FIRM SIZE, BOARD CHARACTERISTICS AND ESG PERFORMANCE: EVIDENCE FROM INDONESIA

Abstract

Growing pressure for corporate sustainability highlights the critical need to understand how governance structures drive corporate environmental, social, and governance (ESG) practices. Utilizing data from 38 Indonesian listed firms between 2020 and 2024, this research analyzed how firm size mediates the impact of board characteristics (size, independence, and gender diversity) on ESG performance. A total of 190 firm-year observations sourced from Refinitiv were analyzed using the Structural Equation Modeling–Partial Least Squares (SEM-PLS) approach. The results indicated that larger and more independent boards positively influenced firm size, whereas board gender diversity unexpectedly exhibited a negative effect. Crucially, firm size significantly drove ESG performance and acted as a vital mediating mechanism across all board characteristics. These robust results demonstrated that the impact of board governance on sustainability outcomes was heavily channeled through organizational scale, providing critical perspectives for policymakers and managers in emerging markets.