DETERMINANT ESG PERFORMANCE : THE IMPACT OF SHARIA STATUS, FIRM CHARACTERISTICS AND OWNERSHIP STRUCTURE
Keywords:
ESG performance, sharia-compliant stocks, profitability, leverage, firm size, ownership structure
Abstract
This study aims to analyze the factors influencing Environmental, Social, and Governance (ESG) performance among companies listed on the Indonesia Stock Exchange. The sample consists of 447 firm year observations covering the period from 2021 to 2024. The independent variables examined include Sharia status, firm characteristics namely profitability, leverage, and firm size, as well as ownership structure represented by institutional ownership and foreign ownership. The analysis is conducted using multiple linear regression. The results indicate that Sharia status has a positive and significant effect on ESG performance, suggesting that firms complying with Sharia principles tend to demonstrate better ESG practices than non Sharia firms. In addition, profitability, leverage, and firm size are also found to have positive and significant effects on ESG performance. In contrast, institutional ownership and foreign ownership do not show a significant relationship with ESG performance. These findings highlight that firms’ financial characteristics and adherence to Sharia principles play an important role in enhancing ESG performance. Meanwhile, ownership structure does not appear to be a primary determinant in explaining variations in ESG performance among the sampled firms. This study contributes to the growing literature on ESG determinants in emerging markets and provides practical implications for investors and regulators in promoting sustainable business practices in the Indonesian capital market.
References
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Qasem, A., Al-duais, S. D., & Wan-hussin, W. N. (2022). Institutional Ownership Types and ESG Reporting : The Case of Saudi Listed Firms. Sustainability, 14, 11316. https://doi.org/10.3390/%0Asu141811316
Qoyum, A., Al Hashfi, R. U., Zusryn, A. S., Kusuma, H., & Qizam, I. (2020). Does an Islamic-SRI portfolio really matter? Empirical application of valuation models in Indonesia. Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2020.08.002
Qoyum, A., Rizky, M., Sakti, P., Mohd, H., & Thaker, T. (2022). Does the islamic label indicate good environmental , social , and governance ( ESG ) performance ? Evidence from sharia-compliant firms in Indonesia and Malaysia. Borsa Istanbul Review, 22(2), 306–320. https://doi.org/10.1016/j.bir.2021.06.001
Qoyum, A., Umar, R., Hashfi, A., Shabrina, A., Kusuma, H., & Qizam, I. (2021). Does an Islamic-SRI portfolio really matter ? Empirical application of valuation models in Indonesia. Borsa Istanbul Review, 21(2), 105–124. https://doi.org/10.1016/j.bir.2020.08.002
Rahat, B., & Nguyen, P. (2024). International Review of Financial Analysis The impact of ESG profile on Firm ’ s valuation in emerging markets. International Review of Financial Analysis, 95(PA), 103361. https://doi.org/10.1016/j.irfa.2024.103361
Salisa, M. R., Jannata, Y., Isa, M., Pembangunan, U., Veteran, N., Timur, J., & Negara, K. S. (2025). Do Sharia-Indexed Firms Enhance ESG Disclosure? Evidence from Indonesian Mining. Research Horizon, 5(5), 1979–1994. https://doi.org/10.54518/rh.5.5.2025.816
Sitorus, C. I., Bukit, R. B., & Bulan, N. (2024). The Influence of Company Size , Board of Directors and Leverage on Sustainability Report Disclosure with Profitability as a Moderation Variable in LQ45 Companies Listed on the Indonesia Stock Exchange. International Journal of Current Science Research and Review, 07(05), 2673–2688. https://doi.org/10.47191/ijcsrr/V7-i5-29
Suchman, M. C. (1995). Managing Legitimacy : Strategic and Institutional Approaches. Academy of Management Review, 20(3), 571–610.
Sun, Y., & Zhao, Z. (2024). Responsible investment : Institutional shareholders and ESG performance. Pacific-Basin Finance Journal, 85(December 2023), 102357. https://doi.org/10.1016/j.pacfin.2024.102357
Tariq, K., Ullah, H., Haq, A. U., & Mustafa, S. N. (2025). Impact of Islamic Label on Environmental, Social, and Governance Performance of Emerging Markets through Sharia-Compliant Firms. Dialogue Social Science Review (DSSR), 3(3), 467–491.
Wang, X., Zhou, B., & Li, X. (2025). Qualified foreign institutional investors and corporate ESG performance : Evidence from China. International Review of Financial Analysis, 101(October 2024), 104032. https://doi.org/10.1016/j.irfa.2025.104032
Widiyanti, N. W., Sulistiyo, A. B., & Aprillianto, B. (2025). Integrating Sharia Enterprise Theory in ESG-Based Sustainable Finance : A Case Study from Indonesia ’ s Agro-Industrial Sector. International Journal of Research and Review, 12(May), 208–218. https://doi.org/10.52403/ijrr.20250525
Ye, S., & Sha, Y. (2025). Common institutional ownership and corporate ESG performance : Perspectives from governance and resource effects. Journal of Cleaner Production, 525(April), 146587. https://doi.org/10.1016/j.jclepro.2025.146587
Yu, X. (2023). Foreign Ownership and Corporate ESG Performance. Highlights in Business, Economics and Management, 18, 136–147.
Zairin, G. M., Lim, T. S., Khairunnisa, H., Respati, D. K., Musyaffi, A. M., Nurmalita, S., & Hoo, W. C. (2025). The Limited Influence of Institutional Ownership on Environmental , Social , Governance , and Financial Outcomes. Corporate Governance and Sustainability Review, 9(3), 242–252. https://doi.org/10.22495/cgsrv9i3sip5
Zhang, J., & Wu, W. (2024). The impact of foreign ownership on corporate ESG performance. Finance Research Letters, 66(May), 105602. https://doi.org/10.1016/j.frl.2024.105602
Zumente, I., & Bistrova, J. ¯ulija. (2021). ESG Importance for Long-Term Shareholder Value Creation : Literature vs . Practice. Journal of Open Innovation Technology, Market and Complexity, 7(127), 1–13. https://doi.org/10.3390/joitmc7020127
Alazzani, A., Hassanein, A., & Aljanadi, Y. (2017). Impact of gender diversity on social and environmental performance: evidence from Malaysia. Corporate Governance (Bingley). https://doi.org/10.1108/CG-12-2015-0161
Ali, I., Lodhia, S., & Narayan, A. K. (2020). Value creation attempts via photographs in sustainability reporting : a legitimacy theory perspective. Meditari Accountancy Research. https://doi.org/10.1108/MEDAR-02-2020-0722
Arayssi, M., & Tabaja, H. H. (2020). The impact of board composition on the level of ESG disclosures in GCC countries. Sustainability Accounting, Management and Policy Journal, 11(1), 137–161. https://doi.org/10.1108/SAMPJ-05-2018-0136
Awaludin, A. A., Prasetyo, A., Yusril, Y., & Saputra, D. C. (2025). Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector. Jurnal Ekonomi & Keuangan Islam, 11(16), 196–210. https://doi.org/10.20885/JEKI.vol11.iss2.art3
Carreira, F., & Silva, A. (2025). Does Profitability Support Sustainability ? Examining the Influence of Financial Performance and ESG Controversies on ESG Ratings. Systems, 1–16.
Cho, C. H., Guidry, R. P., Hageman, A. M., & Patten, D. M. (2012). Do actions speak louder than words ? An empirical investigation of corporate environmental reputation. Accounting, Organizations and Society, 37(1), 14–25. https://doi.org/10.1016/j.aos.2011.12.001
Deegan, C. (2002). The Legitimising Effect of Social and Environmental Disclosures – A Theoretical Foundation. Accounting Auditing & Accountability Journal, 15(3), 282–311. https://doi.org/10.1108/09513570210435852
Dowling, J., & Pfeffer, J. (1975). Organizational Legitimacy: Social Values and Organizational Behavior. The Pacific Sociological Review, 18(1), 122–136.
Gregory, R. P. (2022). The influence of firm size on ESG score controlling for ratings agency and industrial sector. Journal of Sustainable Finance & Investment, May, 1–14. https://doi.org/10.1080/20430795.2022.2069079
Jensen, C., & Meckling, H. (1976). Theory of The Firm: Manaerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305–360.
Kim, E. (2025). The Effect of Foreign Investors on ESG Investment Efficiency : Evidence from South Korea. Sustainability, 17(5), 226. https://doi.org/10.3390/su17052267
Kusmiati, E., & Ungkari, M. D. (2021). Application of Shariah Enterprise Theory on Disclosure of Corporate Social Responsibility in Sharia Banking. El-Qish: Journal of Islamic Economics, 1(2), 119–131. https://doi.org/10.33830/elqish.v1i1.1453.2021
Likitapiwat, T., Starita, S., Treepongkaruna, S., & Fong, K. (2024). Corporate innovation culture and ESG : Evidence from textual analysis in emerging market. Economics Letters, 244(October), 112047. https://doi.org/10.1016/j.econlet.2024.112047
Makatita, G. A. N., Makatita, A. R. M., & Lamba, J. G. (2024). Shariah Enterprise Theory in CSR Disclosure : Toward Sustainability Reporting. Economica: Jurnal Ekomomi Islam, 15(2), 223–240. https://doi.org/10.21580/economica.2024.15.2.22596
Mart, J. (2021). The Nonlinear Relation between Institutional Ownership and Environmental , Social and Governance Performance in Emerging Countries. Sustainability, 13(3), 1586.
Martiny, A., Taglialatela, J., Testa, F., & Iraldo, F. (2024). Determinants of environmental social and governance ( ESG ) performance : A systematic literature review. Journal of Cleaner Production, 456(April), 142213. https://doi.org/10.1016/j.jclepro.2024.142213
Minev, S., & Dankova, P. (2025). Long-Term Effect of Environmental , Social , and Governance ( ESG ) Corporate Practices on Corporate Stock Performance. Sustainability, 17(24), 1–22. https://doi.org/10.3390/su172411321
Nugraheni, P., Indrasari, A., & Hamzah, N. (2022). The Impact of Ownership Structure on CSR Disclosure : Evidence from Indonesia. Journal of Accounting and Investment, 23(2), 229–243. https://doi.org/10.18196/jai.v23i2.14633
Oktavianti, & Gunawan, Y. (2025). Environmental Social Governance Score(ESG), Firm performance & Credit Rating. Jurnal Ilmiah Manajemen, Ekonomi & Akuntansi (MEA), 9(3), 3087–3093. https://doi.org/10.31955/mea.v9i3.6729
Qasem, A., Al-duais, S. D., & Wan-hussin, W. N. (2022). Institutional Ownership Types and ESG Reporting : The Case of Saudi Listed Firms. Sustainability, 14, 11316. https://doi.org/10.3390/%0Asu141811316
Qoyum, A., Al Hashfi, R. U., Zusryn, A. S., Kusuma, H., & Qizam, I. (2020). Does an Islamic-SRI portfolio really matter? Empirical application of valuation models in Indonesia. Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2020.08.002
Qoyum, A., Rizky, M., Sakti, P., Mohd, H., & Thaker, T. (2022). Does the islamic label indicate good environmental , social , and governance ( ESG ) performance ? Evidence from sharia-compliant firms in Indonesia and Malaysia. Borsa Istanbul Review, 22(2), 306–320. https://doi.org/10.1016/j.bir.2021.06.001
Qoyum, A., Umar, R., Hashfi, A., Shabrina, A., Kusuma, H., & Qizam, I. (2021). Does an Islamic-SRI portfolio really matter ? Empirical application of valuation models in Indonesia. Borsa Istanbul Review, 21(2), 105–124. https://doi.org/10.1016/j.bir.2020.08.002
Rahat, B., & Nguyen, P. (2024). International Review of Financial Analysis The impact of ESG profile on Firm ’ s valuation in emerging markets. International Review of Financial Analysis, 95(PA), 103361. https://doi.org/10.1016/j.irfa.2024.103361
Salisa, M. R., Jannata, Y., Isa, M., Pembangunan, U., Veteran, N., Timur, J., & Negara, K. S. (2025). Do Sharia-Indexed Firms Enhance ESG Disclosure? Evidence from Indonesian Mining. Research Horizon, 5(5), 1979–1994. https://doi.org/10.54518/rh.5.5.2025.816
Sitorus, C. I., Bukit, R. B., & Bulan, N. (2024). The Influence of Company Size , Board of Directors and Leverage on Sustainability Report Disclosure with Profitability as a Moderation Variable in LQ45 Companies Listed on the Indonesia Stock Exchange. International Journal of Current Science Research and Review, 07(05), 2673–2688. https://doi.org/10.47191/ijcsrr/V7-i5-29
Suchman, M. C. (1995). Managing Legitimacy : Strategic and Institutional Approaches. Academy of Management Review, 20(3), 571–610.
Sun, Y., & Zhao, Z. (2024). Responsible investment : Institutional shareholders and ESG performance. Pacific-Basin Finance Journal, 85(December 2023), 102357. https://doi.org/10.1016/j.pacfin.2024.102357
Tariq, K., Ullah, H., Haq, A. U., & Mustafa, S. N. (2025). Impact of Islamic Label on Environmental, Social, and Governance Performance of Emerging Markets through Sharia-Compliant Firms. Dialogue Social Science Review (DSSR), 3(3), 467–491.
Wang, X., Zhou, B., & Li, X. (2025). Qualified foreign institutional investors and corporate ESG performance : Evidence from China. International Review of Financial Analysis, 101(October 2024), 104032. https://doi.org/10.1016/j.irfa.2025.104032
Widiyanti, N. W., Sulistiyo, A. B., & Aprillianto, B. (2025). Integrating Sharia Enterprise Theory in ESG-Based Sustainable Finance : A Case Study from Indonesia ’ s Agro-Industrial Sector. International Journal of Research and Review, 12(May), 208–218. https://doi.org/10.52403/ijrr.20250525
Ye, S., & Sha, Y. (2025). Common institutional ownership and corporate ESG performance : Perspectives from governance and resource effects. Journal of Cleaner Production, 525(April), 146587. https://doi.org/10.1016/j.jclepro.2025.146587
Yu, X. (2023). Foreign Ownership and Corporate ESG Performance. Highlights in Business, Economics and Management, 18, 136–147.
Zairin, G. M., Lim, T. S., Khairunnisa, H., Respati, D. K., Musyaffi, A. M., Nurmalita, S., & Hoo, W. C. (2025). The Limited Influence of Institutional Ownership on Environmental , Social , Governance , and Financial Outcomes. Corporate Governance and Sustainability Review, 9(3), 242–252. https://doi.org/10.22495/cgsrv9i3sip5
Zhang, J., & Wu, W. (2024). The impact of foreign ownership on corporate ESG performance. Finance Research Letters, 66(May), 105602. https://doi.org/10.1016/j.frl.2024.105602
Zumente, I., & Bistrova, J. ¯ulija. (2021). ESG Importance for Long-Term Shareholder Value Creation : Literature vs . Practice. Journal of Open Innovation Technology, Market and Complexity, 7(127), 1–13. https://doi.org/10.3390/joitmc7020127
Published
2026-05-17
How to Cite
Hindasah, L. (2026). DETERMINANT ESG PERFORMANCE : THE IMPACT OF SHARIA STATUS, FIRM CHARACTERISTICS AND OWNERSHIP STRUCTURE. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 10(2), 20-43. https://doi.org/10.31955/mea.v10i2.7478
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