Managing Market Pressure Using Sustainability Disclosure in The Banking Industry

Abstract

Firm value is a concern for the market, so it is crucial for the public bank. The research aims to test whether sustainability disclosure can reduce market pressure due to changes in company size, profitability, growth, and leverage in the banking industry. This research was conducted on Indonesia's public banks in 2015-2019. The total sample is 190 firm-years. Hypothesis testing technique uses variance-based structural equation modeling using SmartPLS ver. 3.3.2. The research results prove that sustainability disclosure is a mediating variable to reduce firm value pressure due to changes in profitability, operating income growth, and leverage. The bank's size has no impact on sustainability disclosure and also firm value. It is because the principal does not consider it a direct reflection of management's operational performance. It is because the principal does not consider it a direct reflection of management's operating performance. Expanding sustainability disclosures can reduce management concerns that decreased profitability and growth and increased leverage. The novelty of this research is to reveal a new point of view, namely the function of social responsibility activities to maintain firm value due to shocks in company conditions. This disclosure function is new and needs to be investigated further. The study's results have theoretical implications for the impact arising from sustainability disclosures. The practical implication is the importance of broader disclosure to give confidence about companies' sustainability prospects to the principal and society.