From Amanah to Sustainability: CEO Power and ESG in Indonesia
DOI:
https://doi.org/10.30872/jfor.v27i1/3918Keywords:
Lingkungan, Sosial, Tata Kelola ESG, Masa Jabatan CEO, Kepemilikan CEO, Dualitas CEOAbstract
This study tests whether CEO power shapes ESG performance among Indonesian infrastructure firms. We assemble a balanced panel of 24 IDX issuers (2019–2023; 120 firm-years) from Refinitiv ESG and corporate disclosures. Random-effects regressions with robust errors model ESG on CEO tenure, ownership, and duality, controlling for size, leverage, and profitability. Results show CEO tenure is positively and significantly associated with ESG, suggesting experienced yet non-entrenched leadership advances sustainability. CEO duality exhibits a positive but insignificant coefficient, while CEO ownership is negative and insignificant. Model fit is modest (R²≈0.20), implying external forces and broader governance also matter. Findings align Islamic notions of amanah and maslahah: accountable, seasoned leadership better delivers stakeholder welfare through ESG, whereas concentrated personal control does not reliably improve sustainability
References
Abdullah, Zhu, N., Hashmi, M. A., & Shah, M. H. (2024). CEO power, board features and ESG performance: An extensive novel moderation analysis. Corporate Social Responsibility and Environmental Management, 31(6), 5627–5655. https://doi.org/10.1002/csr.2886
Alejo, J., Galvao, A. F., Montes‐Rojas, G., & Sosa‐Escudero, W. (2015). Tests for Normality in Linear Panel-Data Models. The Stata Journal Promoting Communications on Statistics and Stata, 15(3), 822–832. https://doi.org/10.1177/1536867x1501500314
Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60–79. https://doi.org/10.1016/j.jacceco.2014.11.004
Alsayegh, M. F., Abdul Rahman, R., & Homayoun, S. (2020). Corporate Economic, Environmental, and Social Sustainability Performance Transformation through ESG Disclosure. Sustainability, 12(9), Article 9. https://doi.org/10.3390/su12093910
Al-Shaer, H., Albitar, K., & Liu, J. (2023). CEO power and CSR-linked compensation for corporate environmental responsibility: UK evidence. Review of Quantitative Finance and Accounting, 60(3), 1025–1063. https://doi.org/10.1007/s11156-022-01118-z
Appuhami, R., & Bhuyan, M. (2015). Examining the Influence of Corporate Governance on Intellectual Capital Efficiency. Managerial Auditing Journal, 30(4/5), 347–372. https://doi.org/10.1108/maj-04-2014-1022
Arıcı, H. E., Aladag, O. F., & Köseoğlu, M. A. (2024). How Does CEO Duality Influence ESG Scores in Hospitality and Tourism Companies? Confounding Roles of Governance Mechanisms and Financial Indicators. Journal of Hospitality & Tourism Research, 49(5), 961–981. https://doi.org/10.1177/10963480241266154
Atwood, J. A., Shaik, S., & Watts, M. J. (2003). Are Crop Yields Normally Distributed? A Reexamination. American Journal of Agricultural Economics, 85(4), 888–901. https://doi.org/10.1111/1467-8276.00495
Baltagi, B. H., Kao, C., & Peng, B. (2015). On Testing for Sphericity With Non-Normality in a Fixed Effects Panel Data Model. Statistics & Probability Letters, 98, 123–130. https://doi.org/10.1016/j.spl.2014.12.017
Bhandari, K. R., Ranta, M., & Salo, J. (2022). The resource‐based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm’s embeddedness into ecology, society, and governance. Business Strategy and the Environment, 31(4), 1525–1537. https://doi.org/10.1002/bse.2967
Bhat, B. A., Makkar, M. K., & Gupta, N. (2023). Corporate Board Structure and ESG Performance: An Empirical Study of Listed Firms in the Emerging Market. Corporate Governance and Sustainability Review, 7(2), 8–17. https://doi.org/10.22495/cgsrv7i2p1
Bhatia, S., & Marwaha, D. (2022). The Influence of Board Factors and Gender Diversity on the ESG Disclosure Score: A Study on Indian Companies. Global Business Review, 23(6), 1544–1557. https://doi.org/10.1177/09721509221132067
Brennan, R. L., Harris, D. J., & Hanson, B. A. (1987). ACT Research Report Series: The Bootstrap and Other Procedures for Examining the Variability of Estimated Variance Components in Testing Contexts. https://doi.org/10.1037/e426002008-001
Brookman, J., & Thistle, P. D. (2009). CEO tenure, the risk of termination and firm value. Journal of Corporate Finance, 15(3), 331–344. https://doi.org/10.1016/j.jcorpfin.2009.01.002
Budastra, M. A., Adamu, I., Putra, F. K., & Budastra, I. K. (2023). Do Ceo Characteristics Really Matter for Firm Performance? Evidence From Indonesia. Jurnal Bisnis Terapan, 7(2), 221–229. https://doi.org/10.24123/jbt.v7i2.5936
Bui, H. T., Nguyen, H., & Chau, V. S. (2019). Strategic Agility Orientation? The Impact of CEO Duality on Corporate Entrepreneurship in Privatized Vietnamese Firms. Journal of General Management, 45(2), 107–116. https://doi.org/10.1177/0306307019886170
Chen, H.-L. (2013). CEO Tenure and R&D Investment: The Moderating Effect of Board Capital. The Journal of Applied Behavioral Science, 49(4), 437–459. https://doi.org/10.1177/0021886313485129
Darouichi, A., Kunisch, S., Menz, M., & Cannella, A. A. (2021). CEO tenure: An integrative review and pathways for future research. Corporate Governance: An International Review, 29(6), 661–683. https://doi.org/10.1111/corg.12396
Disli, M., Yilmaz, M. K., & Mohamed, F. F. M. (2022). Board characteristics and sustainability performance: Empirical evidence from emerging markets. Sustainability Accounting, Management and Policy Journal, 13(4), 929–952. https://doi.org/10.1108/SAMPJ-09-2020-0313
Elsayed, K. (2007). Does CEO Duality Really Affect Corporate Performance? Corporate Governance an International Review, 15(6), 1203–1214. https://doi.org/10.1111/j.1467-8683.2007.00641.x
Gupta, V. K., Han, S., Nanda, V., & Silveri, S. (Dino). (2018). When Crisis Knocks, Call a Powerful CEO (or Not): Investigating the Contingent Link Between CEO Power and Firm Performance During Industry Turmoil. Group & Organization Management, 43(6), 971–998. https://doi.org/10.1177/1059601116671603
Gurol, B., & Lagasio, V. (2023). Women board members’ impact on ESG disclosure with environment and social dimensions: Evidence from the European banking sector. Social Responsibility Journal, 19(1), 211–228. https://doi.org/10.1108/SRJ-08-2020-0308
Haider, J., & Fang, H.-X. (2018). CEO power, corporate risk taking and role of large shareholders. Journal of Financial Economic Policy, 10(1), 55–72. https://doi.org/10.1108/JFEP-04-2017-0033
Hambrick, D. C. (2007). Upper Echelons Theory: An Update. Academy of Management Review, 32(2), 334–343. https://doi.org/10.5465/amr.2007.24345254
Hou, W., Priem, R. L., & Goranova, M. (2017). Does One Size Fit All? Investigating Pay–Future Performance Relationships Over the “Seasons” of CEO Tenure. Journal of Management, 43(3), 864–891. https://doi.org/10.1177/0149206314544744
Jiraporn, P., Chintrakarn, P., & Liu, Y. (2012). Capital Structure, CEO Dominance, and Corporate Performance. Journal of Financial Services Research, 42(3), 139–158. https://doi.org/10.1007/s10693-011-0109-8
Khan, T. M., Gang, B., Fareed, Z., & Yasmeen, R. (2020). The impact of CEO tenure on corporate social and environmental performance: An emerging country’s analysis. Environmental Science and Pollution Research, 27(16), 19314–19326. https://doi.org/10.1007/s11356-020-08468-y
Kind, F. L., Zeppenfeld, J., & Lueg, R. (2023). The impact of chief executive officer narcissism on environmental, social, and governance reporting. Business Strategy and the Environment, 32(7), 4448–4466. https://doi.org/10.1002/bse.3375
Lewellyn, K. B., & Fainshmidt, S. (2017). Effectiveness of CEO Power Bundles and Discretion Context: Unpacking the ‘Fuzziness’ of the CEO Duality Puzzle. Organization Studies, 38(11), 1603–1624. https://doi.org/10.1177/0170840616685364
Li, F., Li, T., & Minor, D. (2016). CEO power, corporate social responsibility, and firm value: A test of agency theory. International Journal of Managerial Finance, 12(5), 611–628. https://doi.org/10.1108/IJMF-05-2015-0116
Maak, T., Pless, N. M., & Voegtlin, C. (2016). Business Statesman or Shareholder Advocate? CEO Responsible Leadership Styles and the Micro‐Foundations of Political CSR. Journal of Management Studies, 53(3), 463–493. https://doi.org/10.1111/joms.12195
Mahran, K., & Elamer, A. A. (2024). Chief Executive Officer (CEO) and corporate environmental sustainability: A systematic literature review and avenues for future research. Business Strategy and the Environment, 33(3), 1977–2003. https://doi.org/10.1002/bse.3577
Matta, E., & Beamish, P. W. (2008). The accentuated CEO career horizon problem: Evidence from international acquisitions. Strategic Management Journal, 29(7), 683–700. https://doi.org/10.1002/smj.680
Rath, C., Kurniasari, F., & Deo, M. (2020). CEO Compensation and Firm Performance: The Role of ESG Transparency. Indonesian Journal of Sustainability Accounting and Management, 4(2). https://doi.org/10.28992/ijsam.v4i2.225
Romano, M., Cirillo, A., Favino, C., & Netti, A. (2020). ESG (Environmental, Social and Governance) Performance and Board Gender Diversity: The Moderating Role of CEO Duality. Sustainability, 12(21), 9298. https://doi.org/10.3390/su12219298
Sang, S., Yan, A., & Ahmad, M. (2024). CEO Experience and Enterprise Environment, Social and Governance Performance: Evidence From China. Sustainability, 16(11), 4403. https://doi.org/10.3390/su16114403
Simsek, Z. (2007). CEO tenure and organizational performance: An intervening model. Strategic Management Journal, 28(6), 653–662. https://doi.org/10.1002/smj.599
Song, H. J., & Kang, K. H. (2019). The moderating effect of CEO duality on the relationship between geographic diversification and firm performance in the US lodging industry. International Journal of Contemporary Hospitality Management, 31(3), 1488–1504. https://doi.org/10.1108/IJCHM-12-2017-0848
Triyani, A., & Setyahuni, S. W. (2020). Pengaruh Karakteristik Ceo Terhadap Pengungkapan Informasi Environmental, Social, and Governance (Esg). Jurnal Ekonomi Dan Bisnis, 21(2), 72. https://doi.org/10.30659/ekobis.21.2.72-83
Triyani, A., Setyahuni, S. W., & Kiryanto, K. (2020). The Effect of Environmental, Social and Governance (ESG) Disclosure on Firm Performance: The Role of Ceo Tenure. Jurnal Reviu Akuntansi Dan Keuangan, 10(2), 261–270. https://doi.org/10.22219/jrak.v10i2.11820
Uyar, A., Kuzey, C., Kilic, M., & Karaman, A. S. (2021). Board structure, financial performance, corporate social responsibility performance, CSR committee, and CEO duality: Disentangling the connection in healthcare. Corporate Social Responsibility and Environmental Management, 28(6), 1730–1748. https://doi.org/10.1002/csr.2141
Velásquez, J. P. D., & Cortés, D. L. (2020). CEO Duality and Firm Value: Evidence From Mexico. Entramado, 16(2), 12–23. https://doi.org/10.18041/1900-3803/entramado.2.6435
Velte, P. (2019). Does CEO power moderate the link between ESG performance and financial performance?: A focus on the German two-tier system. Management Research Review, 43(5), 497–520. https://doi.org/10.1108/MRR-04-2019-0182
Wang, G., Holmes, R. M., Oh, I., & Zhu, W. (2016). Do CEOs Matter to Firm Strategic Actions and Firm Performance? A Meta‐Analytic Investigation Based on Upper Echelons Theory. Personnel Psychology, 69(4), 775–862. https://doi.org/10.1111/peps.12140
Wijayanto, W., Giriati, Wendy, W., & Malini, H. (2024). CEO Power and Firm Value: Affirmative Action Implications. Asian Journal of Economics Business and Accounting, 24(6), 552–560. https://doi.org/10.9734/ajeba/2024/v24i61381
Yadav, P., & Jain, A. (2023). Sustainability disclosures and corporate boards: A stakeholder approach to decision-making. Journal of Applied Accounting Research, 24(5), 1027–1047. https://doi.org/10.1108/JAAR-10-2022-0279
Yu, M. (2023). CEO duality and firm performance: A systematic review and research agenda. European Management Review, 20(2), 346–358. https://doi.org/10.1111/emre.12522
Zhu, N., Nagriwum, T. M., & Saeed, U. F. (2025). Advancing ESG Performance in MENA Economies: Do Governance Structures and Eco‐Technology Matter? Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.70111
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Dina Ockta Irani, Ernie Hendrawaty, Sri Hasnawati; Adli Rikanda Saputra
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
