166 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss.

2, pg 166-187

Jurnal Akuntansi dan Keuangan Indonesia

Volume 19 Issue 2 Desember 2022

ESG AND INTELLECTUAL CAPITAL EFFICIENCY:

EVIDENCE FROM ASEAN EMERGING MARKETS

Etikah Karyani
Accounting Department, Universitas Sebelas Maret
etikah.karyani@staff.uns.ac.id

Muhamad Resa Perdiansyah

Assurance Services, Ernst and Young Indonesia
muhamad.r.perdiansyah@id.ey.com

Abstract

This study aims to investigate the impacts of Environmental, Social, and Governance (ESG)
in total and individual performance (“E”, “S”, and “G”) on firms’ intellectual capital (IC)
efficiency. The Value-Added Intellectual Coefficient (VAIC) and Modified Value-Added
Intellectual Coefficient (MVAIC) were used to measure IC efficiency. Meanwhile, the annual
ESG index data from the ASEAN-4 were used to measure ESG from 2015 to 2020. The results
show “E”, “S”, and “G” and total ESG positively affect firms’ efficiency in managing IC.
In addition, the industry type moderates these relationships in terms of that banks have a
greater influence than non-banks. Our results are robust, indicating consistent results. This
paper contributes to the literature by examining whether ESG is a determinant of non-
financial performance; as far as our observation and knowledge, it is still very limited.

Keywords: ESG, intellectual capital, value creation, type of industry

Abstrak

Penelitian ini bertujuan untuk menyelidiki dampak kinerja Environmental, Social and
Governance (ESG) secara total dan individu (“E”, “S”, dan “G”) terhadap efisiensi
intellectual capital (IC) perusahaan. Value-Added Intellectual Coefficient (VAIC) dan
Modified Value-Added Intellectual Coefficient (MVAIC) digunakan untuk mengukur
efisiensi IC, sedangkan data indeks ESG tahunan dari ASEAN-4 digunakan untuk mengukur
ESG selama periode 2015 hingga 2020. Hasil penelitian menunjukkan “E”, “S”, dan “G”
dan total ESG secara positif mempengaruhi efisiensi perusahaan dalam mengelola IC. Selain
itu, jenis industri memoderasi hubungan ini. Hasil kami kuat, yang menunjukkan hasil yang
konsisten. Makalah ini berkontribusi pada literatur dengan menguji apakah ESG merupakan
penentu kinerja non-keuangan, sejauh pengamatan dan pengetahuan kami, masih sangat
terbatas.

Kata kunci: ESG, modal intelektual, penciptaan nilai, jenis industri

Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
INTRODUCTION
In the current era, companies are
required to be more transparent and
valuable in providing sustainable finance
information as per demand from
policymakers or stakeholders (Atan et al.
2016). From a non-financial perspective,
investors usually view corporate social
responsibility (CSR) disclosures as
information, showing that the firm supports
sustainable finance. However, according to
a joint report from the United Nations
Environment Program Finance Initiative
(UNEPFI) and the World Business Council
for Sustainable Development (WBCSD)
(UNEPFI and WBCSD 2010), during the
2007, financial crisis investors and
companies concluded that CSR disclosures
were insufficient to ensure companies’
reliability and capability to deal with
current massive developments of
sustainability. Furthermore, environmental,
social, and governance (ESG) performance
is now used as a new measurement of
sustainability in corporate decision-making
(Nelson 2020).
This study aims to investigate the
effect of total ESG and its individual ESG
components (environmental, social, and
governance) on intellectual capital (IC)
efficiency by comparing the financial and
non-financial sectors 1 . According to
Wagner (2021), since the COVID-19
pandemic and the social justice movement
over the past year, there has been an
increase in awareness of ESG issues.
Consumers and investors now expect
organizations, including financial firms, to
incorporate ESG principles into operations,
supply chains, talent management, and
other essential business areas, in contrast to
the situation before the pandemic. The key
concerns include firm reputation, client
Pulic (2008) defined “The efficiency parameters are
received by putting the business result into relation
to each of the resources” and “Intellectual and
capital employee efficiency gives us an aggregated
167
retention, competitive advantage, revenue
prospects, and capital access.
The term 'capital' implies productive
resources that can be used. The IC concept
is an important factor in production and is
often the basis of competitive advantage.
Together with physical and financial
capital, intellectual capital completes the
organization's resource suite. It is also
related to terms such as ‘assets’ or
‘resources’, and combined with others such
as ‘intangible,’ ‘knowledge-based,’ or
‘non-financial’ (Marr 2018). Particularly in
the new economic era, companies
worldwide have recognized that intangible
assets contribute to obtaining superior
performance. Therefore, the effectiveness
of IC management has been recognized as a
very important resource in shaping the
value of modern firms and their competitive
advantage for modern companies (Nawaz
and Haniffa 2017).
In contrast to the non-financial
sector, ESG issues related to opportunities
and risks are becoming increasingly
relevant for financial institutions (KPMG
2021). One of the reasons why financial
companies are so reactive to ESG issues is
that they can help restore their credibility
and reputation following scandals and
financial crises (Miralles-Quirós et al.
2019). It is in line with the European
commission's commitment to enhance the
integration of ESG parameters in all aspects
of the financial system. The financial crisis
has also increasingly encouraged banks to
adopt ESG practices to increase their trust
in, apart from customers, and stakeholders
(Menicucci and Paolucci 2022). Therefore,
this study investigates how ESG in different
sectors (financial and non-financial) can
affect IC efficiency.
To reach the research objective, data
were gathered from all available integrated
reports released by ASEAN-listed firms
indicator that shows the overall efficiency of a
company in value creation and features its
intellectual ability.”
168 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
between 2015 and 2020. The empirical
findings generated can contribute to the
literature. First, our study aims to
investigate the effect of the total ESG and
individual ESG (ENV, SOC, GOV) on
capital investment (IC) (non-financial
performance). Most previous studies have
generally focused on the association
between ESG and firm financial
performance (Ahmad et al. 2021; Karyani
and Maulina 2021; McKinsey 2019;
Taliento et al. 2019; Xie et al. 2019).
Meanwhile, the association between ESG
and firm’s non-financial performance is
limited. Recent studies tested the
relationship between IC and CSR (Chang
and Chen, 2012; Gallardo-Vázquez et al.
2019; Gangi et al. 2019; Rossi et al. 2021;
Yu et al. 2017) with mixed results.
Compared to CSR, research on ESG as a
determinant of non-financial performance,
as far as our observations and knowledge
are concerned, is still very limited.
Therefore, this study may fill this research
gap. ESG provides more measurable
indicators (including sustainability, ethics,
and corporate governance issues) to
measure accountability than CSR.
Moreover, ESG is one of the non-financial
factors that investors are starting to consider
in assessing company performance about
their investment decision-making (Agostini
and Nosella 2017; Nelson 2020).
Second, we measured IC efficiency
with different proxies (Modified value-
added intellectual coefficient-MVAIC and
Value-added intellectual coefficient-
VAIC). Our findings allow comparisons of
various measures of intellectual capital
across different countries and industries,
thus extending the empirical results from
various angles. Whereas previous studies
2
The MSCI Global survey results reported that ESG
investment in Asia increased by 79% in September
2020. According to ADBI, most of the green bonds
in ASEAN have been channeled to green building
construction (43%). The first green bonds issued in
ASEAN came from a Philippine geothermal
company – for a $226 million renewable energy
project in early 2016, followed by projects in
Indonesia, Malaysia, Singapore, and Thailand at
prefer to focus on a single measurement of
the VAIC model which has been widely
used by many developed countries.
Nimtrakoon (2015) identified the
advantages of VAIC; among others, it is
easy to use in determining IC value and
more objective because it uses secondary
data in the form of audited company
financial statements. However, this model
has several weaknesses in measuring IC
since it does not include relational capital
(RC), which is very significant in value
creation (Agostini and Nosella 2017;
Bayraktaroglu et al. 2019; Reboredo and
Sowaity 2022).
Meanwhile, the MVAIC model,
based on the previous VAIC model, has a
focal point on a different model as an IC
measure. The advantage of MVAIC is that
it can measure the intellectual capital
associated with the company's relationship
with external parties from a broader
perspective. In addition to including RC,
the MVAIC model is able to capture the
structural capital efficiency (SCE) of a firm
more proficiently than the first model
(VAIC) (Maji and Goswami 2017;
Nimtrakoon 2015; Saddam and Jaafar
2021).
Finally, this study uses firm data from the
Association of Southeast Asian Nations
(ASEAN); which are interesting for testing
due to their commitment to economic
stabilization for long-term recovery and
growth (OBG 2021) 2 . In addition, ESG
investment in ASEAN countries shows a
growing pattern of encouraging investment
changes that prioritize sustainability
(Varma and Boulton 2019). Our results can
be the basis for future research on ESG and
its impact on corporate IC efficiency in
corporate and government levels. Furthermore, in
2017, the ASEAN Capital Markets Forum
(ACMF) brought together the securities regulators
of the 10-member bloc, launched a regional
standard based on an international framework to
guide the issuance of green bonds, followed in
2018 by standards for both sustainability social ties
and ties.
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
-
2015 2016 2017
Indonesia (4) Malaysia (17)
Figure 1
Comparison of ESG of companies in each ASEAN-4 country (2015-2020)
other emerging countries. ASEAN-4 was
chosen as the sample because only firms
from these countries are listed on the ESG
Index.
Figure 1 shows the uptrend of ESG
in ASEAN. According to the ASEAN Japan
Center (AJC 2019) report, ASEAN
regulators were the catalyst for change as
they required companies listed on the stock
exchange to include ESG in their annual
reports (Karyani and Maulina 2021) 3 .
Furthermore, Thailand has led in terms of
average ESG for the past six years,
outperforming Philippine, Indonesian, and
Malaysian firms 4 . In 2020, ESG
experienced its highest level compared to
previous years, one of which was due to the
demand for investment funds focusing on
ESG issues, which increased by 29%, or
nearly $1.7 trillion 5 . We found that total
ESG and individual ESG should be
3
For example, based on POJK
No.51/POJK.03/2017 and the additional
provisions of OJK Letter No. S-264/D.04/2020,
Indonesia public companies are required to
prepare a Sustainability Report starting in 2021,
the Business Sustainability Program by
Malaysia, the National Renewable Energy
Program 2011-2013 by the Philippines, and the
Feed-in premium program by Thailand.
4
According to CFA Institute report, Thailand has
established as a regional pioneer in
environmental, social, and governance (ESG)
reporting. Since 2012, it has risen quickly in the
169
2018 2019 2020
Philippines (3) Thailand (21)
included as a type of organizational
performance that contributes to achieving
sustainability by managing IC more
efficiently. This paper supports stakeholder
theory, the resource-based view (RBV), and
the knowledge-based view (KBV).
Stakeholder theory seeks to maintain firm
value by considering corporate actions such
as ESG, while RB and KB theories propose
that resources create a firm’s competitive
advantages. Otherwise, IC is known as a
driver in creating added value for the firm.
In addition, stakeholder theory and both
views encourage organizational actions to
manage their resources more optimally and
efficiently. Recently, due to the emergence
of the COVID-19 pandemic, investors’
expectations for companies to disclose
health and safety metrics are also increasing
(ICCR 2020). In addition, companies are
required to better maintain the safety of
magazine Corporate Knights12's global ranking
of 35 global exchanges, becoming the only Asia-
Pacific exchange in the top ten in 2018. The
ranking is based on the quality of ESG
disclosures by listed companies (Zembrowski et
al. 2019).
5
The increase in ESG investment in ASEAN is
more due to the region's increasing focus on
building green infrastructure as a way to
encourage sustainable recovery from the
pandemic, for example building green spaces in
densely populated areas for the benefit of public
health and the environment (OBG 2021).
170 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
workers during the pandemic (Goldberg et
al. 2020). Furthermore, the positive effect
of ESG (total and individual) was
moderated by industry type.
Our findings provide future research
with practical and policy implications. This
study did not ignore the analysis of the
dimensions of both total and individual
ESG which many previous researchers have
not done. Analysis of each dimension led to
our analysis being more in-depth. For
practical implication, our study could
benefit investors and managers by allowing
them to make more accurate investment
decisions based on ESG, which reflects the
firm's future value creation capabilities.
Regarding policy implications,
policymakers and regulators can also better
understand whether ESG can be used to
control, legislate, and monitor existing
operations for their intended purposes.
The rest of this paper is organized as
follows. In the second part, a review of the
relevant literature is elaborated, and a set of
hypotheses is developed. The third part, the
methodology, tests the research hypotheses
before the empirical results are presented.
Finally, the results are discussed, and
conclusions are drawn, including
suggestions for further research.
LITERATURE REVIEW AND
HYPOTHESIS DEVELOPMENT
Resource-Based View (RBV),
Knowledge-Based View (KBV), and
Stakeholder Theory
Penrose (1959) proposed the
resource-based approach (RBV) for
analyzing competitive advantage. It is
distinguished by the benefits of a
knowledge economy, or an economy based
on intangible assets. The assumption of
RBV is based on how the firm can compete
with other organizations to gain a
competitive advantage by managing its
resources according to its capabilities. The
knowledge-based view (KBV) is a new
stakeholder theory, ESG signals
information about the company's
version of RBV and provides strong
theoretical support for IC. The basic
assumptions of KBV originate from the
RBV, identifying knowledge as a long-term
sustainable competitive advantage for
companies that develop the concept of IC.
For a more in-depth explanation of the
KBV, refer, for example, to (Eisenhardt and
Santos 2002) and (Grant 1996). Since ESG
is an essential element of a firm's strategy,
it is viewed as a distinct capability by RBV
and KBV.
Furthermore, Freeman and Evan
(1990) define stakeholders as each
identified group or individual which can
affect the achievement of organizational
goals or which can be influenced by the
achievement of goals. The main purpose of
stakeholder theory is to help corporate
managers understand the stakeholder
environment and effectively manage the
existing relationships in the corporate
environment. Managers have fulfilled the
ethical aspects of stakeholder theory when
they can optimally manage the
organization, especially in creating value
for the company.
Positive Effect of ESG (Total and
Individual) Performance on IC
Efficiency
IC is defined as the company’s
overall pool of collective knowledge,
information, technology, intellectual
property rights, experiences, organizational
learning and competencies, team
communication systems, customer
relationships, and brands that add value to it
(Stewart 1997). The RBV believes that a
company's competitive advantage stems
from its primary resources and capabilities
(Barney 1991), as well as its social and
environmental responsibility, which can be
the main capability used as a competitive
advantage (Hart 1995). This study
examines how ESG is associated with IC
efficiency, in which ESG is split into "E",
"S", and "G" dimensions. According to
commitment to the welfare and social and
environmental issues. ESG information can
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
improve the firm's reputation and value of
intangible assets as reflected in the
efficiency of IC, which includes employees'
expertise and knowledge contained within
the organization (Reboredo and Sowaity
2022).
According to previous studies, IC is
influenced by the environmental dimension
(“E”), which enables companies to conduct
their productive activities in a way that
limits damage to the natural environment,
and participates in the development of IC
(Albertini 2021). Poor environmental
performance due to pollution, resulting
from inefficient use of resources, reduces
productivity (Porter and Linde 1995).
Green management allows companies to be
more competitive. Those that invest
significantly in green management
resources cannot only avoid environmental
protests or penalties but also to improve
their corporate image, develop markets, and
increase their competitive advantage (Chen
2008; Lee 2009; Chen et al. 2006). When
environmental issues are perceived
positively, companies tend to base
operations on the interests of shareholders
and stakeholders and exhibit more
progressive environmental strategies,
involving more resources in intellectual
capital (Huang and Kung 2011).
Social dimension (“S”) includes the
firm's ability to manage its relationship with
its workforce, communities in which it
operates, and political environment. Using
83 firms categorized as the world’s most
ethical corporations, (Rossi et al. 2021)
stated that adopting an ethical and socially
responsible approach is related to IC
disclosure in a positive way. Firms with
good social capital will reduce the need for
expensive business activity monitoring
processes and lower transaction costs, thus
encouraging their creation of added value
(Putnam 1994). Social initiatives and
activities also assist companies in
developing IC, in terms of human capital
(HC), by increasing employee loyalty and
commitment to achieve a competitive
171
advantage relative to their competitors
(Branco and Rodriguez 2006; Kim et al.
2010). In addition, social activities
enhanced the firm’s relational capital (RC),
one of the components of IC (Shahzad et al.
2021), i.e., its image and reputation (Melo
and Garrido-Morgado 2012), and consumer
loyalty (Aramburu and Pescador 2019). As
a result, we suggest that there might be a
relationship between the social dimension
and IC efficiency.
Finally, prior studies have
emphasized the importance of
understanding the corporate governance
(CG) or “G” in successfully employing,
preserving, and maintaining an
organization’s IC (Alfraih 2018; Appuhami
and Bhuyan 2015; Gangi et al. 2019).
(Aslam and Haron 2020) and (Reboredo
and Sowaity 2022) also reported that
releasing information on the governance
dimension improves IC efficiency in terms
of HC, social capital (SC), and RC. The
higher the level of CG in managing its IC,
the higher the chances of achieving
organizational goals (Makki and Lodhi
2014). In accordance with stakeholder
theory, firms continue to ensure their
survival so that stakeholders believe in their
performance and have undertaken the
necessary responsibilities, especially
regarding the firm's business activities
related to their surrounding community and
environment.
This paper suggests the following
hypothesis based on the above
understandings:
H1: ESG (total) is positively associated
with intellectual capital efficiency.
H1a: Environmental dimension is
positively associated with
intellectual capital efficiency.
H1b: Social dimension is positively
associated with intellectual capital
efficiency.
H1d: Governance dimension is positively
associated with intellectual capital
efficiency
172 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
7
6
5
4
3
2
1
-
2015 2016 2017
Figure 2
Comparison of ESG by industry in ASEAN-4 countries (2015-2020)
Industry Effect on IC Efficiency
The following section investigates
industry-type influences on the positive
relationship between ESG and firm IC.
Previous studies examined the relationship
between ESG and a firm’s performance by
comparing a particular sector with other
sectors because it is evident that ESG
aspects are homogeneous across sectors
(see (Garcia et al. 2017); (Johnson et al.
2019)) We considered financial companies
(banks) as a moderating variable due to the
specificity of their operational activities and
the level of regulation differences (Johnson
et al. 2019)6. In addition, financial firms are
becoming increasingly reactive to ESG
issues (Cash 2018). It was due to the many
recent scandals and financial crises that
have clashed with the prevailing tendency
to value the triple bottom line (Escrig-
Olmedo et al. 2019) that can be a turning
point for financial firms to restore their
credibility and reputation in the eyes of
public opinion (Miralles-Quirós et al.
2019). Firer and Williams (2003) also
6
According to (Johnson et al. 2019), the business
case for ESG practices in South Africa was
evaluated by focusing on a sample of JSE-listed
companies in six distinct industries (a considered
sector: consumer goods, consumer services,
healthcare, technology, telecommunications and
industrials sectors). Meanwhile, Garcia et al
(2017) investigated ESG performance in
sensitive industries (those that are more prone to
create social and environmental harm and are
susceptible to systematic social taboos, moral
2018 2019 2020
reported that the banking industry is one
sector that has intensive IC, and its
employees have a more homogeneous
intellectual concept compared to other
economic sectors.
Thus, the second hypothesis of this
study is:
H2: ESG–IC association is different in
different types of industries
RESEARCH METHOD
Study Sample and Data Collection
After eliminating outliers, the final
sample of observation is 267 firm years of
the MVAIC model and 268 firm years for
the VAIC model. The sample includes 45
listed companies and ten different sectors of
stock exchanges in four ASEAN emerging
market countries: Indonesia, Thailand,
Malaysia, and the Philippines (ASEAN-4),
which have an ESG index covering the
2015-2020 period 7. Furthermore, Figure 2
compares ESG by sector or industry type.
disputes, and political pressures). The industries'
groups of companies that are regarded to be
sensitive (oil, gas, chemicals, mining, steel
making and paper and pulp). Even after
controlling for the firm's size and country, they
found that firms in sensitive industries do better
in terms of environmental performance than
other industries.
7
We observed listed companies in the emerging
markets, as a selected market. Stock exchanges
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
Figure 2 shows the average ESG
based on ten sectors during 2015-2020, with
the energy sector having the highest
performance, followed by real estate,
telecommunications, and finance. Lawson
(2020) stated that, supported by ASEAN
government regulations, energy companies
are rapidly improving their ESG values by
regulating and manufacturing renewable
energy sources and greening environmental
projects. Furthermore, energy projects have
been funded by around one-third of the
allocation of various green bond
instruments. On the other hand, the lowest
ESG corresponded to the utility sector. This
might be due to its difficulty in
implementing ESG, as companies are just
starting out by setting clear ambitions that
aim for short-term operational emission
reduction targets (Gaasman and Kelly
2021). This sector is also still having
problems with several issues, such as waste
disposal and water pollution due to this
industry.
Description of Variables
We analyzed the association
between ESG and IC and how industry type
influences this relationship. We divided our
sample into three sub-samples, namely
firms that are indexed (1) environmental
(ENV), (2) social (SOC), and governance
(GOV), when investigating the individual
effects of ESG. In terms of attribution, this
study further separates two other sub-
samples, namely financial industry (FIN)
and non-financial industry (NonFIN) when
investigating the impact of industry type.
ESG, as an independent variable, was
obtained from the Refinitiv/S-Network
have uniformly applied the same rules and
guidelines to all listed companies so that they
provide high-quality, insightful reports.
Furthermore, emerging markets have the rapid
progress can be made and superior in dynamics
to developed countries, where practices and
habits are entrenched and difficult to change.
173
ESG Best Practices Ratings and Indices8. IC
was measured by two methods. First, the
Modified Value Added Intellectual
Coefficient (MVAIC) model was
developed by (Ulum et al. 2014) and
(Nimtrakoon 2015). Second, the Value-
Added Intellectual Coefficient (VAIC)
model, established by (Pulic 1998), is a
monetary-based intellectual capital
measurement approach that may be used to
examine intellectual capital efficiency
across industries. We used two approaches
to IC estimation because of their advantages
and widely used both research and
corporate practice to assess the efficiency of
intellectual capital (Massaro et al. 2018), so
that the results of this study can be
compared with their findings. The VAIC
model is used to assess the relationship
between intellectual capital (Human
Capital-HC, Structural Capital-SC, Capital
Employed-CE efficiencies, while MVAIC
includes Relational Capital (RC) as
additional component of VAIC. These
measurements show the efficiency of a
firm's value creation. The higher the
MVAIC and VAIC, the better the firm
utilized its IC resources.
Variables of industry type are
dummy, and as in the CSR or ESG
literature, we account for control variables
at the firm level (firm size-SIZE), industry
level (Market to Book Value-MBV), and
country level (Growth of GDP-GGDP), to
avoid confounding effects. Year-fixed
effects were also used to control for time
trends, and country-fixed effects were used
to adjust for unobserved country
8
Refinitiv/S-Network ESG Best Practices Ratings
& Indices is a series of indexes designed to
provide corporate benchmarks demonstrating the
best practices of corporate social responsibility
that are constituents of Environmental, Social
and Governance performance. The index
represents a comprehensive benchmarking
system for CSR investors assessed in 156 main
indicators of ESG.
 174 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187

Table 1
Research variables, measurements, predictions, and data sources

Variables Measure References

Dependent variable
Intellectual Capital (IC)
Modified Value Added M𝑉𝐴𝐼𝐶 = HCE + SCE + CEE + RCE (Ulum et al. 2014);
Intellectual Coefficient (Nimtrakoon 2015)
(MVAIC)
Value Added Intellectual 𝑉𝐴𝐼𝐶 = HCE + SCE + CEE (Pulic 1998)
Coefficient (VAIC)

HCE = Human Capital Efficiency = VA / HC

SCE = Structural Capital Efficiency = VA / SC
CEE = Capital Employed Efficiency = VA / CE
RCE = Relational Capital Efficiency = VA / RC
VA = value added = total revenue-cost of goods sold-operating
expense (excluding staff expenses)
HC = human capital = labor cost
SC = structural capital = VA - HC
CE = capital employed = book value of total asset
RC = relational capital = marketing expenses

Independent variable
Environmental, Social,
ESG = Weight x Index (Kim et al. 2013)
Governance (ESG)
Environmental (ENV) Environment = Weight x Index
Social (SOC) Social = Weight x Index
Governance (GOV) Governance = Weight x Index
Finance firms (FIN) Dummy: 1 for financial firms, 0 for non-financial firms
Control variable
Bank size (SIZE) Natural log of corporate total assets (Alfraih 2018)
Market to Book Value
Natural log of market price divided by book value (Chen et al. 2005)
(MBV)
Country Growth of GDP
Natural log of GDP per capita growth (annual %) World Bank
(GGDP)
Country dummies
Dummy variable for the countries, Indonesia as a benchmark
(CountryD)
Dummy variable for the years of 2015-2019, 2020 as a
Year dummies (YearD)
benchmark

differences. IC data and other control ICit = 𝛼0 + 𝛼1 𝐸𝑆𝐺𝑖𝑡 + 𝛼2 𝐹𝐼𝑁𝑖𝑡 +

variables were obtained from the annual 𝛼3 𝐸𝑆𝐺𝑖𝑡 ∗ 𝐹𝐼𝑁𝑖𝑡 + 𝛼4 𝑆𝐼𝑍𝐸𝑖𝑡 +
𝛼5 𝑀𝐵𝑉𝑖𝑡 + 𝛼6 𝐺𝐷𝑃𝐺𝑖𝑡 +
financial statements (2015-2020) and the 𝛼7 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝐷𝑖𝑡 + 𝛼8 𝑌𝑒𝑎𝑟𝐷𝑖𝑡 +
World Bank (www.data.worldbank.org). A 𝑒𝑖𝑡
detailed description of all the variables is (1)
given in Table 1. ICit = 𝛽0 + 𝛽1 𝐸𝑁𝑉𝑖𝑡 + 𝛽2 𝐹𝐼𝑁𝑖𝑡 +
𝛽3 𝐸𝑁𝑉𝑖𝑡 ∗ 𝐹𝐼𝑁𝑖𝑡 + 𝛽4 𝑆𝐼𝑍𝐸𝑖𝑡 +
Research Model 𝛽5 𝑀𝐵𝑉𝑖𝑡 + 𝛽6 𝐺𝐷𝑃𝐺𝑖𝑡 +
𝛽7 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝐷𝑖𝑡 + 𝛽8 𝑌𝑒𝑎𝑟𝐷𝑖𝑡 +
Models (1)-(4) were used to evaluate the 𝑒𝑖𝑡
relationship between ESG and firm IC
(MVAIC and VAIC).
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187 175

Table 2
Descriptive statistics

Observation Mean Maximum Minimum Std. Dev. Skewness

MVAIC 267 4.375 13.129 0.474 2.444 1.231
VAIC 268 4.259 13.123 0.231 2.444 1.284
ESG 270 3.220 10.186 0.908 1.609 1.174
ESG-fin 4.03 8.15 2.04 1.26 0.760
ESG-nonfin 2.97 10.18 0.91 1.63 1.524
ENV 270 3.039 9.689 0.875 1.536 1.174
ENV-fin 3.75 7.58 1.60 1.26 0.752
ENV-nonfin 2.83 9.69 0.88 1.55 1.486
SOC 270 2.955 8.799 0.794 1.467 1.072
SOC-fin 3.69 6.59 1.73 1.16 0.492
SOC-nonfin 2.72 8.79 0.79 1.47 1.43
GOV 270 3.324 9.164 0.772 1.661 0.898
GOV-fin 4.41 9.16 2.23 1.48 0.817
GOV-nonfin 2.98 8.15 0.77 1.57 1.164
FIN 270 0.252 1 0 0.431 1.189
SIZE (million dollar) 270 30,665 203,845 6018 44,150 1.952
MBR (times) 270 2.458 11.261 0.312 2.119 2.008
GGDP (%) 270 2.866 7.149 -8.083 0.040 -1.715
Notes:
This table shows descriptive statistics for all variables used in the research. MVAIC and VAIC are the value-added
intellectual coefficient. ESG is firms’ ESG. ENV is environmental performance. SOC is social performance. GOV
is governance performance. SIZE is a firm size. MBV is market-to-book value. GGDP is GDP growth.

ICit = 𝛾0 + 𝛾1 𝑆𝑂𝐶𝑖𝑡 + 𝛾2 𝐹𝐼𝑁𝑖𝑡 +
𝛾3 𝑆𝑂𝐶𝑖𝑡 ∗ 𝐹𝐼𝑁𝑖𝑡 + 𝛾4 𝑆𝐼𝑍𝐸𝑖𝑡 +
𝛾5 𝑀𝐵𝑉𝑖𝑡 + 𝛾6 𝐺𝐷𝑃𝐺𝑖𝑡 +
𝛾7 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝐷𝑖𝑡 + 𝛾8 𝑌𝑒𝑎𝑟𝐷𝑖𝑡 +
𝑒𝑖𝑡
(3)
ICit = 𝜃 + 𝜃1 𝐺𝑂𝑉𝑖𝑡 + 𝜃2 𝐼𝑁𝐷𝑖𝑡 +
𝜃3 𝐺𝑂𝑉𝑖𝑡 ∗ 𝐼𝑁𝐷𝑖𝑡 + 𝜃4 𝑆𝐼𝑍𝐸𝑖𝑡 +
𝜃5 𝑀𝐵𝑉𝑖𝑡 + 𝜃6 𝐺𝐷𝑃𝐺𝑖𝑡 +
𝜃7 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝐷𝑖𝑡 + 𝜃8 𝑌𝑒𝑎𝑟𝐷𝑖𝑡 +
𝑒𝑖𝑡
(4)
where i and t represent the firm and year,
respectively; ε denotes the disturbance.
EMPIRICAL RESULTS AND
DISCUSSION
Descriptive Statistics
Table 2 shows the descriptive statistics
where the mean values of MVAIC and
VAIC are 4.375 and 4.259, respectively.
The higher the MVAIC dan VAIC values
indicate that the company has more value
creation efficiency from its tangible and
intangible assets. The highest MVAIC
value of 13.129 and VAIC value of 13.123
correspond to an energy company in
Thailand, indicating the most efficient use
of their IC.
The independent variables, total
ESG, ENV, SOC, and GOV, have mean
values of 3.220, 3.039, 2.955, and 3.324,
respectively. The statistical value explains
that the greater the value of these variables,
the better the environmental, social, and
governance performance. Furthermore, we
divided performance by financial and non-
financial sectors, which shows that the
mean performance of total ESG and
individual ESG (ENV, SOC, GOV) for the
financial sector was higher than the non-
financial sector. Marchyta et al. (2020)
176 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
Correlation Matrix
Probability ESG ENV
ESG 1
ENV 0.964*** 1
SOC 0.979*** 0.981***
GOV 0.979*** 0.958***
LnMBV 0.043 -0.019
LnSIZE 0.487*** 0.473***
GGDP -0.100 -0.104
Notes:
Standard errors *, **, *** indicate significance at 10%, 5%, and 1%, respectively.
ESG represents firms’ ESG. ENV is environmental performance. SOC is social performance. GOV is governance performance.
LnSIZE is the natural log of firm size. LnMBV is the natural log of the market-to-book value. GGDP is the natural log of GDP
growth.
stated that banks rely heavily on public
trust, reputation, and corporate image, so
banks are expected to have higher ESG
(undertaking more ESG) to maintain their
sustainability. Furthermore, the non-
financial sector represents 75% of our
samples, while the financial sector
represents the remainder (25%).
Concerning the control variables,
SIZE (total assets) has a mean value of USD
30.665 million, with the largest asset value
owned by a Malaysian bank. In addition, the
mean value of the market-to-book ratio in
ASEAN-4 was 2.5 times, with the most
expensive shares were 11 times and the
cheapest ones were 0.3 times. The average
GDP growth rate (GGDP) in ASEAN was
2.85%, with the lowest growth experienced
in 2020. The Philippines had the highest
GDP growth rate (7%) in 2016 but also
faced the biggest GDP slowdown (-8%) in
2020.
Correlation Analysis
Table 3 shows the results of the
correlation analysis. As the correlation
between the independent variables, ESG,
ENV, SOC, and GOV, was very high
(>0.9), we did not test these variables in one
equation to avoid multicollinearity
problems. This table shows the results of the
correlation analysis.
Regression Results and Discussion
The results of the static regressions
(panel least square) of four different models
Table 3
SOC GOV LnMBV LnSIZE GGDP
1
0.974*** 1
0.001 -0.012 1
0.497*** 0.544*** -0.505*** 1
-0.089 -0.047 -0.031 0.144** 1
with the MVAIC and VAIC measurements
are reported in Table 4. We also used the
weighted least square (WLS) estimator to
address the probability of heteroscedasticity
problems. WLS, also known as generalized
least square (GLS), is a widely used
econometric technique to deal with data
heterogeneity in ordinary least squares
(OLS) (see, for example (Greene 2018;
Verbeek 2017)).
The influence of ENV, SOC, and
GOV performances on IC, as proxied by
MVAIC and VAIC, was significantly
positive (at a level of 1 percent) with
coefficient values were 0.296, 0.219, 0.190,
and 0.263, 0.211, 0.142, respectively. In
line with previous studies (Alfraih 2018;
Beretta et al. 2019; Chang and Chen 2012;
Gallardo-Vázquez et al. 2019; Gangi et al.
2019) and theories (stakeholder, RBV and
KBV), one way to obtain support from
stakeholders for survival is through
company activities that improve its
reputation and create added value. Based on
the MVAIC model, total ESG had a
significantly positive effect on IC but had
no statistically significant impact on IC
with the VAIC model. It shows that
relational capital is a factor or component
that needs to be considered and integrated
into measuring intellectual capital so that
high ESG levels can increase IC (MVAIC
model).
Environmental performance (ENV)
had a positive and significant effect on IC
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187 177

Table 4
Results of Regression Estimation

This table reports the OLS regression test results from four different models with MVAIC and VAIC

MVAIC VAIC
Variable Prediction Model 1 Model 2 Model 3 Model 4 Model 1 Model 2 Model 3 Model 4
ESG (se) ENV (se) SOC (se) GOV (se) ESG (se) ENV (se) SOC (se) GOV (se)

ESG + 0.134*** 0.079

(0.050) (0.049)
ENV + 0.296 *** 0.263 ***
(0.047) (0.043)
SOC + 0.219 *** 0.211 ***
(0.050) (0.046)
GOV + 0.190 *** 0.142 ***
(0.047) (0.052)
FIN + -1.977 *** -1.185 *** -1.232 *** -1.638 *** -2.184 *** -1.316 *** -1.214 *** -1.739 ***
(0.259) (0.361) (0.267) (0.263) (0.270) (0.353) (0.283) (0.282)
FIN*ESG + 0.302 *** 0.350 ***
(0.075) (0.076)
FIN*ENV + 0.189 *** 0.235 ***
(0.061) (0.064)
FIN*SOC + 0.187 ** 0.217 ***
(0.084) (0.085)
FIN*GOV + 0.186 *** 0.239 ***
(0.067) (0.072)
LnSIZE +/- 0.048 -0.164 -0.055 0.005 0.107 -0.139 -0.0814 0.013
(0.129) (0.134) (0.131) (0.115) (0.126) (0.128) (0.131) (0.105)
LnMBV +/- 0.419 *** 0.291 ** 0.380 *** 0.370 *** 0.374 *** 0.217 * 0.274 ** 0.309 ***
(0.125) (0.120) (0.128) (0.118) (0.124) (0.119) (0.133) (0.117)
GGDP +/- 2.186 -0.679 4.594 1.180 3.173 0.658 6.289 1.903 **
(5.210) (5.653) (5.623) (5.294) (5.650) (5.719) (5.667) (5.215)
Country dummies yes yes yes yes Yes yes Yes yes
178 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187

MVAIC VAIC
Variable Prediction Model 1 Model 2 Model 3 Model 4 Model 1 Model 2 Model 3 Model 4
ESG (se) ENV (se) SOC (se) GOV (se) ESG (se) ENV (se) SOC (se) GOV (se)
Year dummies yes yes yes yes yes yes Yes yes
Adjusted R2 0.496 0.482 0.531 0.488 0.492 0.471 0.508 0.468
F-statistic 19.746 *** 18.697 *** 22.519 *** 19.105 *** 19.479 *** 17.635 *** 20.316 *** 17.455 ***
No of obser. 267 267 267 267 268 268 268 268

Notes:
Standard errors *, **, *** indicate significance at 10%, 5%, and 1%, respectively.
MVAIC is the modified value-added intellectual coefficient developed by Ulum et al. (2014). VAIC is the evaluation value-added intellectual coefficient of Public (1998). ESG
is firms’ ESG. ENV is environmental performance. SOC is social performance. GOV is governance performance. LnSIZE is the natural log of firm size. LnMBV is the natural
log of market to book value. FIN is a dummy variable, given 1 for financial firms and 0 for non-financial firms. GGDP is the natural log of GDP growth.
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
because it can be considered a company
asset that contributes to increasing the
economic value of strategic assets, such as
IC (Gangi et al. 2019). This is undoubtedly
related to the level of public trust in the
firm's reputation when looking at its
actions, particularly in maintaining its
environmental performance. As a business
entity that utilizes its business activities,
firms must protect the environment around
their business. Chang and Chen (2012)
stated that corporate actions which support
environmental sustainability will create a
conducive corporate environment, creating
a trusting relationship both internally and
externally to the business, facilitating the
creation and development of knowledge
contained in IC, and helping optimize the
creation of added value. In addition,
environmental performance represents an
internal dimension that involves individuals
working for the company, motivating them
and their belief to be part of a company, and
prioritizing good values. Environmental
performance is conceptually related to the
multidimensional construction of IC that
involves the knowledge of individuals to
improve the company's reputation (White
1996) and performance by optimizing the
creation of added value (Gallardo-Vázquez
et al. 2019; Zembrowski et al. 2019).
Companies that have environmental
awareness will secure support from external
institutions and stakeholders. According to
stakeholder theory, it is beneficial for firms
to engage in ESG activities that are essential
to certain stakeholders because they may
withdraw their support for companies that
are not involved in such activities (Freeman
1984). Additionally, RBV suggests that
environmental, social responsibility can be
a resource or capability, such as an excellent
corporate image or close relationships with
stakeholders, which will lead to a
sustainable competitive advantage (Barney
1991).
Human involvement and
communication are required to successfully
deploy and manage knowledge processes.
As a result, its social capital and dimensions
179
are crucial (Farahani et al. 2016) because
they enable individuals (groups, teams, and
organizations) to collaborate to achieve
tasks successfully. Organizational social
capital builds cohesiveness by instilling
trust and confidence. Elements like trust,
mutual understanding, dedication, and
stability foster communication that enables
companies to thrive in a changing
marketplace (Cohen and Prusak 2001).
Moreover, Gangi et al. (2019) and Alfraih
(2018) stated that firms that pay attention to
CG performance would strengthen their
ability to create added value for their
stakeholders. Allegrini and Greco (2013)
also report that good CG enables more
efficient IC management control and the
disclosure of sufficient capital information.
Moreover, Table 4 shows that the
coefficient value of industrial type (FIN)
was negative and statistically significant (at
the 1% level) for all models, which means
that the financial industry (banking) had
lower IC efficiency. This is in line with the
finding of Ulum et al. (2016), stating that
the IC of companies in the non-financial
industry is higher than the IC of companies
in the financial industry, although this
sector with extensive IC, and its employees
have a more homogeneous intellectual
concept when compared to other economic
sectors as stated by (Firer and Williams
2003).
FIN*ESG, FIN*ENV, FIN*SOC,
and FIN*GOV variables are significant for
either the MVAIC or VAIC models with
coefficient values of 0.302, 0.350, 0.189,
0.235 (MVAIC model) and 0.187, 0.217,
0.186, 0.239 (VAIC model), respectively.
This is consistent with Hypothesis 2 that
there is a difference in the effect of the
industry type (financial vs. non-financial)
on the association between total ESG and
individual ESG (environment, social, or
governance) performances and IC. The
firm’s total ESG and individual ESG in the
financial sector had a greater influence on
IC than in other sectors.
In recent years, ESG has become
increasingly relevant for banks and
 180 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
Table 5
Summary of Endogeneity Test
MVAIC
Model 1 Model 2 Model 3 Model 4
ESG ENV SOC GOV
AR (2) 0.856 0.091 0.310
Prob (J-stat.) 0.869 0.871 0.922
LaggedMVAIC
1.596 1.647 1.808
(GMM)
Conclusion no bias no bias no bias no bias
financial institutions. ESG activities are
incorporated into their business models,
risk processes, and credit policies, which
can influence prudential requirements and
become strategic for both banks and public
authorities. In line with previous studies,
bank scandals and financial crises played a
crucial role in the development of ESG
practices in the banking sector because
credit institutions began to adopt these
practices to rebuild their confidence with
customers (Menicucci and Paolucci 2022),
and to restore credibility and reputation
(Miralles-Quirós et al. 2019). For example,
a bank's reputation can be enhanced through
announcements of philanthropic projects
for environmental purposes, green building
certification, and achieving ISO 14001
certification (Chang and Devine 2019).
The regression results for the control
variables show that firm size (LnSIZES) did
not affect IC (both models). Companies
with large sizes may not necessarily be able
to manage employee skills and innovation
efficiently. On the contrary, small
companies do not mean it has lower IC
efficiency because of limited resources and
high costs. Kweh et al. (2013) stated that
firm size was not a significant determinant
of the intellectual capital efficiency of
insurance companies in China. In addition,
more staff do not mean the company's level
of innovation is higher, and staff are not the
9
Asymptotically, the GMM estimator is more
efficient than the Spatial Two-Stage Least
Square (2SLS) estimator (Liu and Saraiva 2019).
The advantages of utilizing GMM, according to
VAIC
Model 1 Model 2 Model 3 Model 4
ESG ENV SOC GOV
0.094 0.865 0.074 0.180 0.053
0.893 0.828 0.830 0.888 0.861
1.551 1.603 1.654 1.751 1.495
no bias no bias no bias no bias
only ones who initiate and innovate (El-
Bannany 2012).
Finally, the market-to-book value
(LnMBV) and growth of state income
(GGDP) have a positive and significant
effect on IC. It means firms with high MBV
can create good added value for investors
(Chen et al. 2006). The higher the GDP
growth of a country, the more successful it
will be in utilizing its resources efficiently.
In addition, high GGDP encourages
regulators to be stronger and set higher
standards so that the added value creation
process is optimal, runs well, and is
effective (Yu et al. 2017).
Robustness Check
Our research investigates the effect
of ESG (total and individual) on IC with a
dynamic approach to address endogeneity
issues. The use of the generalized moment
method (GMM) approach is required in
analyzing this issue. Roodman (2009)
stated that the GMM system is the best
estimator because it uses internal
instruments to handle endogeneity to obtain
consistent and unbiased results 9 . Table 5
reports that all models have the value of AR
(2) and the difference in J-stats with
probability is not significant. It can be
concluded that there is no endogeneity bias
in the OLS estimates.
Verbeek (2017), are (i) the lack of a distribution
constraint such as the assumption of normality,
(ii) the ability to address heteroscedasticity
issues, and (iii) the ease of selecting the right
instrument variables to handle endogeneity.
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187 181

CONCLUSION from the Asia Pacific Applied Economics

Association (APAEA).
IC is recognized to improve non-
financial performance in creating value REFERENCE
creation and maintaining a firm's
competitive advantage. Using 267 ASEAN- Agostini, L., and A. Nosella. 2017.
4 firm years listed over the period 2015- Enhancing Radical Innovation
2020, we aimed to investigate how the total Performance Through Intellectual
ESG and individual dimensions of ESG Capital Components. Journal of
(ENV, SOC, and GOV) affect a firm's IC Intellectual Capital, 34(1), 1-5.
proxied by MVAIC and VAIC. We also https://doi.org/10.1108/JIC-10-
investigated the impact of a firm's industry 2016-0103.
type on the association between ESG and Ahmad, N., A. Mobarek, and N. N. Roni.
IC. We conclude that IC had a significant 2021. Revisiting The Impact of
positive association with the firms’ total ESG on Financial Performance of
ESG and individual ESG dimensions FTSE350 UK firms: Static and
performance. Although, in general, there is Dynamic Panel Data Analysis.
no difference in the effect of intellectual Cogent Business and
capital when measured by the VAIC or Management, 8(1).
MVAIC method on firm value. This implies https://doi.org/10.1080/23311975
that the results of this study are very .2021.1900500.
important for companies to pay more Albertini, E. 2021. What are The
attention to relational capital as part of Environmental Capabilities, as
knowledge management. In addition, we Components of The Sustainable
could prove the effect of industry type Intellectual Capital, That Matter
(finance and non-finance firms) on the to The Ceos of European
ESG-IC relationship. This finding is robust; Companies? Journal of
in which GMM approach is used to address Intellectual Capital, 22(5), 918-
endogeneity issues. 937. https://doi.org/10.1108/JIC-
This research has some limitations. 06-2020-0215.
As for future research, our study could be Alfraih, M. M. 2018. The Role of Corporate
extended by dividing MVAIC into HCE, Governance in Intellectual Capital
SCE, CEE, and RCE categories, and VAIC Disclosure. International Journal
into HCE, SCE, and CEE categories, by of Ethics and Systems, 34(1). 101-
considering other measurements of IC and 121,
ESG. Furthermore, future research can https://doi.org/https://doi.org/10.1
compare different economies and settings 108/ IJOES-02-2017-0026.
through the use of a scoring method that Allegrini, M., and G. Greco. 2013.
tests the quality of ESG information Corporate Boards, Audit
disclosure and its relationship with Committees and Voluntary
intellectual capital. Disclosure: Evidence from Italian
listed companies. Journal of
ACKNOWLEDGEMENTS Management and Governance,
This research was presented at: The 15th 17(1), 187-216.
Bulletin of Monetary Economics and https://doi.org/10.1007/s10997-
Banking (BMEB) International Conference 011-9168-3.
Appuhami, R., and M. Bhuyan. 2015.
and Call for Papers (The 15th BMEB).
Examining the Influence of
September 2 – 3 2021. We thank K. P. Corporate Governance on
Prabheesh for reviewing our manuscript Intellectual Capital Efficiency
182 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
Evidence from Top Service Firms
in Australia. Managerial Auditing
Journal, 30(4/5), 347-372.
https://doi.org/10.1108/MAJ-04-
2014-1022.
Aramburu, I. A., and I. G. Pescador. 2019.
The Effects of Corporate Social
Responsibility on Customer
Loyalty: The Mediating Effect of
Reputation in Cooperative Banks
Versus Commercial Banks in the
Basque Country. Journal of
Business Ethics, 154(3), 701-719.
https://doi.org/10.1007/s10551-
017-3438-1.
ASEAN Japan Centre. 2019. ESG
Investment Towards Sustainable
Development in ASEAN and
JAPAN, Working Paper, ASEAN-
Japan Centre.
Aslam, E., and R. Haron. 2020. The
Influence of Corporate
Governance on Intellectual
Capital Efficiency: Evidence
From Islamic Banks of OIC
Countries. Asian Journal of
Accounting Research, 5(2), 195-
208.
https://doi.org/10.1108/AJAR-05-
2020-0030.
Atan, R., F. A. Razali, J. Said, and S.
Zainun. 2016. Environmental,
Social and Governance (ESG)
Disclosure and Its Effect on
Firm’s Performance: A Capital. Management Decision,
Comparative Study. International
Journal of Economics and
Management, 10(S2), 355-375.
Barney, J. 1991. Firm Resources and
Sustained Competitive
Advantage. Journal of
Management, 17(1), 99-120.
https://doi.org/10.1177/01492063
9101700108.
Bayraktaroglu, A. E., F. Calisir, and M.
Baskak. 2019. Intellectual Capital
and Firm Performance : An
Extended VAIC Model. Journal
of Intellectual Capital, 20(3), 406-
425. https://doi.org/10.1108/JIC-
12-2017-0184.
Beretta, V., C. Demartini, and S. M. Trucco.
2019. Does Environmental, Social
and Governance Performance
Influence Intellectual Capital
Disclosure Tone in Integrated
Reporting? Journal of Intellectual
Capital, 20(1), 100-124.
https://doi.org/10.1108/JIC-02-
2018-0049.
Branco, M. C., and L. L. Rodriguez. 2006.
Corporate Social Responsibility
and Resource-Based Perspectives.
Journal of Business Ethics, 69(2),
111-1132.
https://doi.org/10.1007/S10551-
006-9071-Z.
Cash, D. 2018. Sustainable Finance Ratings
as The Latest Symptom of ‘Rating
Addiction’. Journal of
Sustainable Finance and
Investment, 8(3), 242-258.
https://doi.org/10.1080/20430795
.2018.1437996.
Chang, Q., and A. Devine. 2019.
Environmentally-Certified Space
And Retail Revenues: A Study of
U.S. Bank Branches. Journal of
Cleaner Production, 211, 1568-
1599,
https://doi.org/10.1016/j.jclepro.2
018.11.266.
Chang, C. H., and Y. S. Chen. 2012. The
determinants of Green Intellectual
50(1), 74-94,
https://doi.org/10.1108/00251741
211194886.
Chen, M. C., S. J. Cheng, and Y. Hwang.
2005. An Empirical Investigation
of the Relationship between
Intellectual Capital and Firms’
Market Value and Financial
Performance. Journal of
Intellectual Capital, 6(2), 159-
176.
https://doi.org/10.1108/14691930
510592771.
Chen, Y. S. 2008. The Driver of Green
Innovation and Green Image –
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187 183

Green Core Competence. Journal performance. Journal of

of Business Ethics, 81(3), 531- Intellectual Capital, 4(3), 348-
543. 360.
Chen, Y. S., S. B. Lai, and C. T. Wen. 2006. https://doi.org/10.1108/14691930
The Influence of Green 310487806.
Innovation Performance on Freeman, R, E. 1984. Strategic
Corporate Advantage in Taiwan. management: A Stakeholder
Journal of Business Ethics, 67(4), Perspective. Englewood Cliffs,
331–339. NJ : Prentice Hall.
https://doi.org/10.1007/s10551- Freeman, R. E., and W. M. Evan. 1990.
006-9025-5. Corporate Governance: A
Cohen, D., and L. Prusak. 2001. In good Stakeholder Interpretation. The
company: How Social Capital Journal of Behavioral Economics,
Makes Organizations Work. 19(4), 337-359.
Boston, MA: Harvard Business Gaasman, P and C. Kelly. 2021. How ESG
Press. will drive the next wave of
Eisenhardt, K. M., and F. M. Santos. 2002. transformation and what it will
Knowledge-Based View: A New look like on the ground. Retrieved
Theory of Strategy? Handbook of on March 26, 2022,
Strategy and Management, 1(1), https://www.pwc.com/gx/en/issue
139-164. s/reinventing-the-future/take-on-
El-Bannany, M. 2012. Global Financial tomorrow/esg-
Crisis and the Intellectual Capital transformation.html.
Performance of UAE Banks. Gallardo-Vázquez, L. E. Valdez-Juárez,
Journal of Human Resource and J. L. Lizcano-Álvarez. 2019.
Costing and Accounting, 16(1), Corporate Social Responsibility
20-36. and Intellectual Capital: Sources
https://doi.org/10.1108/14013381 of Competitiveness and
211272626. Legitimacy in Organizations'
Escrig-Olmedo, E. Fernández-Izquierdo, I. Management Practices.
Ferrero-Ferrero, J. M. Rivera- Sustainability, 11(20), 5843.
Lirio, and M. J. Muñoz-Torres. https://doi.org/doi:10.3390/su112
2019. Rating The Raters: 05843.
Evaluating How ESG Rating Gangi, F., D. Salerno, A. Meles, and L. M.
Agencies Integrate Sustainability Daniele . 2019. Do Corporate
Principles. Sustainability, 11(3), Social Responsibility and
915. Corporate Governance Influence
Farahani, S., P. Abdarzadeh, and B. Intellectual Capital Efficiency ?
Fotovat. 2016. The Effect of Sustainability, 11(7), 1899.
Intellectual Capital on https://doi.org/10.3390/su110718
Organizational Innovation 99.
Mediated by Knowledge Garcia, A. S., W. Mendes-Da-Silva, and R.
Management and Organizational J. Orsato. 2017. Sensitive
Learning in Print Media. Industries Produce Better ESG
Organizational Resources performance: Evidence from
Management Researchs, 6(1), 23- emerging markets. Journal of
48. Cleaner Production, 150(5), 135–
Firer, S., and M. Williams. 2003. 147.
Intellectual capital and traditional https://doi.org/10.1016/j.jclepro.2
measures of corporate 017.02.180.
184 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187
Goldberg, D., S. Godlewski, and M.
Frerichs. 2020. Amazon Must
Disclose the COVID-19 Impact on
Its Workers. Retrieved on August
23, 2021,
https://www.responsible-
investor.com/articles/amazon-
must-disclose-the-covid-19-
impact-on-its-workers.
Grant, R. M. 1996. Toward A Knowledge-
Based Theory of The Firm.
Strategic Management Journal,
17(S2 : Winter Special Issue),
109-122.
Greene, W. H. 2018. Econometric
Analysis/LimDep Users Manual.
Retrieved on July 15, 2022,
http://cee.eng.usf.edu/faculty/flm/
CE697N_files/ealimdep.pdf.
Hart, S. L. 1995. A Natural-Resource-
Based View of The Firm.
Academy of Management Review,
20(4) , 986-1014.
Huang, C. L., and F. H. Kung. 2011.
Environmental Consciousness
And Intellectual Capital
Management: Evidence from
Taiwan's Manufacturing Industry.
Management Decision, 49(9),
1405–1425.
Interfaith Center on Corporate
Responsibility. 2020. INVESTOR
STATEMENT ON
CORONAVIRUS RESPONSE.
Retrieved on December 27, 2021,
https://www.iccr.org/investor-
statement-coronavirus-response.
Johnson, R., N. Mans-Kemp, and P. D
Erasmus. 2019. Assessing the
business case for environmental,
social and corporate governance
practices in South Africa. South
African Journal of Economic and
Management Sciences, 22(1), e1-
e13.
Karyani, E., and V. Maulina. 2021. ESG
and Performance: Effect of
Government Ownership and
Green Bond Issuer. Proceedings
of the 1st International
Conference on Sustainable
Management and Innovation,
ICoSMI 2020, 14-16 September
2020, Bogor, West Java,
Indonesia.
https://doi.org/10.4108/eai.14-9-
2020.2304405.
Kim, H. R, et al. 2010. Corporate Social
Responsibility And Employee–
Company Identification. Journal
of Business Ethics, 95(4), 557-
569.
Kim, J., S. Chung, and C. Park. 2013.
Corporate Social Responsibility
and Financial Performance: The
Impact of The MSCI ESG Ratings
on Korean Firms. Journal of The
Korea Academia Industrial
Cooperation Society, 14(11),
5586-5593.
KPMG Global. 2021. ESG Risks in Banks.
Retrieved on August 20, 2021,
https://home.kpmg/xx/en/home/in
sights/2021/05/esg-risks-in-
banks.html.
Kweh, Q. L., W. -M. Lu, and W. -K. Wang.
2013, Dynamic Efficiency:
Intellectual Capital in The
Chinese Non-Life Insurance
Firms. Journal of Knowledge
Management, 18(5), 937-951.
https://doi.org/10.1108/JKM-06-
2014-0240.
Lawson, S. 2020. ESG Roadmap: The
Utilities Sector. Retrieved on
January 26, 2022,
https://www.goldmansachs.com/i
nsights/pages/ESG-roadmap-the-
utilities-sector.html.
Lee, K. H. 2009. Why And How To Adopt
Green Management Into Business
Organizations? The Case Study of
Korean Smes in Manufacturing
Industry. Management Decision,
47(7), 1101-1121.
https://doi.org/10.1108/00251740
910978322.
Liu, X., and P. Saraiva. 2019. GMM
Estimation of Spatial
Autoregressive Models in A
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187 185

System of Simultaneous Perspectives on Value and

Equations With Performance. Retrieved on
Heteroskedasticity. Econometric December 27, 2021,
Reviews, 38(4), 359–385. https://www.mckinsey.com/busin
https://doi.org/10.1080/07474938 ess-functions/sustainability/our-
.2017.1308087. insights/the-esg-premium-new-
Makki, M. A. M., and S. A. Lodhi. 2014. perspectives-on-value-and-
Impact of Corporate Governance performance.
on Intellectual Capital Efficiency Melo, T., and A. Garrido-Morgado. 2012.
and Financial Performance. Corporate Reputation: A
Pakistan Journal of Commerce Combination of Social
and Social Sciences (PJCSS), Responsibility and Industry.
8(2), 305–330. Corporate Social Responsibility
http://hdl.handle.net/10419/18814 and Environmental Management,
0. 19(1), 11–31.
Maji, S. G., and M. Goswami. 2017. Menicucci, E., and G. A. Paolucci. 2012.
Intellectual Capital and Firm ESG Dimensions and Bank
Performance in India: A Performance: An Empirical
Comparative Study Between Investigation in Italy. Corporate
Original and Modified Value Governance,
Added Intellectual Coefficient https://doi.org/10.1108/CG-03-
Model. International Journal of 2022-0094
Learning and Intellectual. Miralles-Quirós, M. M., J. L. Miralles-
Capital, 14(1).76-89. Quirós, and J. R. Hernández.
Marchyta, N. K., Devie and H. Semuel. 2019. ESG Performance and
2020. The Effect of Corporate Shareholder Value Creation in
Social Responsibility on Financial The Banking Industry:
Performance of Banks in International Differences.
Indonesia : The Role of Sustainability, 11(5), 1404 .
Intellectual Capital and https://doi.org/10.3390/su110514
Bankruption Risk. International 04.
Journal of Psychosocial Nawaz, T., and R. Haniffa. 2017.
Rehabilitation, 24(06), 14095– Determinants of Financial
14115. Performance of Islamic Banks: An
Marr, B. 2018. Intellectual Capital in The Intellectual Capital Perspective.
Palgrave Encyclopedia of Journal of Islamic Accounting and
Strategic Management. London: Business Research, 8(2), 130–
Palgrave Macmillan. 142.
https://doi.org/10.1057/978-1- https://doi.org/10.1108/JIABR-
137-00772-8_317. 06-2016-0071.
Massaro, M., J. Dumay, A. Garlatti, and F. Nelson, M. 2020. Investor Sentiment on
Dal Mas. 2018. Practitioners’ ESG And Nonfinancial Reporting.
views on intellectual capital and Retrieved on February 11, 2022,
sustainability: From a https://www.ey.com/en_us/assura
performance-based to a worth- nce/how-will-esg-performance-
based perspective. Journal of shape-your-future.
Intellectual Capital, 19(2), 367– Nimtrakoon, S. 2015. The Relationship
386. https://doi.org/10.1108/JIC- Between Intellectual Capital,
02-2017-0033. Firms’ Market Value and
McKinsey. 2019. The ESG premium: New Financial Performance: Empirical
186 Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187

Evidence from the ASEAN. Journal, 9(1), 86-136.

Journal of Intellectual Capital, https://doi.org/10.1177/1536867x
16(3), 587-618. 0900900106.
Oxford Busniess Group. 2021. ESG in Rossi, M., G. Festa, S. Chouaibi, M. Fait,
ASEAN: A Shared Vision of and A. Papa. 2021. The Effects Of
Sustainable Recovery. Retrieved Business Ethics and Corporate
on January 10, 2022, Social Responsibility on
https://oxfordbusinessgroup.com/ Intellectual Capital Voluntary
news/esg-asean-shared-vision- Disclosure. Journal of Intellectual
sustainable-recovery. Capital, 22(7), 1–23.
Penrose, R. 1959. The Apparent Shape of a https://doi.org/10.1108/JIC-08-
Relativistically Moving Sphere. 2020-0287.
Mathematical Proceedings of the Saddam, S. Z., and M. N. Jaafar. 2021.
Cambridge Philosophical Society, Modified Value-Added
55(1), 137-139. Intellectual Capital (MVAIC):
https://doi.org/10.1017/S0305004 Contemporary Improved
100033776. Measurement Model for
Porter, M. E., and C. V. D. Linde. 1995. Intangible Assets. International
Green and Competitive : Ending Journal of Academic Research in
The Stalemate. Harvard Business Accounting Finance and
Review, 73(5), 120-134. Management Sciences, 11(1),
Pulic, A. 1998. Measuring The 201-210.
Performance Of Intellectual Shahzad, F., M. H. Baig, I. U. Rehman, A.
Potential In Knowledge Economy. Saeed, and G. A. Asim. 2021.
19th Annual National Business Does Intellectual Capital
Conference, DeGroote School of Efficiency Explain Corporate
Business, Canada. Social Responsibility
Pulic, A. 2008. The Principles of Engagement-Firm Performance
Intellectual Capital Efficiency-A Relationship? Evidence From
Brief Description. Available on Environmental, Social and
https://www.researchgate.net/pub Governance Performance of US
lication/265262960_The_Principl Listed Firms. Borsa Istanbul
es_of_Intellectual_Capital_Effici Review, 22(2), 295-305.
ency_-A_Brief_Description. https://doi.org/10.1016/j.bir.2021.
Putnam R. D. 1994. Social capital and 05.003.
public affairs”. Bulletin of the Stewart, T. A. 1997. The New Wealth of
American Academy of Arts and Organizations, New York:
Sciences, 47(8), 5-19. Doubleday-Currency.
Reboredo, J. C., and S. M. A Sowaity. 2022. Taliento, M., C. Favino, and A. Netti. 2019.
Environmental, Social, and Impact of Environmental, Social,
Governance Information and Governance Information on
Disclosure and Intellectual Economic Performance :
Capital Efficiency in Jordanian Evidence of a Corporate ‘
Listed Firms. Sustainability, Sustainability Advantage’ from
14(1), 115. Europe. Sustainability, 11(6),
https://doi.org/10.3390/su140101 1738.
15. https://doi.org/10.3390/su110617
Roodman, D. 2009. How to do xtabond2: 38.
An introduction to Difference and Ulum, I., I. Ghozali, and A. Purwanto.
System GMM in Stata. Stata 2014. Intellectual Capital
Jurnal Akuntansi dan Keuangan Indonesia, Desember 2022, Vol. 19, Iss. 2, pg 166-187 187

Performance of Indonesian 300. https://mpra.ub.uni-

Banking Sector: A Modified muenchen.de/88720/.
VAIC (M-VAIC) Perspective. Yu, H. C., L. Kuo, and M. F. Kao. 2017.
Asian Journal of Finance and The Relationship between CSR
Accounting, 6(2), 103. Disclosure and Competitive
https://doi.org/10.5296/ajfa.v6i2. Advantage. Sustainability
5246. Accounting, Management and
Ulum, I., Rizqiyah, and A. W. Jati. 2016. Policy Journal, 8(5), 547-570.
Intellectual Capital Performance : https://doi.org/https://doi.org/10.1
A Comparative Study between 108/SAMPJ-11-2016-0086.
Financial and Non-Financial Zembrowski, P., M. Leung, and K. Schacht.
Industry of Indonesian Biggest 2019. ESG Disclosures in Asia
Companies. International Journal Pacific: A Review of ESG
of Economics and Financial Disclosure Regimes for Listed
Issues, 6(4), 1436–1439. Companies in Selected Markets.
United Nations Environment Program Retrieved on January 17, 2022,
Finance Initiative and World https://www.cfainstitute.org/en/a
Business Council for Sustainable dvocacy/policy-positions/esg-
Development. 2010. Translating disclosures-apac.
ESG into sustainable business
value. Report from an
International Workshop Series,
United Nations Environment
Program Finance Initiative.
Varma, S., and A. Boulton. 2019.
Sustainability Wins as Investors in
Southeast Asia Shift Focus.
Retrieved on January 13, 2022,
https://www.bain.com/insights/su
stainability-wins-as-investors-in-
southeast-asia-shift-focus/.
Verbeek, M. 2017. A Guide to Modern
Econometrics 5th. Hoboken, New
Jersey : Wiley.
Wagner, B. 2021. Financial services enters
a new era of ESG reporting.
Retrieved on January 17, 2022,
https://www.kpmg.us/blogs/feder
al-agenda-blog/2021/new-era-of-
esg-reporting.html.
White, B. 1996. Trading Up: Consumer and
Environmental Regulation in A
Global Economy. International
Affairs, 72(3), 589-590.
https://doi.org/10.2307/2625603.
Xie, Jun. et al. 2019. Do Environmental,
Social, and Governance Activities
Improve Corporate Financial
Performance? Business Strategy
and the Environment, 28(2), 286-