Factors Influencing the Quality of Financial and Sustainability Reports

This study explores the factors influencing Financial Reporting Quality (FRQ) and Sustainability Reporting Quality (SRQ) in Indonesian publicly listed companies. Highquality financial reporting is crucial for supporting decision-making by investors, creditors, and other stakeholders. However, earnings management and financial statement manipulation remain significant challenges, as has happened in the case of several public companies in Indonesia. Concurrently, sustainability reporting is gaining more attention as businesses shift towards environmentally, socially, and governance (ESG) responsible practices. This research aims to explore the determinant factors of FRQ and SRQ and investigate the relationship between the two. Research was conducted on ESGQKEHATI index companies listed on the Indonesia Stock Exchange (IDX). This research utilizes data from financial reports, annual reports, and sustainability reports of companies listed on the IDX for the 2019–2022 period. Through multiple linear regression analysis and 2-Stage Least Squares (2SLS) methods, the study finds that independent board supervision and institution ownership positively and significantly impact financial reporting quality. Additionally, industry classification, company size, and sustainability committees are key determinants of sustainability reporting quality. These findings emphasize the importance of strong corporate governance in enhancing corporate transparency and accountability. This study also found a reciprocal relationship between FRQ and SRQ.