Affiliation:
1. Universitas Diponegoro
2. Universiti Teknologi MARA
Abstract
This study aims to investigate the moderating effect of chief executive officer (CEO) power on the relationship between industry classifications and environmental, social, and governance (ESG) disclosure using the legitimacy theory. Forty-eight public companies listed on the Indonesia Stock Exchange during the period 2012–2016 were analyzed via partial least squares. The results show that industry classifications have a significant effect on ESG disclosure. Specifically, companies in sensitive industries and companies for which the majority of the shares are owned by the government are likely to disclose more ESG information. Furthermore, our study also provides empirical evidence that CEO power plays a significant role in strengthening the relationship between industry classification and ESG disclosure. Surprisingly, CEOs of companies whose majority shares are owned by the government fail to demonstrate their role in encouraging higher disclosure of ESG. The managerial implication of this finding suggested that CEO power may be an effective mechanism in increasing companies’ commitments to disclose ESG activities. This study has practical implications by providing new insights into the role of CEO characteristics in the relationship between industry types and ESG disclosure for Indonesian companies.
Subject
Strategy and Management,Public Administration,Economics and Econometrics,Finance,Business and International Management