The Impact of ESG Performance on Earnings Management: A Review of Corporate Governance and Gender Diversity in Indonesia

Abstract

ABSTRACT

This study assesses how ESG performance relates to earnings management practices, with board gender diversity expected to moderate the relationship. Profitability and leverage are included as control variables to isolate the effect of the main variables under investigation. Unlike previous studies that focus broadly on corporate social responsibility, this research provides a new contribution by specifically isolating ESG metrics and evaluating the critical mass of female board representation in an emerging market context. Using a quantitative approach, data from 12 non-financial LQ45 listed companies over 2022–2024 were analysed through purposive sampling, yielding 36 observations. Moderated Regression Analysis (MRA) via EViews 13 was applied. Findings indicate that ESG performance does not significantly affect earnings management. Board gender diversity likewise fails to moderate this relationship. Both control variables produced insignificant results. These outcomes suggest that ESG disclosures among sampled firms remain largely performative (masking hypothesis), while the limited representation of female commissioners has yet to accumulate sufficient institutional influence to effectively constrain managerial opportunism.

Keywords: Earning management; ESG Performance; Gender Diversity; Board of Commissioners