ESG DISCLOSURE AND ITS EFFECT ON EARNINGS QUALITY

Abstract

This study examines the impact of sustainability disclosure, which includes environmental, social, and governance (ESG) dimensions, on earnings quality among companies listed on the Indonesia Stock Exchange (IDX) during the period 2018–2022. A quantitative approach was employed using multiple regression analysis. The findings reveal that environmental disclosures do not have a significant effect on earnings quality, whereas social and governance disclosures show a positive and significant influence. The results provide theoretical contributions by extending stakeholder and legitimacy theories within the context of an emerging market. Practically, these findings suggest that companies should strengthen the substance of social and governance reporting while improving the quality of environmental disclosure to ensure greater relevance and independent verification. Policy implications have also emerged for regulators to enhance ESG reporting standards by developing clearer sectoral guidelines and implementing third-party assurance, particularly in terms of environmental aspects. This study has certain limitations, including a relatively short observation period and a sample restricted to companies operating in Indonesia. Future research should expand the study period, incorporate mediating or moderating variables, and employ qualitative approaches to explore the substantive aspects of ESG disclosure in greater depth. Overall, this study is expected to serve as a reference for companies, investors, and policymakers in promoting sustainability transparency that supports reliable earnings reporting.