Eduardus Tandelilin

Considering that bank does not always perform its functions to overcome financial constraints and to monitor the company’s financial activities, this study aims to examine the role of bank-firm relationships in the effect of internal finance on investment based on the business cycle. The testing stages started with testing the effect of internal finance on investment, testing the role of bank-firm relationships in the effect of internal finance to investment, and testing the role of bank-firm relationships based on the business cycles. Non-financial companies listed on the Indonesia Stock Exchange make the sample of this study, while the data used are the financial statements for the period of 2002 – 2015 sourced from Osiris database. Hypotheses were tested using unbalanced panel regression. The results showed that internal finance has a positive effect on investment. The bank-firm relationships play a significant role in the effect of internal finance on the investment. In the growing companies, bank-firm relationships reduce underinvestment, and in mature companies, bank-firm relationships reduce overinvestment significantly. This study implies that banks run their role in helping to meet the needs of the internal financing. Companies with strong bank-firm relationships reduce the problem of underinvestment and asymmetric information. They also reduce the problem of overinvestment and agency of free cash flow. Banks perform their role in monitoring the financing activities of the mature companies.

This study analyzes the effects of environmental, social, and governance (ESG) controversies and the presence of women on boards on ESG-washing practices in the global banking sector. ESG washing is a manipulative practice in ESG disclosure where companies highlight positive information to conceal poor sustainability performance. This study employs a panel dataset from 279 public banks in 67 countries, covering five major regions – Asia, Europe, Africa, America, and Oceania – over the period 2011 to 2023. Data were obtained from Refinitiv Eikon and Bloomberg for bank-level information, as well as the World Bank for macroeconomic data. The results show that ESG controversies significantly drive ESG washing. Banks involved in controversies tend to use manipulative ESG disclosures to protect their reputation and mitigate the impact of scandals. Conversely, the presence of women on the board has a significant mitigating effect on ESG washing. This study also identifies a critical mass effect, where the positive influence of women on boards in reducing ESG washing becomes optimal when their representation reaches a certain level. These findings have important implications for policymakers and regulators to promote inclusive governance and sustainability transparency, particularly through increasing gender diversity on boards of directors. Furthermore, these results indicate that good governance, supported by adequate representation of women, can help combat unethical practices such as ESG washing in the global banking sector.