Economics and Business
Quarterly Reviews
ISSN 2775-9237 (Online)
Published: 03 June 2024
Green Banking Disclosure in Indonesia: Do Financial Performance and Board Characteristics Matter?
Theresia Citraningtyas, Ari Kuncara Widagdo, Siti Rochmah Ika
Sebelas Maret University (Indonesia), Janabadra University (Indonesia)
Download Full-Text Pdf
10.31014/aior.1992.07.02.585
Pages: 189-198
Keywords: Green Banking, Green Banking Disclosure, Sustainable Finance, Financial Performance, Board Characteristics
Abstract
Green banking is an environmentally responsible practice within the banking business, despite its classification as a non-environmentally sensitive sector. Commercial banks can actively promote green banking initiatives by investing in emission-reducing technologies and providing loans to sectors with minimal greenhouse gas emissions. This article seeks to examine the impact of bank financial performance, board size, board independence, and board diversity on green banking disclosure. This study applied panel data regression to a sample of forty-three banks listed between 2019 and 2022, demonstrating that these banks' financial performance influences the level of transparency in green banking. The capital adequacy ratio (CAR) has a positive impact on green banking disclosure, whereas non-performing loans (NPL) and the loan-to-deposit ratio (LDR) have a negative impact. The size of board commissioners, board independence, and gender diversity do not correlate with green banking disclosure. The results suggest that banks with strong financial performance, i.e., higher capital and lower non-performing loans, have more resources to participate in the green banking activities disclosed in the sustainability report. The negative relationship between LDR and green banking disclosure indicates that the careful selection of loan distribution to businesses that care about the environment will increase green banking disclosure but decrease LDR. This study informs the Financial Service Authority (OJK) that, in order to promote sustainable finance in the banking industry, the OJK should oversee banks' financial health.
References
Adu, D. A. (2022). Sustainable banking initiatives, environmental disclosure and financial performance: The moderating impact of corporate governance mechanisms. Business Strategy and the Environment, 31(5), 2365–2399. https://doi.org/10.1002/bse.3033
Ali, R., Rehman, R. U., Kanwal, M., Naseem, M. A., & Ahmad, M. I. (2022). Determinants of corporate social responsibility disclosure of banking sector in Pakistan. Social Responsibility Journal, 18(5), 1019–1034. https://doi.org/10.1108/SRJ-08-2019-0272
Amidjaya, P. G., & Widagdo, A. K. (2020). Sustainability reporting in Indonesian listed banks: Do corporate governance, ownership structure and digital banking matter? Journal of Applied Accounting Research, 21(2), 231–247. https://doi.org/10.1108/JAAR-09-2018-0149
Arayssi, M., Jizi, M., & Tabaja, H. H. (2020). The impact of board composition on the level of ESG disclosures in GCC countries. Sustainability Accounting, Management and Policy Journal, 11(1), 137–161. https://doi.org/10.1108/SAMPJ-05-2018-0136
Bose, S., Khan, H. Z., Rashid, A., & Islam, S. (2018). What drives green banking disclosure? An institutional and corporate governance perspective. Asia Pacific Journal of Management, 35(2), 501–527. https://doi.org/10.1007/s10490-017-9528-x
Buallay, A., & Alhalwachi, L. (2022). Board gender diversity and environmental disclosure: evidence from the banking sector. Journal of Chinese Economic and Foreign Trade Studies, 15(3), 350–371. https://doi.org/10.1108/JCEFTS-08-2021-0046
Caby, J., Ziane, Y., & Lamarque, E. (2020). The determinants of voluntary climate change disclosure commitment and quality in the banking industry. Technological Forecasting and Social Change, 161(September), 120282. https://doi.org/10.1016/j.techfore.2020.120282
Cakti, R. R., & Aryani, Y. A. (2023). Do Characteristics of Board Affect Sustainable Finance Disclosure? Evidence: Asean Banking Industry. Jurnal Akuntansi Dan Keuangan Indonesia, 20(2), 142–163. https://doi.org/10.21002/jaki.2023.08
Cicchiello, A. F., Fellegara, A. M., Kazemikhasragh, A., & Monferrà , S. (2021). Gender diversity on corporate boards: How Asian and African women contribute on sustainability reporting activity. Gender in Management, 36(7), 801–820. https://doi.org/10.1108/GM-05-2020-0147
Cosma, S., Principale, S., & Venturelli, A. (2022). Sustainable governance and climate-change disclosure in European banking: the role of the corporate social responsibility committee. Corporate Governance (Bingley), 22(6), 1345–1369. https://doi.org/10.1108/CG-09-2021-0331
European Commision. (2023). Overview of sustainable finance. The European Union. https://finance.ec.europa.eu/sustainable-finance/overview-sustainable-finance_en
Farache, F., & Perks, K. J. (2010). CSR advertisements: a legitimacy tool? Corporate Communications: An International Journal, 15(3), 235–248. https://doi.org/10.1108/13563281011068104
Farida, D. N., & Purwanto, A. (2021). Do Board Characteristics Impact Green Banking Disclosure? Empirical Evidence from Indonesia. Indonesian Journal of Sustainability Accounting and Management, 5(2). https://doi.org/10.28992/ijsam.v5i2.333
Firmansyah, A., & Kartiko, N. D. (2024). Exploring the association of green banking disclosure and corporate sustainable growth: the moderating role of firm size and firm age. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2312967
Ghabayen, M. A., Mohamad, N. R., & Ahmad, N. (2016). Board characteristics and corporate social responsibility disclosure in the jordanian banks. Corporate Board: Role, Duties and Composition, 12(1), 84–99. https://doi.org/10.22495/cbv12i1c1art2
Handajani, L. (2019). Corporate Governance dan Green Banking Disclosure: Studi pada Bank di Indonesia. Jurnal Dinamika Akuntansi Dan Bisnis, 6(2), 121–136. https://doi.org/10.24815/jdab.v6i2.12243
Hasanah, H. U., Rachmawati, S., & Murwaningsari, E. (2022). Determinants of Sustainable Finance in Banking Industry. Jurnal Riset Akuntansi Kontemporer, 14(1), 122–130. https://doi.org/10.23969/jrak.v14i1.5182
Hermawan, A., & Gunardi, A. (2019). Motivation for disclosure of corporate social responsibility: Evidence from banking industry in Indonesia. Entrepreneurship and Sustainability Issues, 6(3), 1297–1306. https://doi.org/10.9770/jesi.2019.6.3(17)
Hoque, M. K., Masum, M. H., & Babu, M. A. (2022). Impact of Financial Performance on Green Banking Disclosure: Evidence from the Listed Banking Companies in Bangladesh. Universal Journal of Accounting and Finance, 10(2), 450–456. https://doi.org/10.13189/ujaf.2022.100209
Ika, S. R., Nurhidayati, Nugroho, J. P., & Ari Kuncara Widagdo. (2023). Firm Value , Financial Performance , and Corporate Social Responsibility. 1st International Conference of Management and Business (ICoMB 2022), 2, 66–76. https://doi.org/10.2991/978-94-6463-160-9
Indonesian Central Bank Regulation Number 15/12/PBI/2013 concerning Minimum Capital Adequacy Requirements for Commercial Banks, 1 (2013).
Indonesian Financial Service Authority. (2023). Regulation of the Financial Services Authority No. 30/2023 on the Implementation of Good Corporate Governance for Commercial Banks. https://peraturan.go.id/files/peraturan-ojk-no-17-tahun-2023.pdf
Indonesian Financial Services Authority. (2014). Roadmap Keuangan Berkelanjutan di Indonesia (Roadmap for Sustainable Finance in Indonesia 2015-2019). Otoritas Jasa Keuangan (Indonesian Financial Services Authority).
Indonesian Financial Services Authority. (2017). Salinan Peraturan Otoritas Jasa Keuangan Nomor 51/ POJK.03/2017 Tentang Penerapan Keuangan Berkelanjutan bagi Lembaga Jasa Keuangan, Emiten, dan Perusahaan Publik (Copy of Financial Services Authority Regulation Number 51/POJK.03/2017 concerning the Imple. https://www.ojk.go.id/id/kanal/perbankan/regulasi/peraturan- ojk/Documents/Pages/POJK-Penerapan-Keuangan-Berkelanjutan-bagi-Lembaga- Jasa-Keuangan,-Emiten,-dan-Perusahaan-Publik/SAL POJK 51 - keuangan berkelanjutan.pdf
Islam, M. A. (2014). An Analysis of the Financial Performance of National Bank Limited Using Financial Ratio. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport, 2(5), 121–129. https://doi.org/10.12691/jbe-2-5-3
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy. Journal of Business Ethics, 114(2), 207–223. https://doi.org/10.1007/s10551-012-1336-0
Mazumder, M. M. M., & Hossain, D. M. (2023). Voluntary cybersecurity disclosure in the banking industry of Bangladesh: does board composition matter? Journal of Accounting in Emerging Economies, 13(2), 217–239. https://doi.org/10.1108/JAEE-07-2021-0237
Miah, M. D., Rahman, S. M., & Mamoon, M. (2021). Green banking: the case of commercial banking sector in Oman. Environment, Development and Sustainability, 23(2), 2681–2697. https://doi.org/10.1007/s10668-020-00695-0
Patten, D. M. (2002). The relation between environmental performance and environmental disclosure: A research note. Accounting, Organizations and Society, 27(8), 763–773. https://doi.org/10.1016/S0361-3682(02)00028-4
Pfeffer, J., & Salancik, G. (2015). External control of organizations—Resource dependence perspective. In Organizational behavior 2 (pp. 355–370). Routledge.
Qudriyah, H. L., Hastuti, Burhany, D. I., & Sumardi, S. (2021). An Analysis of Sustainable Finance Disclosure at Indonesian Sharia Commercial Banks using POJK 51/POJK.03/2017 Its Determinants and Influence on the Profitability. Advances in Engineering Research, 207(Issat), 544–551.
Rachmawati, W., Karim, A., & Manan, A. (2023). Analisis Green Banking Disclosure: Sebuah Perspektif Pada Perbankan Indonesia (The Analysis of Green Banking Disclosure: A Perspective on the Banking Sector In Indonesia). Jurnal RAK (Riset Akuntansi Keuangan), 8(2), 160–169.
Raharjo, P. G., Hakim, D. B., Manurung, A. H., & Maulana, T. N. A. (2014). The determinant of commercial banks’ interest margin in Indonesia: An analysis of fixed effect panel regression. International Journal of Economics and Financial Issues, 4(2), 295–308.
Rahayu, R., & Djuminah, D. (2022). Does the Board of Commissioners’ Characteristics Relevant to the Sustainable Finance Disclosure in Indonesian Banks? Journal of Accounting and Investment, 23(2), 209–228. https://doi.org/10.18196/jai.v23i2.14163
The Copernicus Climate Change Service (C3S). (2024). Copernicus: 2023 is the hottest year on record, with global temperatures close to the 1.5°C limit. Global Climate Highlight 2023. https://climate.copernicus.eu/copernicus-2023-hottest-year-record
The Ministry of Environment and Forestry of the Republic of Indonesia. (2022). Proyeksi Dampak Ekonomi Akibat Perubahan Iklim (Projections of Economic Impacts Due to Climate Change). Literasi (Literacy). https://adaptasiklhk.id/adaptasi/getDetailContent/5/20
Widagdo, A. K., Rahanyamtel, B. A., & Ika, S. R. (2022). The impact of audit committee characteristics, financial performance, and listing age on greenhouse gas emission disclosures of highly emitted industry in Indonesia. IOP Conference Series: Earth and Environmental Science, 1016(1). https://doi.org/10.1088/1755-1315/1016/1/012047
Zaid, M. A. A., Wang, M., & Abuhijleh, S. T. F. (2019). The effect of corporate governance practices on corporate social responsibility disclosure: Evidence from Palestine. Journal of Global Responsibility, 10(2), 134–160. https://doi.org/10.1108/JGR-10-2018-0053