Financial statement comparability and cash holding: moderated by ESG performance in Indonesia

Purpose
The paper examines the impact of financial statement comparability on cash holding moderated by Environmental Social Governance (ESG) performance.

Design/methodology/approach
A panel dataset of all publicly listed Indonesian firms from 2009 to 2022, evaluated with panel data regressions controlled by year and clustered by firms was the method of study. Then, a robustness test using alternative measurements, lagged variables and additional analyses are performed.

Findings
The result shows that there is no moderating role of ESG performance on financial statement comparability toward cash holding among Indonesian firms; nonetheless, ESG performance strengthened the capacity of financial statement comparability to lower cash holding significantly for firms with high ESG performance scores and not significant otherwise. This interplay of variables is developed following the Financial Services Authority imposed ESG regulation for publicly listed firms in Indonesia. Further, the analyses reveal that higher ESG performance can help firms achieve high market-based performance and make it easier to obtain external financing, thus lowering the need to hold more cash.

Originality/value
The study highlights the effect of financial statement comparability on cash holding, particularly moderated by ESG performance in a developing country where the agency cost is high and still very rare to be scrutinized. Additionally, the study helps to know the impacts prior and post-ESG regulation imposed in Indonesia.