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Executive compensation, sustainability, climate, environmental concerns, and company financial performance: evidence from indonesian commercial banks

Kartadjumena, Eriana; Rodgers, Waymond

Authors

Eriana Kartadjumena eriana.kartadjumena@widyatama.ac.id



Abstract

This research investigates whether executive compensation is designed to motivate managers to pursue corporate sustainability (CS) concerns as measured by Global Reporting Initiative (GRI) 3.1 disclosure indicators in Indonesian listed commercial banks throughout 2007–2014. In addition, this study examines the impact of executive compensation, climate, and environmental concerns on both financial health and market value performance as components of company financial performance (CFP). This study, based on an agency theoretic and stakeholder positions, focuses on banking entities in a developing country, and enriches the literature by examining topics through the application of the Throughput Model that captures different pathways and stages. The results suggest that higher executive compensation in Indonesian banking entities may motivate management to do more for climate and environmental concerns, as well as to enhance CFP. Contrary to expectations, climate and environmental concerns have a significant negative impact on both financial health and market value performance. This implies that Indonesian banking companies may tend to conduct corporate responsibility activities only for their own-sake as an altruism motive, which influences the reduction of firms’ financial performance. This study comes to the conclusion that CS concern depicts a weakening factor as well as a partial mediator in the relationship between executive compensation and financial health performance.

Journal Article Type Article
Publication Date Mar 20, 2019
Print ISSN 0001-4788
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
Volume 11
Issue 6
Article Number 1673
APA6 Citation Kartadjumena, E., & Rodgers, W. (2019). Executive compensation, sustainability, climate, environmental concerns, and company financial performance: evidence from indonesian commercial banks. Accounting and business research, 11(6), https://doi.org/10.3390/su11061673
DOI https://doi.org/10.3390/su11061673
Keywords Executive compensation; Corporate sustainability; Global reporting initiative
Publisher URL https://www.mdpi.com/2071-1050/11/6/1673

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Copyright Statement
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).





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