Exploring the Drivers of Green Banking Disclosure in Indonesia and Malaysia: The Role of Financial Performance, Gender Diversity on the Board, Human Resource Slack, Independent Commissioners, and Institutional Ownership

Abstract

Introduction: Climate change continues to be a pressing global challenge, notably impacting regions like Indonesia and Malaysia. Despite an upward trend in ecological banking disclosures, misalignment remains between stated sustainability commitments and actual funding allocations toward environmentally detrimental sectors. This discrepancy signals potential weaknesses in the genuine application of eco-conscious financial governance.

Objectives: This inquiry seeks to evaluate the extent of environmental banking transparency exhibited by conventional financial institutions publicly traded on Indonesia’s IDX and the Malaysian bourse throughout 2019-2023. Moreover, it endeavors to identify the influence of firm-specific attributes, namely fiscal soundness, executive gender heterogeneity, labor resource slack, independent board composition and institutional ownership toward the scope of green banking reporting.

Methods: A quantitative approach was applied using panel data from 60 conventional banks (40 in Indonesia, 20 in Malaysia) over 2019–2023, resulting in 300 observations. Green Banking Disclosure was measured using an index covering four domains: green products, operations, customers, and policies. Independent variables included ROA, board gender diversity, human resource slack, independent commissioners, and institutional ownership. Purposive sampling was used for banks with consistent annual or sustainability reports. To interpret the data, descriptive statistics were utilized, classical assumption tests, in conjunction with panel data regression analysis via STATA 18 with F-tests, t-tests, and R².

Results: This study analyzes the significance of internal governance factors linked to sustainable banking operations disclosure in conventional banks in Indonesia and Malaysia using panel regression with the PCSE approach. Results demonstrate that the board gender diversity, non-affiliated board members, and institutional ownership significantly enhance disclosure, while financial performance and human resource slack have no notable effect. The model explains 75.07% of the disclosure variation, highlighting the critical role of governance in advancing bank disclosures concerning sustainability performance.

Conclusions: The findings reveal that governance elements like board diversity, independent control, and institutional influence significantly drive green disclosure, while profitability and labor surplus do not. This suggests that ethical oversight, rather than performance metrics, is key to advancing environmental transparency.