Integrating Sustainability and Finance: Evidence from Apparel & Luxury Goods, Food & Beverage, and Food & Staples Retailing Sub-Sectors in Indonesia

Abstract

This paper examines factors causing financial distress in companies by obtaining empirical evidence regarding the role of environment, social, governance, as well as financial factors such as sales growth, profitability, liquidity, and leverage in the apparel & luxury goods, food & beverage, and food & staples retailing sub-sectors listed on the Indonesia Stock Exchange (IDX) for the research year 2021-2024. This research was analysed using STATA 17 with panel data regression. The data used comes from the annual financial and sustainability reports of the companies. The results of the analyses in this research indicated that environmental, social, and sales growth didn’t influence financial distress. Meanwhile, profitability, liquidity, and control variable, firm size, are positively associated with financial distress, while governance and leverage have a negative effect on financial distress. The results of the analyses in this research indicated that environmental, social, and sales growth didn’t influence financial distress. Meanwhile, profitability, liquidity, and control variable, firm size, are positively associated with financial distress, while governance and leverage have a negative effect on financial distress. This research is original in examining essential industries that contribute the most in daily human life by integrating ESG and financial factors in assessing financial distress, and its distinctiveness also lies in the novel calculation of ESG scores using content analysis, an approach rarely applied in prior research.