Does Financial Slack Matter? Corporate Governance, Corporate Activities, And Sustainability Reporting Quality in Indonesia

This study examines the effects of corporate governance mechanisms and asset turnover on sustainability reporting quality, with particular emphasis on the moderating role of financial slack. Drawing on agency, legitimacy, and stakeholder theories, the study employs a quantitative approach using panel data from 33 companies consistently included in Indonesia's ESGQ-KEHATI Index between 2021 and 2024, yielding 132 firm-year observations. Sustainability reporting quality is assessed through content analysis of 33 environmental, social, and governance (ESG) indicators, while financial slack is measured as the ratio of free cash flow to total revenue. The data are analyzed using fixed-effects panel regression and moderated regression analysis. The findings reveal that the proportion of independent commissioners, audit committee, and total asset turnover positively and significantly influence sustainability reporting quality, whereas managerial ownership has no significant effect. Financial slack exhibits a positive direct association with reporting quality and strengthens the effects of independent commissioners and the audit committee, but does not significantly moderate the relationships involving managerial ownership or asset turnover. The adjusted R² increases from 0.514 to 0.533 following the inclusion of financial slack in the regression specification. Firm age is positively associated with reporting quality, while firm size has no significant effect. These findings suggest that financial flexibility complements formal corporate governance oversight in improving sustainability reporting quality. The study contributes to sustainability governance literature by demonstrating that the moderating role of financial slack differs across governance and operational mechanisms, highlighting the importance of resource availability in supporting effective sustainability oversight.