SUSTAINABILITY AND GOING CONCERN IMPACTS ON FINANCIAL PERFORMANCE OF INDONESIA’S IDX-LISTED TOURISM AND HOSPITALITY FIRMS

Abstract

Drawing upon signalling theory and stakeholder theory, this study investigates the impact of going concern opinions (GCOs) and sustainability reporting (SR) on the financial performance of tourism, hotel, and restaurant firms listed on the Indonesia Stock Exchange (IDX) between 2020 and 2023. Utilizing a balanced panel dataset comprising 32 companies (128 firm-year observations), fixed-effects regression models are employed to examine the direct effects of GCOs and the quality of SR on core financial indicators, namely return on assets (ROA), return on equity (ROE), and return on investment (ROI). The empirical findings indicate that GCOs significantly reduce financial performance by approximately 2.1–4.3 % in terms of profitability, supporting signalling theory’s proposition that signs of financial distress diminish market confidence. Conversely, sustainability reporting exerts a significant positive influence on financial performance, consistent with stakeholder theory, which asserts that enhanced disclosure practices contribute to increased firm value. Furthermore, the study reveals that regulatory enhancements in SR requirements after 2021 have amplified these effects, underscoring the importance of policy frameworks in shaping disclosure outcomes. Accordingly, the findings suggest that policymakers should consider the adoption of global sustainability reporting standards to mitigate risks while simultaneously improving financial performance. This research contributes to the existing body of literature by offering empirical insights into the financial implications of audit and sustainability disclosures within the context of an emerging tourism, hotel, and restaurant sector.