The Relationship between Sustainability Performance and Financial Performance with External Assurance as the Moderating Variable in Indonesian Listed Companies

Sustainability reporting has been mandated in several ASEAN countries, and the trend toward more extensive reporting is expected to continue due to regulatory and market pressures. Sustainability reporting would be expected to be the subject of external assurance to bring competitive advantage through verifiable quality of sustainability performance information. This study aims to examine the relationship between sustainability performance disclosure and financial performance as well as how external assurance moderates the relationship. This study contributes to the literature by highlighting the importance of external assurance as a quality enhancement mechanism for sustainability performance information. This study employs quantitative research, specifically a regression analysis of empirical cross-section data using samples from 63 listed companies in Indonesia that published sustainability reports in 2020. The sustainability performance disclosure is measured based on the disclosure required by Circular Letter SEOJK/16/2021. Financial performance is measured by price to book value, and the provision of external assurance is used as the moderating variable. The results indicate that sustainability performance disclosure and financial performance do not show a significant relationship unless the sustainability report is externally assured. The assurance has been found to positively moderate the previously insignificant relationship; hence, external assurance was considered a relevant, strong, and credible signal for investors.