The Importance of Assets and Liabilities in Sustainability Disclosure: Evidence from Indonesia

The shift in the way businesses operate has transitioned from solely focusing on generating profits to adopting a more sustainable development-oriented approach. Companies that embrace sustainable business practices with the intention of achieving long-term viability now communicate their efforts through disclosures about their sustainability initiatives. This research focuses on examining how the presentation of assets and liabilities impacts the disclosure of sustainability initiatives. The investigation involved studying a selection of 200 companies listed on the Indonesia Stock Exchange that have issued sustainability reports. The study encompassed a substantial time span, from 2013 to 2021, and employed panel data analysis using EViews software. The outcomes of the panel data analysis revealed that the size of a company's assets does indeed influence the extent of sustainability disclosure. However, when scrutinizing the results based on industry-specific sensitivities, it was evident that the impact differed significantly. Notably, the effect of asset size on sustainability disclosure was more pronounced in companies with lower profiles compared to those with higher profiles. Contrarily, the assessment of the influence of liabilities on sustainability disclosure displayed no significant impact overall. Nevertheless, upon segmenting the liability results according to industry-specific dynamics, a discernible effect emerged. Specifically, the impact of liabilities on sustainability disclosure was more conspicuous in companies with lower profiles, as opposed to those with higher profiles. In light of the study's findings, certain recommendations can be made. Firstly, it is apparent that current policies promoting sustainability disclosures predominantly rely on administrative penalties, which have not proven fully effective in motivating companies to openly share their sustainability endeavors. As a result, the study suggests that in the future, there is a need for more binding and stringent policies and penalties to be established by both governmental bodies and the financial market to encourage and enforce enhanced sustainability disclosures.