Good corporate governance and corporate sustainability performance in Indonesia

Surbakti, Lidya Primta; Sari, Rida Perwita; Swatdikun, Trairong; Nugraheni, Ranti; Wibawaningsih, Ekawati Jati

doi:10.1590/1678-6971/eRAMF250129

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Strategic Finance • RAM, Rev. Adm. Mackenzie 26 (5) • 2025 • https://doi.org/10.1590/1678-6971/eRAMF250129 linkcopy

Good corporate governance and corporate sustainability performance in Indonesia

Boa governança corporativa e desempenho de sustentabilidade corporativa na Indonésia

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

Purpose: This study investigated the effect of good corporate governance on corporate sustainability performance using the triple-bottom-line approach within a two-tier governance system. Good corporate governance is measured by the size, expertise, gender diversity, age, and educational background of the board of commissioners and top management team. Corporate sustainability performance is assessed across economic, social, and environmental dimensions.

Originality/value: This study uniquely explored how different aspects of good corporate governance influence corporate sustainability performance using recent data from Indonesian non-financial companies. It revealed significant roles of top management’s education and gender diversity, offering valuable insights for research and practice.

Design/methodology/approach: The sample data for this study was collected from annual reports, financial statements, and sustainability reports of non-financial companies listed on the Indonesia Stock Exchange (IDX) for 2019 to 2021. Multiple regression analysis was applied to test the study’s hypotheses.

Findings: Higher levels of education among top management have significantly enhanced corporate sustainability performance. Gender diversity within top management teams has positively influenced economic performance. Interchangeably, gender diversity on the board of commissioners has reduced economic performance. Additionally, the level of education among board members has not significantly impacted overall corporate sustainability performance. These insights provided valuable contributions to understanding how various aspects of good corporate governance influence different dimensions of corporate sustainability, offering implications for academic research and corporate practice.

Keywords:
good corporate governance; board; top management team; corporate sustainability performance; Triple Bottom Line

Keywords:
boa governança corporativa; conselho; equipe de alta gerência; desempenho de sustentabilidade corporativa; Tripé da Sustentabilidade

Variable	Acronym	Measurement
Corporate Sustainability Performance
Economic Sustainability Performance	ECOSP	Total score for economic sustainability disclosure
Economic Sustainability Performance	ECOSP	Total point economic sustainability disclosure
Environment Sustainability Performance	ENVSP	Total score for environment sustainability disclosure
Environment Sustainability Performance	ENVSP	Total point environment sustainability disclosure
Social Sustainability Performance	SOCSP	Total score for social sustainability disclosure
Social Sustainability Performance	SOCSP	Total point social sustainability disclosure
Good Corporate Governance
Board of Commissioner Size	BOCSize	The total number of commissioners in the Company
Board of Commissioner Education	BOCEdu	The BoC with a Bachelor’s, Master’s, MBA, and Ph.D. educational background is assigned a dummy variable with a value of 1. Otherwise, they are assigned the value of 0.
Gender Diversity on the Board of Commissioners	BOCGend	The ratio of female commissioners divided by the total number of commissioners
Top Management Team Size	TMTSize	The total number of top executives in the company
Top Management (CEO) Education	TMTEdu	A dummy variable (score of 0 is given to CEOs who do not have a college education, a score of 1 is given to a CEO who has an undergraduate education, and a score of 2 is given to a CEO who has a postgraduate education)
Top Management (CEO) Gender	TMTGend	The ratio of female Top Management (CEO) divided by the total number of Top Management
Control Variable
Leverage	Lev	Total Liabilities divided by total assets
Firm Age	AgeFirm	a logarithm of the number of years since foundation
Firm Size	SizeFirm	Natural logarithm of Total Asset
Profitability	ROA	Calculated by dividing a firm’s net income by the total assets.
Industry Effect	IE	A dummy variable (where 1 (one) indicates whether a company is in the manufacturing industry and 0 (zero) otherwise.

Chow test results
	Model 1	Model 2	Model 3
Prob > F	0.608	0.000	0.004
α	0.05	0.05	0.05
Results of The Lagrange-Multiplier test
Chibar2(01)	64.22	39.35	34.58
Prob > chibar2	0.000	0.000	0.000
Hausman Test Results
Chi2(10)	11.71	47.33	24.05
Prob > chi2	0.305	0.000	0.008

Variable	VIF	Tolerance
BOCSize	1.81	0.552
BOCEdu	1.11	0.899
BOCGend	1.13	0.884
TMTSize	1.56	0.641
TMTEdu	1.06	0.946
TMTGend	1.35	0.741
Lev	1.78	0.560
AgeFirm	1.22	0.820
SizeFirm	1.77	0.565
ROA_w	1.57	0.638
IE	1.13	0.885
Mean VIF	1.41

Variable	Obs	Mean	Std. Dev	Min	Max
ECOSP	168	0.314	0.170	0	0.9411765
ENVSP	168	0.372	0.214	0	0.90625
SOCSP	168	0.346	0.171	0.025	0.8
BOCSize	168	5.179	1.832	2	10
BOCEdu	168	1.577	0.865	0	3
BOCGend	168	0.087	0.137	0	0.75
TMTSize	168	5.958	1.884	3	13
TMTEdu	168	1.530	0.568	0	2
TMTGend	168	0.106	0.145	0	0.6
Lev	168	0.549	0.248	0.103	1.850
AgeFirm	168	40.893	19.771	5	103
SizeFirm	168	30.570	1.289	27.527	33.537
ROA	168	0.035	0.081	-0.229	0.302
IE	168	0.411	0.493	0	1

	Model 1		Model 2		Model 3
	Co ef.	P > \|t\|	C o ef.	P > \|t\|	Co e f.	P > \|t\|
BOCSize	0.025	0.003***	.005	0.187	.003	0.595
BOCEdu	-0.020	0.149	-.0133	0.303	-.008	0.318
BOCGend	-0.199	0.024**	.069	0.475	.163	0.167
TMTSize	-0.023	0.003***	.001	0.942	.003	0.505
TMTEdu	0.050	0.017**	-.036	0.000***	-.043	0.000***
TMTGend	0.200	0.028**	-.110	0.132	.045	0.294
Lev	0.014	0.819	-.0433	0.245	-.136	0.031**
AgeFirm	-0.001	0.094*	.0689	0.000***	.052	0.000***
SizeFirm	0.027	0.019**	.063	0.229	.001	0.987
ROA_w	0.116	0.507	.001	0.987	.019	0.725
IE	-0.104	0.000**	-	-	-	-
cons	-0.493	0.131	-4.286	0.009	-1.688	0.271
Sig	0.000		0.506		0.172
R-square	0.026		0.263		0.218
N	168		168		168

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Editora Mackenzie; Universidade Presbiteriana Mackenzie Rua da Consolação, 896, Edifício Rev. Modesto Carvalhosa, Térreo - Coordenação da RAM, Consolação - São Paulo - SP - Brasil - cep 01302-907 - São Paulo - SP - Brazil
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[TFN1] Note: Model 1: random effect; Model 2 & 3: fixed effect. Prob > F: Probability value from the Chow test to compare Common Effect and Fixed Effect. α: Significance level used as the limit for accepting/rejecting the hypothesis. Chibar 2: Lagrange Multiplier test statistic to compare Random Effect with Common Effect. Prob > chibar2: Probability value from the Lagrange Multiplier test. Chi2: Hausman test statistic to compare Fixed Effect with Random Effect. Prob > chi2: Probability value from the Hausman test.