Do Esg and Board Structure Improve Financial Performance? Evidence From Indonesian Family Firms

The consideration of socioemotional wealth in Indonesian family firms might create tension between sustainability and economic objectives. This study aims at examining how environmental, social, and governance (ESG) performance and board structure affect the financial performance of Indonesian family firms. Drawing on the resource-based view and socioemotional wealth perspective, ESG is conceptualised as a strategic capability, and board structure represents a governance mechanism that shapes its effectiveness. Panel data were used from family firms listed on the Indonesia Stock Exchange between 2011 and 2023, with firm and year fixed effects; the results showed that both ESG performance and board structure positively influence profitability. Moreover, the positive effect of ESG is stronger in firms with smaller boards, suggesting that more cohesive governance enhances the implementation of ESG strategies and their financial benefits. Ultimately, these findings highlight the importance of governance in enabling family firms to realise greater value from ESG, particularly in emerging markets.