The EFFECT OF ESG DISCLOSURE ON CORPORATE RISK: THE MEDIATING ROLE OF FINANCIAL CONSTRAINTS IN INDUSTRIAL COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE
Keywords:
Corporate Risk, ESG Disclosure, Financial Constraints, Industrial Companies, SustainabilityAbstract
This study examines the effect of Environmental, Social, and Governance (ESG) disclosure on
corporate risk with financial constraints acting as a mediating variable. The study focuses on
industrial companies listed on the Indonesia Stock Exchange during the 2022–2024 period.
ESG disclosure has become increasingly important due to growing stakeholder demands for
transparency and sustainable business practices. Using a quantitative approach, secondary
data were collected from annual reports and sustainability reports based on Global Reporting
Initiative (GRI) standards. The purposive sampling method produced 60 industrial companies,
resulting in 180 firm-year observations. Panel data regression analysis and mediation testing
were employed to evaluate the relationships among variables. The findings indicate that ESG
disclosure significantly affects corporate risk. ESG disclosure also influences financial
constraints, while financial constraints significantly affect corporate risk. Furthermore, financial
constraints mediate the relationship between ESG disclosure and corporate risk. These results
support signaling theory and legitimacy theory, suggesting that transparent ESG reporting can
reduce information asymmetry, improve access to external financing, and ultimately lower
corporate risk. This study contributes to the literature on sustainable finance by providing
evidence from industrial companies in Indonesia.
References
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[3] L. Chen et al., “ESG Disclosure and Corporate Risk,” Journal of Sustainable Finance, 2023.
[4] H. Huang et al., “Financial Constraints and ESG Performance,” Finance Research Letters,
2025.
[5] F. Chen, “ESG Disclosure and Financing Accessibility,” Sustainability, 2024.
[6] Bao et al., “ESG Reporting Quality and Financial Constraints,” Corporate Governance
Review, 2024.
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