Main Article Content
Abstract
The primary objective of this study is to thoroughly investigate the association between director tenure diversity and corporate sustainability performance. This study utilizes a sample comprising 578 firm-year observations from non-financial companies listed on the Indonesia Stock Exchange. To test the hypothesis, the study employs the Ordinary Least Squares method, complemented by a series of endogeneity tests. This study reveals that the sustainability performance of corporations in Indonesia falls significantly short of satisfactory levels. Furthermore, the study indicates that there is a negative association between tenure diversity and sustainability performance, demonstrating a U-shaped curve pattern. To ensure the robustness of our findings, we performed additional analysis using coarsened exact matching and Heckman (1979) two-stage least square methodologies, confirming that the results remained consistent with those of the initial test. Intriguingly, our supplementary analyses also revealed an inverse association between tenure diversity in the boardroom and sustainability performance within companies. This study makes a significant contribution to the corporate governance literature by elucidating the inverse association between director tenure diversity and sustainability performance. In doing so, it enhances the originality and novelty of existing studies, particularly within the context of developing countries, such as Indonesia. This study exhibits novelty by embracing a quantitative approach to measure sustainability performance, revealing an intriguing inverse association between sustainability performance and ESG initiatives within the companies.
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References
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- Ardianto, A., Anridho, N., Cahyono, S., Noman Alam, A. H. M., & Harymawan, I. (2024). The role of risk management committee on the relationship between corporate carbon emission disclosure and capital structure. Corporate Social Responsibility and Environmental Management, 31(3), 1–32. https://doi.org/10.1002/csr.2671
- Ben-Amar, W., Chang, M., & McIlkenny, P. (2017). Board gender diversity and corporate response to sustainability initiatives: evidence from the carbon disclosure project. Journal of Business Ethics, 142(2), 369–383. https://doi.org/10.1007/s10551-015-2759-1
- Berzkalne, I., & Zelgalve, E. (2014). Intellectual capital and company value. Procedia - Social and Behavioral Sciences, 110, 887–896. https://doi.org/10.1016/j.sbspro.2013.12.934
- Bui, B., Houqe, M. N., & Zaman, M. (2020). Climate governance effects on carbon disclosure and performance. British Accounting Review, 52(2), 100880. https://doi.org/10.1016/j.bar.2019.100880
- Cahyono, S. (2023). A bibliographic study for management control systems on journal of management accounting research. Jurnal Bisnis Dan Akuntansi, 25(1), 1–16.
- Cahyono, S., Harymawan, I., & Kamarudin, K. A. (2023). The impacts of tenure diversity on boardroom and corporate carbon emission performance: exploring from the moderating role of corporate innovation. Corporate Social Responsibility and Environmental Management, 30(5), 2507–2535. https://doi.org/10.1002/csr.2500
- Cahyono, S., Damayanti, V. A., Ardianto, A., & Ardianto, A. (2024). Empirical evidence of esg disclosure’s impact on corporate investment decision in Indonesia. Jurnal Dinamika Akuntansi Dan Bisnis, 11(1), 135–154. https://doi.org/10.24815/jdab.v11i1.31466
- Chang, Y. K., Oh, W. Y., Park, J. H., & Jang, M. G. (2017). Exploring the relationship between board characteristics and csr: empirical evidence from Korea. Journal of Business Ethics, 140(2), 225–242. https://doi.org/10.1007/s10551-015-2651-z
- Chen, W. (Tina), Zhou, G. (Stephen), & Zhu, X. (Kevin). (2019). CEO tenure and corporate social responsibility performance. Journal of Business Research, 95(July 2017), 292–302. https://doi.org/10.1016/j.jbusres.2018.08.018
- Fallah, M. A., & Mojarrad, F. (2019). Corporate governance effects on corporate social responsibility disclosure: empirical evidence from heavy-pollution industries in Iran. Social Responsibility Journal, 15(2), 208–225. https://doi.org/10.1108/SRJ-04-2017-0072
- Ferrero-Ferrero, I., Fernández-Izquierdo, M. Á., & Muñoz-Torres, M. J. (2015). Integrating sustainability into corporate governance: an empirical study on board diversity. Corporate Social Responsibility and Environmental Management, 22(4), 193–207. https://doi.org/10.1002/csr.1333
- Frias-Aceituno, J. V., Rodriguez-Ariza, L., & Garcia-Sanchez, I. M. (2013). The role of the board in the dissemination of integrated corporate social reporting. Corporate Social Responsibility and Environmental Management, 20(4), 219–233. https://doi.org/10.1002/csr.1294
- Ghozali, I. (2016). Desain penelitian kuantitatif dan kualitatif: untuk akuntansi, bisnis, dan ilmu sosial lainnya.
- Graf-Vlachy, L., Bundy, J., & Hambrick, D. C. (1984). Effects of an advancing tenure on CEO cognitive complexity. Organization Science, 31(4), 936–959. https://doi.org/10.1287/orsc.2019.1336
- Gulluscio, C., Puntillo, P., Luciani, V., & Huisingh, D. (2020). Climate change accounting and reporting: A systematic literature review. Sustainability (Switzerland), 12(13), 1–31. https://doi.org/10.3390/su12135455
- Hafsi, T., & Turgut, G. (2013). Boardroom diversity and its effect on social performance: conceptualization and empirical evidence. Journal of Business Ethics, 112(3), 463–479. https://doi.org/10.1007/s10551-012-1272-z
- Harymawan, I., Putra, F. K. G., Fianto, B. A., & Wan Ismail, W. A. (2021). Financially distressed firms: environmental, social, and governance reporting in Indonesia. Sustainability (Switzerland), 13(18), 1–18. https://doi.org/10.3390/su131810156
- Harjoto, M., Laksmana, I., & Lee, R. (2015). Board diversity and corporate social responsibility. Journal of Business Ethics, 132(4), 641–660. https://doi.org/10.1007/s10551-014-2343-0
- Henderson, A. D., Miller, D., & Hambrick, D. C. (2006). How quickly do CEOs become obsolete? industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447–460. https://doi.org/10.1002/smj.524
- Ibrahim, A. H., & Hanefah, M. M. (2016). Board diversity and corporate social responsibility in Jordan. Journal of Financial Reporting and Accounting, 14(2), 279–298. https://doi.org/10.1108/jfra-06-2015-0065
- Jeong, N., Kim, N., & Arthurs, J. D. (2021). The CEO’s tenure life cycle, corporate social responsibility and the moderating role of the CEO’s political orientation. Journal of Business Research, 137(August), 464–474. https://doi.org/10.1016/j.jbusres.2021.08.046
- Ji, J., Peng, H., Sun, H., & Xu, H. (2021). Board tenure diversity, culture and firm risk: cross-country evidence. Journal of International Financial Markets, Institutions and Money, 70, 101276. https://doi.org/10.1016/j.intfin.2020.101276
- Kang, J. (2010). The effect of firm compensation structures on the mobility and entrepreneurship of extreme performers. Strategic Management Journal, 405(October), 1–43. https://doi.org/10.1002/smj
- Katmon, N., Mohamad, Z. Z., Norwani, N. M., & Farooque, O. Al. (2019). Comprehensive board diversity and quality of corporate social responsibility disclosure: evidence from an emerging market. Journal of Business Ethics, 157(2), 447–481. https://doi.org/10.1007/s10551-017-3672-6
- Majeed, S., Aziz, T., & Saleem, S. (2015). The effect of corporate governance elements on corporate social responsibility (csr) disclosure: An empirical evidence from listed companies at kse Pakistan. International Journal of Financial Studies, 3(4), 530–556. https://doi.org/10.3390/ijfs3040530
- Marquis, C., & Lee, M. (2013). Who is governing whom? Executives, governance, and the structure of generosity in large U.S. firms. Strategic Management Journal, 34(4), 483–497. https://doi.org/10.1002/smj.2028
- Nguyen, T. L. H., Tran, N. M., & Vu, M. C. (2021). The influence of board characteristics and state holding on corporate social responsibility disclosure, evidence from vietnamese listed firms. Business: Theory and Practice, 22(1), 190–201. https://doi.org/10.3846/btp.2021.13490
- Ningsih, S., Prasetyo, K., Puspitasari, N., & Cahyono, S. (2023). Earnings management and sustainability reporting disclosure: Risks (MDPI), 11(137), 1–19. https://doi.org/10.3390/risks11070137
- Nosratabadi, S., Mosavi, A., Shamshirband, S., Zavadskas, E. K., Rakotonirainy, A., & Chau, K. W. (2019). Sustainable business models: a review. Sustainability (Switzerland), 11(6), 1–30. https://doi.org/10.3390/su11061663
- Oh, W. Y., Chang, Y. K., & Cheng, Z. (2016). When CEO career horizon problems matter for corporate social responsibility: the moderating roles of industry-level discretion and blockholder ownership. Journal of Business Ethics, 133(2), 279–291. https://doi.org/10.1007/s10551-014-2397-z
- Ratri, M. . M. C., Harymawan, I., & Kamarudin, K. A. (2021). Busyness, tenure, meeting frequency of the ceos, and corporate social responsibility disclosure. Sustainability (Switzerland), 13(10), 1–22. https://doi.org/10.3390/su13105567
- Said, R., Zainuddin, Y., & Haron, H. (2009). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Social Responsibility Journal, 5(2), 212–226. https://doi.org/10.1108/17471110910964496
- Thomas, A. S., & Simerly, R. L. (1994). The chief executive officer and corporate social performance: an interdisciplinary examination. Journal of Business Ethics, 13(12), 959–968. https://doi.org/10.1007/BF00881665
- van Zanten, J. A., & van Tulder, R. (2018). Multinational enterprises and the sustainable development goals: an institutional approach to corporate engagement. Journal of International Business Policy, 1(3–4), 208–233. https://doi.org/10.1057/s42214-018-0008-x
- Wang, C., Deng, X., Álvarez-Otero, S., Sial, M. S., Comite, U., Cherian, J., & Oláh, J. (2021). Impact of women and independent directors on corporate social responsibility and financial performance: empirical evidence from an emerging economy. Sustainability (Switzerland), 13(11), 1–16. https://doi.org/10.3390/su13116053
- Wang, Z., Hsieh, T. S., & Sarkis, J. (2018). CSR performance and the readability of csr reports: too good to be true? Corporate Social Responsibility and Environmental Management, 25(1), 66–79. https://doi.org/10.1002/csr.1440
- Wu, S. R., Shao, C., & Chen, J. (2018). Approaches on the screening methods for materiality in sustainability reporting. Sustainability (Switzerland), 10(9), 14–16. https://doi.org/10.3390/su10093233
- Yang, Y., Orzes, G., Jia, F., & Chen, L. (2021). Does GRI sustainability reporting pay off? an empirical investigation of publicly listed firms in China. Business and Society, 60(7), 1738–1772. https://doi.org/10.1177/0007650319831632
- Zhang, J. Q., Zhu, H., & Ding, H. bin. (2013). Board composition and corporate social responsibility: an empirical investigation in the post sarbanes-oxley era. Journal of Business Ethics, 114(3), 381–392. https://doi.org/10.1007/s10551-012-1352-0
- Zhu, J., Ye, K., Tucker, J. W., & Chan, K. (Johnny) C. (2016). Board hierarchy, independent directors, and firm value: evidence from China. Journal of Corporate Finance, 41, 262–279. https://doi.org/10.1016/j.jcorpfin.2016.09.009
References
Ali, M., Ng, Y. L., & Kulik, C. T. (2014). Board Age and gender diversity: a test of competing linear and curvilinear predictions. Journal of Business Ethics, 125(3), 497–512. https://doi.org/10.1007/s10551-013-1930-9
Ardianto, A., Anridho, N., Cahyono, S., Noman Alam, A. H. M., & Harymawan, I. (2024). The role of risk management committee on the relationship between corporate carbon emission disclosure and capital structure. Corporate Social Responsibility and Environmental Management, 31(3), 1–32. https://doi.org/10.1002/csr.2671
Ben-Amar, W., Chang, M., & McIlkenny, P. (2017). Board gender diversity and corporate response to sustainability initiatives: evidence from the carbon disclosure project. Journal of Business Ethics, 142(2), 369–383. https://doi.org/10.1007/s10551-015-2759-1
Berzkalne, I., & Zelgalve, E. (2014). Intellectual capital and company value. Procedia - Social and Behavioral Sciences, 110, 887–896. https://doi.org/10.1016/j.sbspro.2013.12.934
Bui, B., Houqe, M. N., & Zaman, M. (2020). Climate governance effects on carbon disclosure and performance. British Accounting Review, 52(2), 100880. https://doi.org/10.1016/j.bar.2019.100880
Cahyono, S. (2023). A bibliographic study for management control systems on journal of management accounting research. Jurnal Bisnis Dan Akuntansi, 25(1), 1–16.
Cahyono, S., Harymawan, I., & Kamarudin, K. A. (2023). The impacts of tenure diversity on boardroom and corporate carbon emission performance: exploring from the moderating role of corporate innovation. Corporate Social Responsibility and Environmental Management, 30(5), 2507–2535. https://doi.org/10.1002/csr.2500
Cahyono, S., Damayanti, V. A., Ardianto, A., & Ardianto, A. (2024). Empirical evidence of esg disclosure’s impact on corporate investment decision in Indonesia. Jurnal Dinamika Akuntansi Dan Bisnis, 11(1), 135–154. https://doi.org/10.24815/jdab.v11i1.31466
Chang, Y. K., Oh, W. Y., Park, J. H., & Jang, M. G. (2017). Exploring the relationship between board characteristics and csr: empirical evidence from Korea. Journal of Business Ethics, 140(2), 225–242. https://doi.org/10.1007/s10551-015-2651-z
Chen, W. (Tina), Zhou, G. (Stephen), & Zhu, X. (Kevin). (2019). CEO tenure and corporate social responsibility performance. Journal of Business Research, 95(July 2017), 292–302. https://doi.org/10.1016/j.jbusres.2018.08.018
Fallah, M. A., & Mojarrad, F. (2019). Corporate governance effects on corporate social responsibility disclosure: empirical evidence from heavy-pollution industries in Iran. Social Responsibility Journal, 15(2), 208–225. https://doi.org/10.1108/SRJ-04-2017-0072
Ferrero-Ferrero, I., Fernández-Izquierdo, M. Á., & Muñoz-Torres, M. J. (2015). Integrating sustainability into corporate governance: an empirical study on board diversity. Corporate Social Responsibility and Environmental Management, 22(4), 193–207. https://doi.org/10.1002/csr.1333
Frias-Aceituno, J. V., Rodriguez-Ariza, L., & Garcia-Sanchez, I. M. (2013). The role of the board in the dissemination of integrated corporate social reporting. Corporate Social Responsibility and Environmental Management, 20(4), 219–233. https://doi.org/10.1002/csr.1294
Ghozali, I. (2016). Desain penelitian kuantitatif dan kualitatif: untuk akuntansi, bisnis, dan ilmu sosial lainnya.
Graf-Vlachy, L., Bundy, J., & Hambrick, D. C. (1984). Effects of an advancing tenure on CEO cognitive complexity. Organization Science, 31(4), 936–959. https://doi.org/10.1287/orsc.2019.1336
Gulluscio, C., Puntillo, P., Luciani, V., & Huisingh, D. (2020). Climate change accounting and reporting: A systematic literature review. Sustainability (Switzerland), 12(13), 1–31. https://doi.org/10.3390/su12135455
Hafsi, T., & Turgut, G. (2013). Boardroom diversity and its effect on social performance: conceptualization and empirical evidence. Journal of Business Ethics, 112(3), 463–479. https://doi.org/10.1007/s10551-012-1272-z
Harymawan, I., Putra, F. K. G., Fianto, B. A., & Wan Ismail, W. A. (2021). Financially distressed firms: environmental, social, and governance reporting in Indonesia. Sustainability (Switzerland), 13(18), 1–18. https://doi.org/10.3390/su131810156
Harjoto, M., Laksmana, I., & Lee, R. (2015). Board diversity and corporate social responsibility. Journal of Business Ethics, 132(4), 641–660. https://doi.org/10.1007/s10551-014-2343-0
Henderson, A. D., Miller, D., & Hambrick, D. C. (2006). How quickly do CEOs become obsolete? industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447–460. https://doi.org/10.1002/smj.524
Ibrahim, A. H., & Hanefah, M. M. (2016). Board diversity and corporate social responsibility in Jordan. Journal of Financial Reporting and Accounting, 14(2), 279–298. https://doi.org/10.1108/jfra-06-2015-0065
Jeong, N., Kim, N., & Arthurs, J. D. (2021). The CEO’s tenure life cycle, corporate social responsibility and the moderating role of the CEO’s political orientation. Journal of Business Research, 137(August), 464–474. https://doi.org/10.1016/j.jbusres.2021.08.046
Ji, J., Peng, H., Sun, H., & Xu, H. (2021). Board tenure diversity, culture and firm risk: cross-country evidence. Journal of International Financial Markets, Institutions and Money, 70, 101276. https://doi.org/10.1016/j.intfin.2020.101276
Kang, J. (2010). The effect of firm compensation structures on the mobility and entrepreneurship of extreme performers. Strategic Management Journal, 405(October), 1–43. https://doi.org/10.1002/smj
Katmon, N., Mohamad, Z. Z., Norwani, N. M., & Farooque, O. Al. (2019). Comprehensive board diversity and quality of corporate social responsibility disclosure: evidence from an emerging market. Journal of Business Ethics, 157(2), 447–481. https://doi.org/10.1007/s10551-017-3672-6
Majeed, S., Aziz, T., & Saleem, S. (2015). The effect of corporate governance elements on corporate social responsibility (csr) disclosure: An empirical evidence from listed companies at kse Pakistan. International Journal of Financial Studies, 3(4), 530–556. https://doi.org/10.3390/ijfs3040530
Marquis, C., & Lee, M. (2013). Who is governing whom? Executives, governance, and the structure of generosity in large U.S. firms. Strategic Management Journal, 34(4), 483–497. https://doi.org/10.1002/smj.2028
Nguyen, T. L. H., Tran, N. M., & Vu, M. C. (2021). The influence of board characteristics and state holding on corporate social responsibility disclosure, evidence from vietnamese listed firms. Business: Theory and Practice, 22(1), 190–201. https://doi.org/10.3846/btp.2021.13490
Ningsih, S., Prasetyo, K., Puspitasari, N., & Cahyono, S. (2023). Earnings management and sustainability reporting disclosure: Risks (MDPI), 11(137), 1–19. https://doi.org/10.3390/risks11070137
Nosratabadi, S., Mosavi, A., Shamshirband, S., Zavadskas, E. K., Rakotonirainy, A., & Chau, K. W. (2019). Sustainable business models: a review. Sustainability (Switzerland), 11(6), 1–30. https://doi.org/10.3390/su11061663
Oh, W. Y., Chang, Y. K., & Cheng, Z. (2016). When CEO career horizon problems matter for corporate social responsibility: the moderating roles of industry-level discretion and blockholder ownership. Journal of Business Ethics, 133(2), 279–291. https://doi.org/10.1007/s10551-014-2397-z
Ratri, M. . M. C., Harymawan, I., & Kamarudin, K. A. (2021). Busyness, tenure, meeting frequency of the ceos, and corporate social responsibility disclosure. Sustainability (Switzerland), 13(10), 1–22. https://doi.org/10.3390/su13105567
Said, R., Zainuddin, Y., & Haron, H. (2009). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Social Responsibility Journal, 5(2), 212–226. https://doi.org/10.1108/17471110910964496
Thomas, A. S., & Simerly, R. L. (1994). The chief executive officer and corporate social performance: an interdisciplinary examination. Journal of Business Ethics, 13(12), 959–968. https://doi.org/10.1007/BF00881665
van Zanten, J. A., & van Tulder, R. (2018). Multinational enterprises and the sustainable development goals: an institutional approach to corporate engagement. Journal of International Business Policy, 1(3–4), 208–233. https://doi.org/10.1057/s42214-018-0008-x
Wang, C., Deng, X., Álvarez-Otero, S., Sial, M. S., Comite, U., Cherian, J., & Oláh, J. (2021). Impact of women and independent directors on corporate social responsibility and financial performance: empirical evidence from an emerging economy. Sustainability (Switzerland), 13(11), 1–16. https://doi.org/10.3390/su13116053
Wang, Z., Hsieh, T. S., & Sarkis, J. (2018). CSR performance and the readability of csr reports: too good to be true? Corporate Social Responsibility and Environmental Management, 25(1), 66–79. https://doi.org/10.1002/csr.1440
Wu, S. R., Shao, C., & Chen, J. (2018). Approaches on the screening methods for materiality in sustainability reporting. Sustainability (Switzerland), 10(9), 14–16. https://doi.org/10.3390/su10093233
Yang, Y., Orzes, G., Jia, F., & Chen, L. (2021). Does GRI sustainability reporting pay off? an empirical investigation of publicly listed firms in China. Business and Society, 60(7), 1738–1772. https://doi.org/10.1177/0007650319831632
Zhang, J. Q., Zhu, H., & Ding, H. bin. (2013). Board composition and corporate social responsibility: an empirical investigation in the post sarbanes-oxley era. Journal of Business Ethics, 114(3), 381–392. https://doi.org/10.1007/s10551-012-1352-0
Zhu, J., Ye, K., Tucker, J. W., & Chan, K. (Johnny) C. (2016). Board hierarchy, independent directors, and firm value: evidence from China. Journal of Corporate Finance, 41, 262–279. https://doi.org/10.1016/j.jcorpfin.2016.09.009