The Effects Of Mandatory Esg Disclosure on the Financial Performance of Banking Sector

Abstract

This research investigates the effect of mandatory ESG disclosure on financial performance within Indonesia's banking sector, emphasizing key metrics such as ROA, PBV and ROE. Using a quantitative methodology and simple linear regression analysis, the study analyzes data from banking firms listed on the Indonesia Stock Exchange from 2021 to 2022. The findings reveal that ESG disclosure significantly enhances ROA and ROE, suggesting improvements in profitability and asset utilization efficiency. However, ESG disclosure negatively influences PBV, indicating potential market valuation concerns despite the fact that it increases transparency. These results underscore the role of ESG practices in strengthening financial stability and investor confidence, highlighting the necessity for banks to integrate sustainability considerations to align with global regulatory standards and evolving stakeholder expectations