Objective

This study explores the effect of sustainability development and Independent Board of Commissioners on operational and systematic risks in Indonesian listed companies.

Design/methodology/approach

This study uses a five-year period of data from 2018 to 2022 and ordinary least squares regression to estimate the associations. We also applied the Generalized Method of Moments to address endogeneity issues, as well as several robustness tests, including the impact of the COVID 19 pandemic and other additional control variables.

Findings

Overall, our empirical research shows that companies with higher sustainable performance and Independent Board of Commissioner members experience lower operational and systematic risks, whereas the Independent Board of Commissioners has no association with systematic risk. Furthermore, we test for endogeneity and the results remain consistent.

Implications

This study has practical implications for policymakers and academics by considering sustainable development and corporate governance mechanisms in emerging economies, such as increasing ESG practices and the role of an independent board of commissioners to promote transparency and competitiveness of the organization. This study also assists investors in considering the large amount of funds issued and the investment decisions for companies in developing countries.

Originality/value

This study examines the knowledge gap in the literature in developing countries regarding sustainability development and the independent board of commissioners in Indonesia.