ABSTRACT This study examined whether the quality of environmental and social disclosures influences the financial performance of listed Indonesian companies. Using panel data from 101 firms for 2020–2022 (303 observations), we assess disclosure quality based on Global Reporting Initiative (GRI) Standards across eight dimensions. Fixed‐effects panel regression demonstrates that environmental disclosure quality significantly enhances Return on Assets ( β = 0.495, p < 0.001), remaining robust across alternative estimators, standard error corrections, and temporal periods. Social disclosure shows no significant effect ( β = −0.187, p = 0.317). We attribute this difference to symbolic reporting practices, investment time lags, stakeholder prioritization of environmental issues, and measurement challenges. Average disclosure quality remains low (19.7% environmental; 13.8% social). The results support legitimacy theory for environmental disclosure but reveal stakeholder theory limitations in Indonesia's emerging market context, where institutional infrastructure is still developing. The findings inform the implementation of Peraturan Otoritas Jasa Keuangan 51/2017 and the phase‐out of the mandatory disclosure policy.
Oktris et al. (Mon,) studied this question.
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