika Putri Larasati

doi:10.17977/jabe.v10i4.65341

ESG Disclosure and Financial Performance: Does Financial Slack Matter? A DuPont Analysis Approach

Varra Nur Ramadhani, Nujmatul Laily, Rizky Firmansyah, Ika Putri Larasati

Abstract

This study aims to analyze the effect of ESG Disclosure on financial performance, with Financial Slack serving as a moderating variable. The study employs an explanatory quantitative approach using 240 firm-year observations from 60 non-financial companies listed in the IDX ESG Leaders index in Indonesia over the period 2021–2024. Data analysis is conducted using panel data regression with a Moderated Regression Analysis (MRA) approach, processed through EViews software. The results indicate that ESG Disclosure does not have a significant effect on corporate financial performance, either when measured by Return on Equity (ROE) or by individual components of the DuPont analysis, namely Net Profit Margin (NPM), Total Asset Turnover (TAT), and Equity Multiplier (EM). Furthermore, Financial Slack is found to strengthen the positive effect of ESG Disclosure on Net Profit Margin (NPM). Overall, these findings reinforce the Resource-Based View (RBV) perspective, which posits that ESG Disclosure as an intangible resource requires the support of adequate Financial Slack as a tangible resource to create complementary capabilities and achieve sustainable competitive advantage. The findings provide practical insights for management to improve the quality of ESG disclosure and maintain sufficient levels of Financial Slack so that sustainability investments can generate long-term financial value. In addition, the results suggest that sustainability commitment supported by financial flexibility serves as an important signal for investors and regulators in assessing corporate performance and competitiveness.

Keywords

ESG disclosure; financial slack; financial performance

References

Ali, N. B. M., Ali Hussin, H. A. A., Mohammed, H. M. F., Mohmmed, K. A. A. H., Almutiri, A. A. S., & Ali, M. A. (2025). The Effect of Environmental, Social, and Governance (ESG) Disclosure on the Profitability of Saudi-Listed Firms: Insights from Saudi Vision 2030. Sustainability (Switzerland), 17(7). https://doi.org/10.3390/su17072977

Ameyaw, F., Ramakrishnan, S., & Jayamana, J. (2023). Sustainability reporting and corporate financial performance: Moderating effect of financial slack resource. International Journal of Academic Research in Accounting, Finance and Management Sciences, 13(4). https://doi.org/10.6007/ijarafms/v13-i4/19233

Andronic, M. L., & Netcu, I. C. (2024). A Financial Research on Transport Trade Services Group. Bulletin of the Transilvania University of Brasov. Series V: Economic Sciences, 121–136. https://doi.org/10.31926/but.es.2024.17.66.1.11

Anita, A., & Jessica, J. (2023). Corporate Social Responsibility dan Kinerja Perusahaan: Financial Slack sebagai Variabel Moderasi. Owner, 7(3), 2771–2784. https://doi.org/10.33395/owner.v7i3.1830

Annesi, N., Battaglia, M., Ceglia, I., & Mercuri, F. (2025). Navigating paradoxes: building a sustainable strategy for an integrated ESG corporate governance. Management Decision, 63(2), 531–559. https://doi.org/10.1108/MD-10-2023-2006

Aprullah, M. P., Diantimala, Y., Arfan, M., & Irsyadillah, I. (2025). The Role of ESG Committee on Indonesian Companies in Promoting Sustainable Practice to Creditors: Symbolic or Substantive? International Journal of Financial Studies, 13(4), 180. https://doi.org/10.3390/ijfs13040180

Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. In Borsa Istanbul Review (Vol. 22, pp. S119–S127). Borsa Istanbul Anonim Sirketi. https://doi.org/10.1016/j.bir.2022.11.006

Barnard, C. (1938). The Functions of the Executive. Harvard University Press: Cambridge, MA.

Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management.

Bhandari, K. R., Ranta, M., & Salo, J. (2022). The resource-based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm’s embeddedness into ecology, society, and governance. Business Strategy and the Environment, 31(4), 1525–1537. https://doi.org/10.1002/bse.2967

Branco, M. C., & Rodrigues, L. L. (2006). Corporate social responsibility and resource-based perspectives. Journal of Business Ethics, 69(2), 111–132. https://doi.org/10.1007/s10551-006-9071-z

Bunea, O. I., Corbos, R. A., & Popescu, R. I. (2019). Influence of some financial indicators on return on equity ratio in the Romanian energy sector - A competitive approach using a DuPont-based analysis. Energy, 189. https://doi.org/10.1016/j.energy.2019.116251

Cardillo, M. A. dos R., & Basso, L. F. C. (2025). Revisiting knowledge on ESG/CSR and financial performance: A bibliometric and systematic review of moderating variables. Journal of Innovation and Knowledge, 10(1). https://doi.org/10.1016/j.jik.2024.100648

Chandra Asri. (2024, September 30). Chandra Asri group ESG rating improvement. Chandra Asri Group. https://chandra-asri.com/en/sustainability/sustainability-in-action/peningkatan-rating-esg-chandra-asri-group

Chau, L., Anh, L., & Duc, V. (2025). Valuing ESG: How financial markets respond to corporate sustainability. International Business Review, 34(3). https://doi.org/10.1016/j.ibusrev.2025.102418

Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of Environmental Management, 345. https://doi.org/10.1016/j.jenvman.2023.118829

Chin, M., Yan, L., & Rahmawati, I. P. (2025). ESG Disclosure Comparison Analysis in the Fast-Moving Consumer Goods Industry. Jurnal Akuntansi Terapan Indonesia, 08, 1–32. https://doi.org/10.18196/jati.v8i1.254

Chininga, E., Alhassan, A. L., & Zeka, B. (2024). ESG ratings and corporate financial performance in South Africa. Journal of Accounting in Emerging Economies, 14(3), 692–713. https://doi.org/10.1108/JAEE-03-2023-0072

Chopra, S. S., Senadheera, S. S., Dissanayake, P. D., Withana, P. A., Chib, R., Rhee, J. H., & Ok, Y. S. (2024). Navigating the Challenges of Environmental, Social, and Governance (ESG) Reporting: The Path to Broader Sustainable Development. In Sustainability (Switzerland) (Vol. 16, Issue 2). Multidisciplinary Digital Publishing Institute (MDPI). https://doi.org/10.3390/su16020606

Clementino, E., & Perkins, R. (2021). How Do Companies Respond to Environmental, Social and Governance (ESG) ratings? Evidence from Italy. Journal of Business Ethics, 171(2), 379–397. https://doi.org/10.1007/s10551-020-04441-4

CNN Indonesia. (2021, August 27). Gagal Penuhi Kewajiban, Sritex Terdepak dari BEI. CNN Indonesia.

Darsono, D., Ratmono, D., Tujori, A., & Clarisa, T. Y. (2025). The relationship between ESG, financial performance, and cost of debt: the role of independent assurance. Cogent Business and Management, 12(1). https://doi.org/10.1080/23311975.2024.2437137

Duque-Grisales, E., & Aguilera-Caracuel, J. (2021). Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack. Journal of Business Ethics, 168(2), 315–334. https://doi.org/10.1007/s10551-019-04177-w

Fang, L., & Guo, X. (2025). From responsibility to value: ESG and long-term corporate value. PLoS ONE, 20(4 APRIL). https://doi.org/10.1371/journal.pone.0322018

Financial Times. (2025). How Indonesia’s textile and rubber exporters feel tariff turmoil.

Fu, T., & Li, J. (2023). An empirical analysis of the impact of ESG on financial performance: the moderating role of digital transformation. Frontiers in Environmental Science, 11. https://doi.org/10.3389/fenvs.2023.1256052

GSSB. (2016). GRI 2016: Standar Pelaporan Keberlanjutan.

Hamdi, K., Guenich, H., & Ben Saada, M. (2022). Does corporate financial performance promote ESG: Evidence from US firms. Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2154053

Handoyo, S., & Anas, S. (2024). The effect of environmental, social, and governance (ESG) on firm performance: the moderating role of country regulatory quality and government effectiveness in ASEAN. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2371071

Hassan, S., Naveed, & Ali Jadoon, U. (2024). The Impact of Environmental, Social and Governance on Firm Performance: Moderating Role of Financial Slacks and Research & Development Intensity. 14(1). http://cusitjournals.com/index.php/CURJ

Heubeck, T., & Ahrens, A. (2024). Governing the Responsible Investment of Slack Resources in Environmental, Social, and Governance (ESG) Performance: How Beneficial are CSR Committees? Journal of Business Ethics. https://doi.org/10.1007/s10551-024-05798-6

Ho, L., Nguyen, V. H., & Dang, T. L. (2024). ESG and firm performance: do stakeholder engagement, financial constraints and religiosity matter? Journal of Asian Business and Economic Studies. https://doi.org/10.1108/JABES-08-2023-0306

Hu, Y., Hassan, A., & Atif, S. (2024). Examining the Interplay between CEPSA’s ESG Performance and Financial Performance: An Overview of the Energy Sector Transformation. In Sustainability (Switzerland) (Vol. 16, Issue 7). Multidisciplinary Digital Publishing Institute (MDPI). https://doi.org/10.3390/su16072772

Husna, S., Said Razali, B., Binti, H., & Kadir, A. (2024). Financial Performance Analysis using Modified Dupont Model in Malaysian Public Listed Companies. In Journal of Information Systems Engineering and Management (Vol. 2025, Issue 32s). https://www.jisem-journal.com/

IMF. (2021, March 2). Impact of Covid-19 on Nonfinancial Corporate Vulnerabilties in Indonesia. IMF ELIBRARY.

Indo Tambangraya Megah. (2024, November 24). ITM Raih Penghargaan Tertinggi Platinum Rank ASRRAT 2024. ITM News. https://www.itmg.co.id/id/media/itm-news/itm-achieves-the-highest-award-platinum-rank-asrrat-2024

Indrawati, A., Ruliana, T., Yudhyani, E., & Nurfitriani, N. (2023). Environmental, Social, Governance Report, and Materiality Analysis Effect on Financial and Market Performance. Journal of Accounting and Strategic Finance, 6(1), 71–89. https://doi.org/10.33005/jasf.v6i1.392

Javid, S., Saleem, I., & Khan, H. (2020). Financial Slack and Firm’s Performance: Does Ownership Structure Matters? Article in Gaziantep University Journal of Social Sciences. https://doi.org/10.34091/AJSS.13.1.18

Jiang, J. (2023). Application of Dupont-factor analysis to financial performance and market measurement of the southeast Asian hotel industry. International Journal of Applied Economics, Finance and Accounting, 17(1), 127–134. https://doi.org/10.33094/ijaefa.v17i1.1089

Katrancı, A., Kundakcı, N., & Pamucar, D. (2025). Financial performance evaluation of firms in BIST 100 index with ITARA and COBRA methods. Financial Innovation, 11(1). https://doi.org/10.1186/s40854-024-00704-5

Khalifaturofi’ah, S. O., & Setiawan, R. (2024). Profitability of Manufacturing Firms in Indonesia Amidst the Pandemic. ETIKONOMI, 23(2), 497–510. https://doi.org/10.15408/etk.v23i2.35169

Khamisu, M. S., Paluri, R. A., & Sonwaney, V. (2024). Environmental social and governance (ESG) disclosure motives for environmentally sensitive industry: an emerging economy perspective. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2322027

Krueger, P., Sautner, Z., Tang, D. Y., & Zhong, R. (2024). The Effects of Mandatory ESG Disclosure Around the World. Journal of Accounting Research, 62(5), 1795–1847. https://doi.org/10.1111/1475-679X.12548

Kurnianto, S., & Soewarno, N. (2024). Moderating effect of board gender diversity on the relationship between prospector business strategy and financial performance: evidence from Indonesia. In Cogent Business and Management (Vol. 11, Issue 1). Cogent OA. https://doi.org/10.1080/23311975.2024.2371066

Ladvenicová, J., Košovská, I., & Hudáková, M. (2025). Financial performance of SMEs wineries in Slovakia: DuPont decomposition analysis. Entrepreneurship and Sustainability Issues, 12(3), 22–33. https://doi.org/10.9770/k7382535877

Larasati, I. D., Dwi, R., Ibrahim, B., & Larasati, I. P. (2024). Slack Resources and Corporate Sustainability Performance Slack Resources and Corporate Sustainability Performance. In Jurnal Akuntansi Universitas Jember (Vol. 22, Issue 1).

Le, L. T. (2024). Impact of environmental, social and governance practices on financial performance: evidence from listed companies in Southeast Asia. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2379568

Lefebvre, V. (2025). When do workforce reductions pay off? A question of size and slack in privately held firms. European Management Review. https://doi.org/10.1111/emre.70015

Li, S., Liu, Y., & Xu, Y. (2023). Does ESG Performance Improve the Quantity and Quality of Innovation? The Mediating Role of Internal Control Effectiveness and Analyst Coverage. Sustainability (Switzerland), 15(1). https://doi.org/10.3390/su15010104

Liang, Y., Lee, M. J., & Jung, J. S. (2022). Dynamic Capabilities and an ESG Strategy for Sustainable Management Performance. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg.2022.887776

Lin, W. L., Ho, J. A., Ng, S. I., & Lee, C. (2020). Does corporate social responsibility lead to improved firm performance? The hidden role of financial slack. Social Responsibility Journal, 16(7), 957–982. https://doi.org/10.1108/SRJ-10-2018-0259

Malik, M. S., & Nadeem, M. (2014). Impact of corporate social responsibility on the financial performance of banks in pakistan. International Letters of Social and Humanistic Sciences.

Marfu, A., Abbas, H., Sya, A., Purwanto, A., Nadiroh, Sumargo, B., Wulandari, S. S., Daiman, Malaihollo, C. A., Syakyakirti, Tanubrata, D., & Pratiwi, D. I. (2025). Building long-term value: A practical guide to integrating ESG into business strategies. Sustainable Futures, 10. https://doi.org/10.1016/j.sftr.2025.100955

Morri, G., Colantoni, F., & De Paolis, A. M. (2024). ESG performance variability: profitability and market implications for real estate entities in a worldwide context. Journal of European Real Estate Research. https://doi.org/10.1108/JERER-11-2023-0046

Napitupulu, R. B., Simanjuntak, T. P., Hutabarat, L., Damanik, H., Harianja, H., Sirait, R. T. M., & Tobing, C. E. R. L. (2021). Penelitian Bisnis : Teknik dan Analisis Data dengan SPSS - STATA - EVIEWS. Madenatera.

Nareswari, N., Tarczynska-Luniewska, M., & Al Hashfi, R. U. (2023). Analysis of Environmental, Social, and Governance Performance in Indonesia: Role of ESG on Corporate Performance. Procedia Computer Science, 225, 1748–1756. https://doi.org/10.1016/j.procs.2023.10.164

OJK. (2025). Stabilitas Sistem Keuangan Tetap Terjaga, KSSK Memperkuat Koordinasi dan Kebijakan di Tengah Meningkatnya Ketidakpastian Global.

Omar, R. H., & Ilham. (2025). The Role of ESG (Environmental, Social, and Governance) Investment in Attracting Global Investors. Journal of Multidisciplinary Sustainability Asean, 2(1), 23–34. https://doi.org/10.70177/ijmsa.v2i1.1944

Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-analysis. www.sagepublications.com

Parashar, M., Jaiswal, R., & Sharma, M. (2024). An empirical analysis of ESG and financial performance of clean energy companies through unsupervised machine learning. Procedia Computer Science, 241, 330–337. https://doi.org/10.1016/j.procs.2024.08.044

Prasad, R., & Mondal, A. (2025). Nexus between ESG scores and financial performance: evidence from the Indian banking sector. Asian Journal of Accounting Research. https://doi.org/10.1108/AJAR-06-2024-0244

Rahmaniati, N. P. G., & Ekawati, E. (2024). The role of Indonesian regulators on the effectiveness of ESG implementation in improving firms’ non-financial performance. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2023.2293302

Rohendi, H., Ghozali, I., & Ratmono, D. (2024). Environmental, social, and governance (ESG) disclosure and firm value: the role of competitive advantage as a mediator. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2023.2297446

Saraswati, R. M., Widyaningsih, N. P., Perez, E. F., Parikesit, A. A., Sam, T. H., & Ansori, A. N. M. (2025). Achieving Sustainability in Indonesia’s Manufacturing Sector Through Green Design Innovations. Journal of Lifestyle and SDGs Review, 5(2), e03341. https://doi.org/10.47172/2965-730x.sdgsreview.v5.n02.pe03341

Seelanatha, S. L., & Natoli, R. (2025). The impact of financial development and regulation on technology gaps and cost efficiency in banks: a cross-country analysis. Journal of Asia Business Studies, 19(2), 315–338.

Shan, X., Song, Y., & Song, P. (2024). How ESG performance impacts corporate financial performance: a DuPont analysis approach. International Journal of Climate Change Strategies and Management. https://doi.org/10.1108/IJCCSM-07-2024-0125

Simone, D. L., Petracci, B., & Piva, M. (2022). Economic Sustainability, Innovation, and the ESG Factors: An Empirical Investigation. Sustainability (Switzerland), 14(4). https://doi.org/10.3390/su14042270

Song, B., Yang, X., & Xu, Y. (2025). The Impact of Financial Asset Allocation on Firms’ Total Factor Productivity: Evidence from China’s Non-Financial Companies. Sustainability (Switzerland), 17(1). https://doi.org/10.3390/su17010096

SSEi. (2025). Stock Exchange Sustainability Activities. Https://Sseinitiative.Org/.

Utami, H., & Alamanos, E. (2025). Resource-Based Theory: A review. https://open.ncl.ac.uk

Wang, M., Liu, L., & Liang, T. (2025). Does the ESG disclosure quality affect financial performance: Empirical evidence from Chinese energy-listed companies. Finance Research Letters, 77. https://doi.org/10.1016/j.frl.2025.107118

Warouw, F., Mashudi, Mudrikatul, A., Noviany, H., & Hendarto, T. (2024). The Rise of Environmental, Social, and Governance (ESG): Assessing the Impact and Implications for Global Business Practices and Policy Formulation. International Journal of Science and Society, 6(1), 2024. http://ijsoc.goacademica.com

Xu, L., Xie, L., Mei, S., Hao, J., Zhang, Y., & Song, Y. (2024). Corporate Sustainability Reporting and Stakeholders’ Interests: Evidence from China. Sustainability (Switzerland) , 16(8). https://doi.org/10.3390/su16083443

Zhang, F., Lai, X., & Guo, C. (2024). ESG disclosure and investment-financing maturity mismatch: Evidence from China. Research in International Business and Finance, 70. https://doi.org/10.1016/j.ribaf.2024.102312

Zhang, J., & Liu, Z. (2023). Study on the Impact of Corporate ESG Performance on Green Innovation Performance—Evidence from Listed Companies in China A-Shares. Sustainability (Switzerland), 15(20). https://doi.org/10.3390/su152014750

Zhao, X., & Zhang, H. (2024). How does ESG performance determine the level of specific financing in capital structure? New insights from China. International Review of Financial Analysis, 95. https://doi.org/10.1016/j.irfa.2024.103508

Zimuto, J., & Zvarimwa, C. (2022). Valuable, Rare, Inimitable, Non-Substitutable and Exploitable (Vrine) Resources on Competitive Advantage. EPH - International Journal of Business & Management Science, 8(1), 9–21. https://doi.org/10.53555/ephbms.v8i1.1915

DOI: http://dx.doi.org/10.17977/jabe.v10i4.65341