Governance Mechanisms, Sustainability Reporting, and Investor Confidence: The Mediating Role of Information Risk

Andi Aris Mattunruang; Rahmawati Rahmawati; Inayah Abdillah Rabbani; Nurul Afiqah Annas

doi:10.61255/jeemba.v4i2.897

Authors

Andi Aris Mattunruang Universitas Patompo, Indonesia
Rahmawati Universitas Patompo, Indonesia
Inayah Abdillah Rabbani Universitas Muhammadiyah Kendari, Indonesia
Nurul Afiqah Annas Universitas Patompo, Indonesia

DOI:

https://doi.org/10.61255/jeemba.v4i2.897

Keywords:

Corporate Governance, Information Risk, Investor Confidence, Sustainability Reporting, ESG Disclosure

Abstract

Purpose – This study examines the role of corporate governance mechanisms in reducing information risk and enhancing investor confidence through sustainability reporting. The topic is important as increasing ESG disclosure requirements and market expectations have intensified the need for transparent and credible corporate reporting to mitigate information asymmetry in emerging markets.

Design/methodology/approach – Research employs a quantitative approach using panel data from 35 firms listed in the Indeks SRI-KEHATI over the period 2018–2024, resulting in 245 observations. Panel data regression is used to analyze the effect of governance mechanisms on information risk, while Structural Equation Modeling (SEM-PLS) is applied to examine direct and mediating relationships among variables.

Finding/Results – The results indicate that governance mechanisms significantly reduce information risk, particularly through independent commissioners, board size, and institutional ownership. Furthermore, information risk plays a significant mediating role in strengthening investor confidence, as lower information asymmetry leads to higher market trust.

Originality/Value – This study provides empirical evidence on the mediating role of information risk in the relationship between governance mechanisms and investor confidence within the context of sustainability reporting. The findings highlight that effective governance and transparent ESG disclosure are not only regulatory requirements but also strategic tools to enhance market credibility and investor trust in emerging markets.

Abstract views: 9 ,

PDF downloads: 2

Downloads

Download data is not yet available.

References

Ab Aziz, N. H., Alshdaifat, S. M., & Al Amosh, H. (2025). ESG Controversies and Firm Performance in ASEAN: Do Board Gender Diversity and Sustainability Committee Matter? Business Strategy and Development, 8(1), 1–14. https://doi.org/10.1002/bsd2.70094

Abideen, Z. U. (2025). The Moderating Role of Investor Sentiments Between Sustainability Reporting and Firm Reputation. Evidence from Chinese Listed Firms. Corporate Social Responsibility and Environmental Management, 32(1), 138–159.

Akinsola, K., Onu, K., Owoeye, Y., & dkk. (2025). Legal Compliance in Corporate Governance Frameworks: Best Practices for Ensuring Transparency, Accountability, and Risk Mitigation. SSRN Electronic Journal.

Aldoseri, M. M., & Melegy, M. M. A. (2023). Readability of Annual Financial Reports, Information Efficiency, and Stock Liquidity: Practical Guides From the Saudi Business Environment. Information Sciences Letters, 12(2), 813–821. https://doi.org/10.18576/isl/120223

Busman, R. M., Piotroski, J. D., & Smith, A. J. (2018). What Determines Corporate Transparency? Journal of Accounting Research, 54(2), 2016.

Chali, M. S., Eshete, S. K., & Debela, K. L. (2022). Learning How Research Design Methods Work: A Review of Creswell’s Research Design: Qualitative, Quantitative and Mixed Methods Approaches. The Qualitative Report, 27(12), 2956–2960. https://doi.org/10.46743/2160-3715/2022.5901

Cormier, D., & Magnan, M. (2015). The Economic Relevance of Environmental Disclosure and its Impact on Corporate Legitimacy: An Empirical Investigation. Business Strategy and the Environment, 24(6), 431–450. https://doi.org/10.1002/bse.1829

Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The Impact of Corporate Sustainability on Organizational Processes. Nber Working Paper Series, 1–35. https://doi.org/10.1007/s13398-014-0173-7.2

Elamer, A. A., & Boulhaga, M. (2024). ESG Controversies and Corporate Performance: The Moderating Effect of Governance Mechanisms and ESG Practices. Corporate Social Responsibility and Environmental Management, 31(4), 3312–3327. https://doi.org/10.1002/csr.2749

Feng, Y., Gou, B., Wang, X., & Hu, F. (2024). Facilitating or Inhibiting? The Impact of Environmental Information Disclosure on Enterprise Investment Value. Environmental Science and Pollution Research, 31(5), 7793–7805.

Fu, M., & Jia, Y. (2025). The Impact of Environmental Social and Governance Performance on Systematic Tail Risk of Chinese Corporations. Sustainability (Switzerland), 17(5), 1–23. https://doi.org/10.3390/su17051854

García-Sánchez, I. M., Hussain, N., Khan, S. A., & Martínez-Ferrero, J. (2021). Assurance of Corporate Social Responsibility Reports: Examining the Role of Internal and External Corporate Governance Mechanisms. Corporate Social Responsibility and Environmental Management, 29(1), 89–106. https://doi.org/10.1002/csr.2186

Gidage, M., Gyamfi, B. A., & Asongu, S. A. (2025). Environmental Reporting and Financial Performance: Evidence From the Banking Sector in BRICS Countries. Business Strategy and the Environment, 34, 7412–7437. https://doi.org/10.1002/bse.4358

Goerzen, A., Van Assche, A., Zhan, J. X., & Zhang, L. (2025). From the Editors: Global Sustainability Reporting Standards and the Future of International Business. Journal of International Business Policy, 8(2), 125–136. https://doi.org/10.1057/s42214-025-00213-x

Hajek, P., & Munk, M. (2024). Corporate Financial Distress Prediction Using the Risk-Related Information Content of Annual Reports. Information Processing & Management, 61(5), 103820.

Hummel, K., & Schlick, C. (2015). The Relationship Between Sustainability Performance and Sustainability Disclosure Quality Hard Numbers Beat Smooth Talk. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2595045

Lajmi, A., & Yab, M. (2021). The Impact of Internal Corporate Governance Mechanisms on Audit Report Lag: Evidence From Tunisian Listed Companies. EuroMed Journal of Business, 17(4), 619–633. https://doi.org/10.1108/EMJB-05-2021-0070

Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility During the Financial Crisis. Journal of Finance, 72(4), 1785–1824. https://doi.org/10.1111/jofi.12505

Ma, Y., Feng, G.-F., Yin, Z., & Chang, C.-P. (2025). ESG Disclosures, Green Innovation, and Greenwashing: All for Sustainable Development? Sustainable Development, 33(2), 1797–1815.

Mattunruang, A. A., & Asmirawati. (2023). Pengaruh Green Business dan Good Corporate Governance Terhadap Kinerja Keuangan: Corporate Social Responsibility sebagai Pemoderasi. Owner: Riset & Jurnal Akuntansi, 7(4), 3672–3680. https://doi.org/10.33395/owner.v7i4.1948

Mismiwati, M., Dara, R., & Kiri, M. (2025). Corporate Governance and Earnings Management: Empirical Study of Public Companies in Indonesia. Journal Markcount Finance, 3(1), 25–37. https://doi.org/10.70177/jmf.v3i1.2063

Moussa, A. S., & Elmarzouky, M. (2024). Sustainability Reporting and Market Uncertainty: The Moderating Effect of Carbon Disclosure. Sustainability (Switzerland) , 16(13), 1–18. https://doi.org/10.3390/su16135290

Naz, A., Ali, M., & Barut, A. K. (2025). Sukuk and Corporate Governance: Ethical Foundations, Economic Impact, and Global Relevance in Islamic Finance. Islamic Finance and Corporate Governance: Synergies for Sustainable Growth, 147–173.

Nguyen, H. C., & Duong, H. K. (2025). The Impact of Sustainability Reporting on The Cost of Capital: Evidence From Vietnam’s Listed Companies. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-09-2024-0642

Nyantakyi, G., Atta Sarpong, F., Adu Sarfo, P., Uchenwoke Ogochukwu, N., & Coleman, W. (2023). A Boost for Performance or a Sense of Corporate Social Responsibility? A Bibliometric Analysis on Sustainability Reporting and Firm Performance Research (2000-2022). Cogent Business and Management, 10(2), 1–23. https://doi.org/10.1080/23311975.2023.2220513

Oyerogba, E. O., Oladele, F., Kolawole, P. E., & Adeyemo, M. A. (2024). Corporate Governance Practices and Sustainability Reporting Quality: Evidence From the Nigerian Listed Financial Institution. Cogent Business and Management, 11(1), 1–19. https://doi.org/10.1080/23311975.2024.2325111

Salehi, M., Ajel, R. A., & Zimon, G. (2023). The Relationship Between Corporate Governance and Financial Reporting Transparency. Journal of Financial Reporting and Accounting, 21(5), 1049–1072.

Takona, J. P. (2024). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches / Sixth Edition. Quality & Quantity, 58(1), 1011–1013.

Villiers, C. de, & Dimes, R. (2021). Determinants, mechanisms and Consequences of Corporate Governance Reporting: A Research Framework. Journal of Management and Governance, 25(1), 7–26.

Wang, W., Sun, Z., Wang, W., Hua, Q., & Wu, F. (2023). The Impact of Environmental Uncertainty on ESG Performance: Emotional vs. Rational. Journal of Cleaner Production, 397.

Zadeh, A., Amir, & Serafeim, G. (2018). Why and How Investors Use ESG Information: Evidence from a Global Survey. Financial Analysts Journal, 74(3), 87–103. https://doi.org/10.2469/faj.v74.n3.2

Zheng, Y. (2024). Digital Information Disclosure, Investor Sentiment and Enterprise Default Risk. Finance Research Letters, 62.

Zimon, G., Arianpoor, A., & Salehi, M. (2022). Sustainability Reporting and Corporate Reputation: The Moderating Effect of CEO Opportunistic Behavior. Sustainability (Switzerland), 14(3), 1–28. https://doi.org/10.3390/su14031257