Two Faces of Sustainability and Earnings Quality: A Comparative Profile of Plantation and Processed-Food Firms in Indonesia

Dewi Indrayani Hamin; Eduart Wolok; Raflin Hinelo; Rizan Machmud

doi:10.32535/ijafap.v9i1.4717

Two Faces of Sustainability and Earnings Quality: A Comparative Profile of Plantation and Processed-Food Firms in Indonesia

Dewi Indrayani Hamin, Eduart Wolok, Raflin Hinelo, Rizan Machmud

Abstract

ABSTRACT

The transition toward a green economy has intensified pressure on firms to align earnings quality with sustainability performance, yet subsector differences within food industries remain underexplored. This study profiles and compares earnings management and Environmental, Social, and Governance (ESG) performance among plantation and processed-food firms listed on the Indonesia Stock Exchange during 2018–2025. Using a descriptive-comparative design, the analysis covers 184 firm-year observations from 23 firms selected through multistage sampling. Earnings management is assessed through discretionary accruals estimated with Modified Jones and Dividend-Adjusted Modified Jones models, while sustainability performance is evaluated through environmental, social, governance, and overall ESG scores, supported by nonparametric difference tests. Results show earnings management is largely adaptive, as the dividend-adjusted measure reveals stronger income-increasing tendencies once dividend distribution is incorporated. Plantation firms record significantly higher ESG performance than processed-food firms (59.08 versus 47.11 on a 0–100 scale; p = 0.000), especially in the environmental dimension, while processed-food firms show governance-led improvement after 2022. The study concludes that earnings quality and sustainability performance are subsector-contingent and cannot be inferred from aggregate ESG scores alone. Regulators and managers should calibrate green financial governance to each subsector’s operational pressures

Keywords: corporate sustainability performance; discretionary accruals; earnings management; ESG; plantation firms; processed food

JEL Classification: M41; Q56; G34

Keywords

corporate sustainability performance; discretionary accruals; earnings management; ESG; plantation firms; processed food

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References

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DOI: https://doi.org/10.32535/ijafap.v9i1.4717