The Effect of Intellectual Capital, Sustainability Reporting on Financial Performance in Indonesia

Rima Auliyamartha Agustina, Indar Khaerunnisa, Noviatin Syarifuddin, Adittia Saputra

Abstract


The increasing emphasis on intangible assets and corporate sustainability has shifted the focus of financial performance analysis beyond traditional accounting measures. This study examines the effect of Intellectual Capital (IC) and Sustainability Reporting (SR) on the financial performance of secondary manufacturing companies in Indonesia. Financial performance is measured using Return on Equity (ROE). The objective of this study is to analyze both the partial and simultaneous effects of IC and SR on ROE. The population of this study consists of all secondary manufacturing companies listed on the Indonesia Stock Exchange during the period 2021–2024. Using a quantitative approach, the data were obtained from annual and sustainability reports published by the companies. The analysis technique employed is multiple regression analysis to test the proposed relationships among variables. The empirical results reveal that Intellectual Capital (IC) has a significant positive effect on financial performance (ROE), indicating that effective management of human, structural, and relational capital enhances firm profitability. In contrast, Sustainability Reporting (SR) shows a significant negative effect on ROE, suggesting that sustainability initiatives may impose short-term financial burdens that have yet to translate into immediate financial returns. However, when tested simultaneously, IC and SR jointly exert a significant positive effect on financial performance. These findings imply that while sustainability reporting may initially reduce profitability due to implementation costs, its integration with strong intellectual capital can enhance long-term firm value. This study provides important insights for managers, investors, and policymakers in developing strategies that balance profitability and sustainability in the manufacturing sector.

 


Keywords


Intellectual Capital; Sustainability Reporting; Financial Performance; Return on Equity (ROE); Manufacturing Companies

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References


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DOI: http://dx.doi.org/10.17576/ebangi.2026.2301.19

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