ESG, Corporate Maturity and Capital Structure: The Moderating Role of Firm Size In LQ45 Firms

Abstract

This study examines how environmental social, and governance (ESG) performance, financial characteristics, and corporate maturity shape leverage among Indonesia's most liquid listed firms, and whether firm size conditions the effects of ESG and listing age. A balanced panel of 20 non-financial LQ45 constituents observed from 2019 to 2025 (140 firm-year observations) is estimated using random-effects generalized least squares with Driscoll-Kraay standard errors and moderated regression analysis. ESG is negatively associated with leverage (β = -1.176, p = 0.045). Asset tangibility, liquidity, firm age, and market-to-book value are also negative and significant, whereas listing age and the direct effect of firm size are not significant. The ESG × size interaction is positive (β = 0.250, p = 0.027), indicating that scale attenuates the negative ESG-leverage association. Conversely, the listing age × size interaction is negative (β = -0.049, p = 0.025), so market maturity is associated with lower leverage particularly among larger firms. The baseline model explains 46.54% of overall leverage variation. These findings integrate sustainability, conventional financing determinants, and two maturity proxies within an emerging-market capital structure model. They also show that the financing implications of ESG and public-market experience depend materially on organizational scale.