The Role of Audit Report Readability in Linking Management Characteristics to Corporate Sustainability Performance: A Study of Indonesian SOEs

Corporate Sustainability Performance has become a primary focus in light of the growing demands for transparency and accountability. Subsequently, the role of management characteristics (MC) and Audit Report Readability (ARR) is becoming increasingly critical in generating sustainability value. This study aimed to examine the effect of management characteristics on Corporate Sustainability Performance (CSP) with ARR as a mediating variable. The research sample consisted of 120 observations on 20 non-financial State-Owned Enterprises (SOEs) listed in Indonesia Stock Exchange during the 2018–2023 period. Using a quantitative approach with the Partial Least Square-Structural Equation Modeling (PLS-SEM) method, this study found that management characteristics did not have a significant direct effect on CSP. However, the effect became significant through the full mediation of ARR. The test results showed that management characteristics had a positive and significant effect on ARR, and ARR had a significant positive effect on CSP. This indicates that the readability of audit reports is a key factor that bridges the relationship between management and sustainability performance. This research offers a new perspective in the context of corporate sustainability by highlighting the importance of financial reporting transparency and accountability in improving corporate sustainability performance. This research emphasizes the need for companies to improve the quality of information through the ARR reports to build stakeholder trust and support sustainability.