Pa Modou

Type of the article: Research Article

Abstract
Financial restatements remain a significant concern because they reflect weaknesses in financial reporting quality, corporate transparency, and governance effectiveness, particularly in emerging markets. This study examines the effects of the Environmental, Social, and Governance (ESG) dimensions and ownership structures on the likelihood of financial restatements, as well as the moderating role of board independence. The study employs logistic regression and Moderated Regression Analysis (MRA) using 609 firm-year observations of manufacturing companies listed on the Indonesia Stock Exchange during 2017–2023. The findings indicate that none of the ESG dimensions, ownership structures, or their interaction with board independence show a statistically significant association with financial restatements at the 5% level, and the model’s explanatory power is limited (Nagelkerke R2 = 0.057). While these results should be interpreted with caution given the model’s limited explanatory capacity, they are consistent with the view that formal ESG and governance mechanisms may not yet operate as effective monitoring instruments in this emerging-market setting. The findings underscore the need for further research and stronger regulatory enforcement to strengthen the substantive role of governance in corporate reporting integrity. These findings have important implications for regulators, corporate boards, and investors in emerging markets, suggesting that voluntary ESG commitments and concentrated ownership structures alone are insufficient safeguards against reporting irregularities unless accompanied by credible enforcement and independent oversight mechanisms.