Exploring the Influence of ESG and Prosperity Disclosure Score on Financial Performance

Almost all companies are starting to pay attention to the impact of environment, social, and governance (ESG) & and prosperity disclosure. This research aims to analyze empirical evidence of the Exploring the Financial Performance from ESG And Prosperity Disclosure Score. The research was conducted using causality design, while the samples of 84 companies listed on the IDX-IC (Indonesian Stock Exchange) for the 2019 – 2021 period were selected using certain criteria. Data analysis was carried out with balanced panel data regression. The results show that aggregate ESG & prosperity disclosure impaired the increasing returns on company assets. Individually, environmental and prosperity disclosure did not affect financial performance, while social and governance disclosures affect financial performance. The ESG and prosperity disclosures can undermine financial performance, in part because a focus on ESG initiatives can divert management’s attention from short-term financial goals to long- term sustainability goals. This causes management to prioritize goals aligned with sustainability and social responsibility over short-term financial gains. In this study, financial performance is measured using ROA. This ratio has a weakness in its use, namely that it does not take into account differences in the company’s capital structure, and depreciated fixed assets can affect ROA, providing a less accurate picture of actual financial performance.