Substantive or Symbolic? The Ethical Influence of Female Directors on Green Innovation Disclosure in Politically Connected Firms

Abstract

Motivated by the ethical implications of gender diversity on boards, this study examines the effect of female directors on symbolic green innovation disclosure and substantive green innovation disclosure. The study defines substantive green innovation disclosure as environmentally oriented innovation that produces tangible value creation, evidenced through its positive effect on firm value, distinguishing it from symbolic green innovation that serves rent-seeking or legitimacy purposes. Using a sample of Indonesian manufacturing firms from 2021 to 2023, the research tests the model separately for politically and nonpolitically connected firms to capture the moderating role of political embeddedness. The results reveal that in nonpolitically connected firms, female directors do not significantly affect green innovation disclosure; however, substantive green innovation positively influences firm value, confirming its genuine strategic and ethical impact. In contrast, in politically connected firms, female directors negatively affect green innovation disclosure, and green innovation fails to improve firm value—indicating that political influence turns sustainability efforts into symbolic compliance rather than authentic environmental innovation. These findings extend upper-echelon and legitimacy theories by showing that in patriarchal cultural background, female directors’ ethical orientation negatively affects symbolic green innovation disclosure but do not affect substantive green innovation disclosure.

1. Introduction

In today’s corporate environment, the integration of governance, ethics, and sustainability has become increasingly significant. Global concerns about climate change and social responsibility have driven organizations to embed environmental and ethical considerations into their business strategies (Ghaeli, 2018). Within this context, corporate boards play a pivotal role in shaping strategic responses to sustainability challenges. In particular, female directors have received growing scholarly attention for their potential to introduce ethical awareness, social sensitivity, and stakeholder orientation into corporate decision-making (Xie et al., 2020; Romano et al., 2020).

However, whether these ethical orientations translate into substantive sustainability actions depends heavily on the institutional and political context in which firms operate. In many emerging economies, including Indonesia, political connections remain a defining feature of corporate governance (Rudyanto et al., 2023; Harymawan et al., 2019b). These connections can help firms secure resources and legitimacy but may also foster rent-seeking behaviors, weaken regulatory enforcement, and encourage symbolic compliance rather than genuine sustainability performance (Damanik et al., 2025; H. Liu et al., 2024). This tension raises a critical ethical question: Do female directors in politically connected firms support green innovation disclosure as an ethical commitment, or do they resist it when such disclosures are merely symbolic or politically motivated?From an ethical perspective, green innovation disclosure can represent either a substantive or a symbolic response to environmental challenges. Substantive green innovation disclosure reflects a genuine ethical commitment to reduce environmental harm, whereas symbolic innovation disclosure functions as a legitimizing façade that enhances corporate image without meaningful impact. Prior studies have documented the positive link between female directors and green innovation (Nadeem et al., 2020; García-Meca et al., 2024; Moreno-Ureba et al., 2022) and between green innovation and firm value (Farza et al., 2021; Lopes & Basso, 2024). Yet, these studies often assume that green innovation is implemented in good faith. In contrast, this study contends that in politicized environments, green innovation may lose its ethical substance, becoming a tool for legitimacy rather than environmental improvement.

This ethical dynamic aligns with upper-echelon theory, which posits that strategic outcomes reflect the values and moral cognition of top executives (Hambrick & Mason, 1984). Female directors’ ethical orientation influences how they respond to institutional pressures: they are more likely to support sustainability when it aligns with moral legitimacy, but may resist it when it becomes an instrument of political opportunism (Y. Wang et al., 2022b). From the lens of legitimacy theory, politically connected firms tend to pursue pragmatic legitimacy—seeking acceptance through political influence or symbolic disclosure (Bianchi et al., 2019)—whereas female directors often seek moral legitimacy, grounded in ethical justification and genuine societal contribution (Tjahjadi & Adhariani, 2022). The clash between these two forms of legitimacy explains why the relationship between female directors and green innovation weakens, or even reverses, in politically connected settings.

By analyzing these dynamics, this study contributes to the literature in three main ways. First, it extends upper-echelon and legitimacy theories by introducing an ethical lens, showing that female directors’ sustainability influence depends on the moral authenticity of corporate innovation disclosure. Second, it identifies political connection as an ethical boundary condition that determines whether gender-diverse boards advance or constrain green innovation disclosure. Previous research has investigated the effect of political connections and female directors on financial reporting quality (Belghitar et al., 2018; Tee, 2020; Tee & Kasipillai, 2021) or the mediating role of green innovation on the effect of female directors on firm value (Lestari & Soewarno, 2023; Mahsina & Agustia, 2023). Unlike prior research that assumes a uniform positive link between female directors, green innovation, and firm value, this study reveals that such relationships are context-dependent. These findings extend the upper echelon perspective by introducing political connections as an institutional boundary condition that reshapes how board diversity contributes to sustainable value creation.

Third, it provides evidence from an emerging-market context that illuminates how institutionalized political power can distort ethical intent, transforming sustainability from a moral pursuit into a symbolic instrument (Harymawan et al., 2019a, 2019b). Indonesia has made several commitments to achieve Sustainable Development Goals by implementing green innovation (Mahsina & Agustia, 2023). However, these commitments are realized within a developing economy context marked by regulatory fragmentation, limited enforcement capacity, and a high dependence on natural resource exploitation. While the government promotes sustainability initiatives, the translation into firm-level action is often uneven, particularly between nonpolitically connected firms and politically connected firms. As a result, green innovation disclosure may be adopted more as a symbolic gesture rather than a substantive strategy for sustainable development. This disparity presents a compelling context to examine how female directors react on symbolic and substantive green innovation disclosure.

This study takes a comparative institutional approach by testing the proposed model separately for politically connected and nonpolitically connected firms. To see whether the green innovation disclosure is symbolic or substantive, this study analyzes the effect of green innovation disclosure on firm value (Truong et al., 2021). This strategy captures the contextual influence of political embeddedness more precisely, as these two groups operate under distinct governance environments. By comparing the pathways from female directors to green innovation and firm value across these groups, we assess whether political ties amplify or weaken the strategic impact of gender-diverse boards. This approach aligns with upper-echelon and institutional theories, which emphasize that leadership effects on firm outcomes are contingent on the broader institutional setting in which decisions are made.

2. Literature Review and Hypothesis Development

2.1. Substantive vs. Symbolic Green Innovation Disclosure and Political Connection

The concept of green innovation has evolved significantly in both academic and practical contexts, particularly in how it is perceived and implemented by organizations. Green innovation refers to environmentally conscious initiatives aimed at improving sustainability through new or enhanced products, processes, or services (Barforoush et al., 2021). The disclosure of green innovation activities is an essential part of corporate sustainability reporting, as it provides stakeholders with insight into a firm’s environmental practices and commitment to sustainability. However, there is a growing distinction in the literature between symbolic and substantive green innovation disclosure. Substantive green innovation disclosure refers to transparent, accurate, and detailed reporting on genuine environmental initiatives that have measurable impacts on sustainability. This type of disclosure typically includes specific data on reductions in energy consumption, emissions, waste management improvements, and the adoption of innovative green technologies. It is grounded in a company’s long-term sustainability strategy and is aimed at providing stakeholders with reliable, action-oriented information that reflects the firm’s actual environmental performance (T. T. Bui & To, 2024; Michelon et al., 2015). In contrast, symbolic green innovation disclosure involves superficial or exaggerated claims of environmental responsibility, often with little to no supporting evidence or actual impact. Firms may engage in symbolic disclosure to project an image of environmental commitment, primarily to meet regulatory requirements or enhance their reputation, without undertaking substantial environmental improvements (Michelon et al., 2015; Shabana & Ravlin, 2016; Truong et al., 2021). This form of disclosure is often vague, unverified, or lacks quantitative data to substantiate claims of green innovation.

Previous studies identify symbolic and substantive green innovation disclosure in various ways (Gu & Matisoff, 2023; Lopez & Romero, 2014; Michelon et al., 2015; Shabana & Ravlin, 2016). However, all of them agree that while symbolic transparency does not improve a company’s performance, substantive disclosure does. Substantive green innovation disclosure provides evidence of a company’s accountability to stakeholders regarding its sustainability status and initiatives (Junior et al., 2014). Transparency of green innovation information can increase shareholder trust in the company. Drawing from most literature, this study argues that symbolic and substantive green innovation disclosure can be seen from its effect on firm value.

The risk of symbolic green innovation disclosure is particularly prevalent in politically connected firms, where the motivation to enhance legitimacy or appease political stakeholders can lead to the adoption of hollow sustainability practices, intended more for external perception than internal change (Maas et al., 2016). However, within the broader sustainability literature, a critical distinction has emerged between substantive and symbolic green innovation.

Previous studies show that state-owned enterprises are driven by symbolic green innovation (Zhang et al., 2019). This is because SOEs, influenced by government regulations, may engage in environmentally friendly practices primarily to demonstrate compliance, rather than a genuine commitment to sustainability. These firms may adopt sustainability initiatives that serve to appease stakeholders, such as regulators and the public, without producing significant environmental impact or changes in business practices. This paper argues that a similar phenomenon can occur in firms with strong political connections. Just as SOEs may engage in symbolic green innovation, politically connected firms may also prioritize appearances over substantive environmental change. In such firms, green innovation could be used as a tool for securing political favor, accessing financial resources, or maintaining legitimacy, rather than driven by a genuine ethical commitment to sustainability. Political ties can thus create a context where the adoption of green innovation is more about strategic positioning and fulfilling regulatory expectations than about actual environmental impact.

The strong political ties characterizing Indonesia’s institutional environment may modulate the motivations for green innovation and value creation driven by governance mechanisms. Businesses may rely on political embeddedness to fill institutional gaps and lower transaction costs in environments with weak formal institutions, like Indonesia under and after the New Order regime (Ge et al., 2018; Yuliansyah et al., 2016). Rent-seeking theory suggests that politically connected firms may exploit their privileged positions for benefits like government contracts or lenient regulations (Damanik et al., 2025). Such rent-seeking behavior can disincentivize investments in green innovation, as firms may prioritize maintaining political connections over pursuing environmentally sustainable practices that enhance long-term firm value (Lestari & Soewarno, 2023). Businesses with political clout may participate in symbolic compliance, putting appearances ahead of actual environmental performance (Bernhagen, 2008; Xing et al., 2024).

H1. 

Green innovation has a positive effect on firm value in nonpolitically connected firms, indicating substantive green innovation disclosure.

H2. 

Green innovation has no effect on firm value in politically connected firms, indicating symbolic green innovation disclosure.

2.2. Female Directors and Ethical Commitment to Sustainability

The presence of women on corporate boards has been widely linked to higher ethical sensitivity, transparency, and social responsibility (Peng & Chandarasupsang, 2023; Sánchez et al., 2025; Y. Wang et al., 2022b). Drawing on upper-echelon theory, directors’ personal values and ethical orientations are reflected in strategic and disclosure decisions (Hambrick & Mason, 1984). Female directors are more likely to advocate for ethical sustainability, emphasizing integrity, authenticity, and stakeholder accountability in environmental communication (Peng & Chandarasupsang, 2023; Sánchez et al., 2025; Y. Wang et al., 2022b).

Female directors enhance governance quality and support the firm’s sustainability goals by encouraging green innovation. In Indonesia, environmental concerns have become more prominent, especially as companies respond to pressure from global supply chains, domestic regulatory reforms, and investor demands for sustainability performance (Dzikriansyah et al., 2023; Prisandani, 2022). Female directors are more likely to promote eco-innovation, environmental compliance, and sustainable business models that meet stakeholder and societal expectations (Triana & Asri, 2017).

Female directors frequently contribute substantially to advancing openness and responsibility in environmental standards (Al-Qahtani & Elgharbawy, 2020; De Masi et al., 2021; Sánchez et al., 2025). By promoting the revelation of environmental hazards, sustainability objectives, and green performance metrics, they generate both internal and external pressure for firms to engage in meaningful, rather than merely symbolic, environmental innovation (Lakhal et al., 2024; Moreno-Ureba et al., 2022). This focus on transparency also bolsters stakeholder trust, thus augmenting the firm’s legitimacy and facilitating joint initiatives in green technology advancement (Y. Wang et al., 2022b).

Female directors may provide countervailing governance benefits in Indonesia, where many businesses are still typified by family control, concentrated ownership, and a lack of board independence. These benefits include strengthening board discussions, increasing transparency, and expanding the firm’s strategic vision (Tjahjadi & Adhariani, 2022). Their involvement fosters greater congruence with stakeholder expectations and regulatory trends while ensuring long-term value generation precedes short-term goals (Tjahjadi & Adhariani, 2022).

In Indonesia, a patriarchal culture deeply influences corporate governance, where male dominance in leadership roles often leads to the marginalization of female perspectives in decision-making. This patriarchal environment can limit the agency of female directors, but it also creates a unique setting where women in leadership positions are more likely to challenge established norms and promote ethical governance (Areneke et al., 2023). Despite the historical underrepresentation of women in Indonesian boards, the increasing presence of female directors provides an opportunity to introduce greater ethical accountability into the decision-making process.

H3. 

Female directors have a positive effect on substantive green innovation disclosure (in nonpolitically connected firms).

In firms where sustainability reporting serves as a symbolic act—intended to project compliance or legitimacy without substantive environmental improvement—female directors may perceive such disclosure as inconsistent with their moral standards (Jeriji & Louhichi, 2021). Instead of supporting symbolic green innovation disclosure, which represents ethical compromise and potential greenwashing, they may oppose or reduce the extent of such disclosures to maintain board credibility and moral legitimacy (Lim & Park, 2022). This reaction does not signal a lack of environmental concern; rather, it demonstrates ethical resistance to symbolic compliance. Consequently, firms with greater female board representation are expected to engage less in symbolic green innovation disclosure, reflecting their commitment to genuine, substantive sustainability.

H4. 

Female directors have a negative effect on symbolic green innovation disclosure (in politically connected firms).

3. Data and Methodology

This study utilized secondary data from the Indonesia Stock Exchange (IDX) and other publicly available sources from 2021 to 2023. By focusing on Indonesia, this study sheds light on a developing economy context where gender diversity, political influence, and sustainability initiatives intersect in a unique way. First, Indonesia has not established regulations for the minimum number of female board members, like Norway, Spain, or Sweden (Peng & Chandarasupsang, 2023). This lack of formal gender quotas results in a voluntary governance environment where the presence of women on corporate boards is mainly influenced by firm discretion, cultural norms, and stakeholder pressure rather than legal requirements. Additionally, Indonesia is known for its patriarchal culture (Manik & Ekayanta, 2024), which traditionally places men in dominant leadership roles and often limits women’s access to top executive and board positions. The unique Indonesia’s corporate landscape which features concentrated ownership structures, frequent political ties among board members, and relatively weak enforcement of corporate governance codes impact how female directors react on symbolic and substantive green innovation (Rudyanto et al., 2023).

Manufacturing firms are expected to be more responsible for implementing green innovation to mitigate environmental degradation from their operations (Asni & Agustia, 2021; Lestari & Soewarno, 2023). The study period from 2021 to 2023 is selected to capture the most recent post-pandemic recovery phase, during which the government emphasized sustainable business practices. Additionally, the issuance of SEOJK No. 16/SEOJK.04/2021 mandated all listed companies to publish a sustainability report starting in 2021, marking a regulatory shift that enhanced transparency in environmental strategy disclosures (Martawardaya et al., 2021).

This paper excludes firms that did not consistently publish audited financial statements, annual reports, or relevant disclosures from 2021 to 2023. After applying all criteria, the study finalizes a sample of 71 firms, resulting in 213 firm-year observations.

Table 1. Sample Selection Procedure.

No	Criterion	Number of Companies	Amount of Data
1	Manufacturing companies that are consistently listed on the Indonesia Stock Exchange (IDX) in the 2021–2023 period.	165	495
2	Manufacturing companies that do not consistently publish audited financial reports.	(14)	(42)
3	Manufacturing companies that do not consistently publish reports as of December 31.	(2)	(6)
4	Manufacturing companies that are not using the rupiah currency.	(27)	(81)
5	Manufacturing companies that do not consistently have profits before tax positive.	(41)	(123)
6	Manufacturing companies that do not have a Cash Effective Tax Rate (CETR) of more than zero and less than 1.	(10)	(30)
		71	213
	Outlier		(3)
	Total		210

sample selection procedure is shown as follows:

This study categorized the samples into politically and nonpolitically connected firms. This study adopts a subsample analysis, separating politically connected from non-connected firms, to examine whether politically (nonpolitically) connected firms have symbolic (substantive) green innovation disclosure. This study uses indirect effect of female directors on firm value with green innovation as mediating variable across two groups of firms to see the response of female directors on symbolic and substantive green innovation. Hypotheses H1 and H2 are tested through the coefficient β2, while H3 and H4 are evaluated using the coefficient α1.

Based on the research framework, the empirical model was as follows:

Model 1: Political connection sample (direct effect):

GIN = α0 + α1WOM + ε

(1)

Model 2: Political connection sample (indirect effect):

TOBIN = β0 + β1WOM + β2GIN + β3CG + β4CETR + β5OWN + β6ROA + β7FSIZE + ε

(2)

Model 3: Non-political connection sample (direct effect):

GIN = α0 + α1WOM + ε

(3)

Model 4: Non-Political connection sample (indirect effect):

TOBIN = β0 + β1WOM + β2GIN + β3CG + β4CETR + β5OWN + β6ROA + β7FSIZE + ε

(4)

The measurement summary of each variable is explained in

Table 2. Description of the Measurement Variables.

Variables	Description
• Dependent variable
Firm value (TOBIN)	Firm value was measured using Tobin’s Q, which is calculated by subtracting the book value of equity from total assets, adding the market value of equity, and then dividing the result by total assets (Lestari & Soewarno, 2023; Rudyanto & Pirzada, 2020).
• Independent variable
Female directors (WOM)	Female directors were measured using the ratio of female directors to total board members (De Masi et al., 2021; Lestari & Soewarno, 2023; Moreno-Ureba et al., 2022).
• Mediating variable
Green innovation (GIN)	Green innovation was measured through content analysis based on disclosures in the firms’ annual and sustainability reports. This study used eight indicators from Lestari and Soewarno (2023) to define the green innovation practices implemented by firms. Weights from zero to two were attributed to each indicator: zero if the indicator was not disclosed, one if the indicator was disclosed without detail (only narrative), and two if disclosed in detail with supporting qualitative and quantitative information. Green innovation was calculated by dividing the total disclosure score obtained by a company by the maximum possible score of sixteen. The eight indicators used in this content analysis were as follows: (1) reduction in resource, water, and energy consumption and improvements in efficiency; (2) use of recycled materials, recycling techniques, and environmental technologies; (3) implementation of environmental campaigns; (4) adoption of technology that reduces energy, water, or waste; (5) product design changes to eliminate pollution or toxic compounds; (6) improvement or design of eco-friendly packaging for existing or new products; (7) creation or redesign of products to improve energy efficiency during use; and (8) use of less harmful or nonpolluting materials in the product.
• Moderating Variable
Political connection	According to Rudyanto et al. (2023), firms were classified as politically connected if they met one of the criteria. These included whether a major shareholder, board member, or director—either currently or in the past—held a position in the government such as president, minister, or legislator; served as a political party leader or presidential or governor campaign chair; held an influential role in the government; or was an official in a government institution or the military. Political connection was measured as a dummy variable, where one value was assigned to firms meeting any of these criteria, and zero otherwise. To investigate potential differences in strategic behavior, this study divided the sample into two subsamples: politically and nonpolitically connected.
• Control Variable
Corporate governance (CG)	Corporate governance was measured by dividing the number of independent commissioners by the total number of commissioners.
Tax avoidance (CETR)	Tax avoidance was calculated by dividing the total cash tax the company paid by its total pre-tax income.
Ownership power (OWN)	Ownership power is measured using the percentage of shares owned by the CEO, which was obtained by dividing the number of shares held by the CEO by the total number of outstanding shares.
Profitability (ROA)	Profitability was measured using return on assets (ROA), which was computed by dividing net income by total assets.
Firm size (FSIZE)	Firm size is measured using the natural logarithm of total assets.

Source: The author’s work.

.

The main analysis used the structural equation model (SEM) to estimate direct and indirect relationships in the proposed model for both subsamples (politically and nonpolitically connected firms). SEM allows for the simultaneous examination of mediation and control effects within a multivariate framework. In addition, we also use bootstrapping method to tackle the unstable results of SEM method.

4. Result and Discussion

The descriptive statistics results are presented in

Table 3. Descriptive Statistics for All Samples.

Variable	Mean	Std. Dev	Min	Max
TOBIN	1.668	1.235	0.341	6.523
WOM	0.135	0.178	0	0.75
GIN	0.49	0.181	0.063	1
CETR	0.237	0.136	0.004	0.854
CG	0.437	0.114	0.25	0.833
OWN	0.046	0.12	0	0.649
ROA	0.113	0.087	0.004	0.469
FSIZE	28.945	1.634	25.161	33.731

Source: The author’s work.

. Table 3 indicates that the mean value of female board members is 0.135, ranging from 0 to 0.75, suggesting that most firms have low female representation on their boards. The extent of green innovation adoption varies within the sample, ranging from 6.3% to 100%. The samples consist of large, profitable firms that may potentially engage in tax avoidance and tend to have low ownership power. Tobin’s Q has a mean of 1.668, indicating that the manufacturing companies studied are generally considered in good financial health.

To illustrate the disparities between politically connected firms and those without such connections, an independent samples t-test was performed on the two subgroups.

Table 4. Independent Sample t-test for Politically and Nonpolitically Connected Firms.

Variables	Politically Connected Firms (77 Firms)	Nonpolitically Connected Firms (133 Firms)	p-Value
TOBIN	1.789497	1.598192	0.2805
WOM	0.134275	0.126104	0.7425
GIN	0.514610	0.467575	0.0311 **
CETR	0.228192	0.242548	0.4659
CG	0.438853	0.427551	0.4513
OWN	0.067127	0.035158	0.0317 **
ROA	0.104531	0.117363	0.2746
FSIZE	29.685	28.48077	0.0000 ***

*** p < 0.01, ** p < 0.05. Source: The author’s work. Source: The author’s work.

reveals statistically significant green innovation and ownership power variations between politically connected firms and their unconnected counterparts. Notably, firms with political connections demonstrate higher levels of green innovation and ownership power. Furthermore, a statistically significant difference is observed in firm size between the two groups. These results show that politically connected firms tend to be larger (Nadeem et al., 2020).

Table 5. Pairwise Correlations for Politically Connected Firms.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
(1) TOBIN	1.000
(2) WOM	0.017	1.000
(3) GIN	0.118	−0.411 *	1.000
(4) CETR	−0.042	0.243 *	−0.284 *	1.000
(5) CG	−0.038	0.109	−0.224 *	0.111	1.000
(6) OWN	0.063	−0.290 *	−0.022	−0.035	0.100	1.000
(7) ROA	0.762 *	0.051	0.002	0.065	−0.009	0.230 *	1.000
(8) FSIZE	−0.278 *	−0.018	0.146	0.202 *	−0.145	−0.227 *	−0.299 *	1.000

* p < 0.1. Source: The author’s work.

and

Table 6. Pairwise Correlations for Nonpolitically Connected Firms.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
(1) TOBIN	1.000
(2) WOM	0.184 *	1.000
(3) GIN	0.228 *	0.017	1.000
(4) CETR	−0.015	0.047	0.175 *	1.000
(5) CG	−0.033	0.058	−0.005	−0.111	1.000
(6) OWN	−0.210 *	−0.159 *	−0.066	0.033	0.056	1.000
(7) ROA	0.546 *	0.217 *	0.095	−0.087	0.145 *	−0.192 *	1.000
(8) FSIZE	0.147 *	0.016	0.302 *	0.007	0.072	−0.329 *	0.161 *	1.000

* p < 0.1. Source: The author’s work.

show the pairwise correlation between politically and non-politically connected firms. Table 5 shows that, for politically connected firms, the degree of correlation among variables is lower than for nonpolitically connected firms (Nugrahanti & Nurfitri, 2022). Female directors and green innovation positively correlate with firm value only in nonpolitically connected firms. In politically connected firms, female directors negatively correlate with green innovation. These observations suggest that political connected firms have symbolic green innovation disclosure and nonpolitically connected firms have substantive green innovation disclosure. A series of regression models were constructed to test the hypotheses empirically, and the results are presented in

Table 7. Structural Equation Model of Politically Connected Firms.

		OIM
	Coefficient	Std. Err.	z	P > |z|	[95% Conf. Interval]
Structural
GIN
WOM	−0.3666654	0.0925784	−3.96	0.000	−0.5481157	−0.185215
_cons	0.5638444	0.0202355	27.86	0.000	0.5241836	0.6035052
TOBIN
GIN	1.014818	0.7624121	1.33	0.183	−0.4794826	2.509118
WOM	−0.0584135	0.6856498	−0.09	0.932	−1.402263	1.285435
CETR	−0.5577275	0.9367898	−0.60	0.552	−2.393802	1.278347
CG	0.0121606	0.9647086	0.01	0.990	−1.878633	1.902955
OWN	−1.374781	0.799225	−1.72	0.085	−2.941233	0.1916716
ROA	12.6065	1.257587	10.02	0.000	10.14167	15.07132
FSIZE	−0.0718674	0.0672253	−1.07	0.285	−0.2036265	0.0598918
_cons	2.143175	2.091246	1.02	0.305	−1.955591	6.24194
var(e.GIN)	0.0196307	0.0031638			0.0143137	0.0269228
var(e.TOBIN)	0.7664608	0.1235263			0.5588643	1.051171

Source: The author’s work.

and

Table 8. Structural Equation Model of Nonpolitically Connected Firms.

		OIM
	Coefficient	Std. Err.	z	P > |z|	[95% Conf. Interval]
Structural
GIN
WOM	0.0187373	0.0929462	0.20	0.840	−0.1634339	0.2009085
_cons	0.4652123	0.019876	23.41	0.000	0.4262562	0.5041685
TOBIN
GIN	1.061466	0.4459983	2.38	0.017	0.1873256	1.935607
WOM	0.4014546	0.4637635	0.87	0.387	−0.5075052	1.310414
CETR	−0.0987744	0.5431694	−0.18	0.856	−1.163367	0.965818
CG	−1.15606	0.7767955	−1.49	0.137	−2.678552	0.3664309
OWN	−0.9125977	0.7975999	−1.14	0.253	−2.475865	0.6506694
ROA	7.281842	1.04645	6.96	0.000	5.230838	9.332846
FSIZE	−0.009194	0.06062	−0.15	0.879	−0.128007	0.109619
_cons	1.102247	1.693136	0.65	0.515	−2.216239	4.420732
var(e.GIN)	0.0342706	0.0042025			0.0269489	0.0435816
var(e.TOBIN)	0.7916615	0.0970798			0.6225274	1.006747

Source: The author’s work.

.

Table 7 and Table 8 show the regression results of the hypothesis testing. The results show that in nonpolitically connected firms, female board members have no effect on green innovation and green innovation positively affects firm value. In politically connected firms, female board members have a negative effect on green innovation and green innovation does not affect firm value. Female board members have no direct effect on firm value in both subsamples. The results show that hypotheses one, two and four are supported, while hypothesis three is not supported.

The influence of female directors on green innovation and the subsequent impact of green innovation on firm value are contingent upon the presence of political connections. As green innovation in politically connected firms does not affect firm value, it can be inferred that the green innovation disclosures are used for rent-seeking activities and symbolic disclosures (H. Liu et al., 2024). Firms with political ties may exploit their advantageous access to governmental green subsidies, grants, or tax incentives designed to foster environmental innovation (Lin et al., 2015). Instead of channeling these resources into authentic innovation, such entities might inflate or falsely represent their innovation efforts (Chen et al., 2024; L. Wang et al., 2022a). These firms could also lobby for regulations mandating that public entities favor “green-certified” firms, certifications that they can acquire or manipulate with greater ease (Heitz et al., 2021; Lin et al., 2015). Furthermore, green innovation endeavors might serve as a means to divert public attention or legitimize unethical or monopolistic practices (H. Liu et al., 2024).

When female directors see that the green innovation disclosures are used for rent-seeking, they may be less motivated to engage in green innovation (Nugrahanti & Nurfitri, 2022). This behavior can be understood in the context of the upper echelon theory (Liao et al., 2018). However, when green innovation disclosures are not used for rent-seeking, female directors do not increase green innovation activities. In Indonesia’s patriarchal corporate culture, where male leadership is historically dominant, female directors often operate in a context that demands subtlety and restraint in their actions and decisions. The societal and organizational norms in such a culture tend to discourage overt displays of power or influence, especially for women in leadership positions (Ayadi et al., 2015). As a result, female directors may not feel the need to emphasize or publicly advocate for substantive green innovation disclosures—even though such disclosures are aligned with their ethical commitment to sustainability.

The results of this study indicate that in politically connected companies, female directors tend to promote the disclosure of only symbolic green innovations, which do not enhance firm value. This finding aligns with Y. Liu et al. (2025), who show that firm-level political risk significantly decreases bond market liquidity, thereby weakening market discipline. With reduced liquidity, investor pressure for tangible green innovations diminishes, encouraging management to opt for symbolic disclosures rather than substantial investments to boost legitimacy. Haque et al. (2023) demonstrate that geopolitical risk raises tax avoidance among firms, especially when financial constraints are tight. This indicates that politically connected firms, exposed to both political risk and funding pressures, may prioritize legitimizing strategies, such as symbolic green disclosures, over genuine innovation, since genuine green investments could limit their financial flexibility.

Parallel to the findings of A. Bui et al. (2019), which indicate that the quality of local governance affects how benefits from foreign direct investment support community welfare, our research suggests that political connections within companies can influence the way green innovations are implemented and reported. While female directors might promote more ethical green innovation, political connections seem to encourage symbolic rather than meaningful disclosure, as institutional and market pressures shape green strategy decisions.

4.1. Additional Test Results

4.1.1. Critical Mass of Female Directors

The limited impact of female board members on green innovation within nonpolitically connected firms may stem from structural or cultural barriers that impede their influence in strategic environmental decision-making processes. Prior studies have emphasized that the mere presence of women on boards does not guarantee meaningful participation or influence, particularly in male-dominated governance environments (Kakabadse et al., 2015; Lestari & Soewarno, 2023). To address this issue, dummy variable proxies are used to investigate further the impact of a critical mass of female directors on green innovation and firm value (De Masi et al., 2021; Y. Wang et al., 2022b). Given the variance in the total number of directors across firms, this research employs the proportion of female directors rather than absolute counts. As indicated by previous studies, this paper uses three dummy variables: WOMD1, which equals one if the proportion of female director is more than 20%, and 0 otherwise; WOMD2, which equals one if the proportion of female director is between 20 and 40%, and zero otherwise; and WOMD3, which equals one if the proportion of female directors is more than 40%, zero otherwise (Ferrary & Déo, 2022). The results of the test are shown in

Table 9. Structural Equation Model for Politically Connected Firms.

WOM→ GIN	WOMD1	WOMD2	WOMD3
WOM	−0.0083487	−0.001739	−0.0248096
WOM, GIN —> TOBIN
GIN	1.056551 **	1.080652 **	1.09666 **
WOM	−0.099987	−0.190771	0.2566323
CETR	−0.0356536	−0.0409087	−0.1032761
CG	−1.065198	−1.012235	−1.119113
OWN	−1.091482	−1.152176	−0.9929652
ROA	7.543343 ***	7.532817 ***	7.339527 ***
FSIZE	−0.017753	−0.02698	−0.0184589

*** p < 0.01, ** p < 0.05. Source: The author’s work.

and

Table 10. Structural Equation Model for Nonpolitically Connected Firms.

WOM→ GIN	WOMD1	WOMD2	WOMD3
WOM	−0.1177033 ***	−0.059543	−0.1645154 ***
WOM, GIN —> TOBIN
GIN	0.9574886	0.9672947	1.139208
WOM	−0.0913643	−0.221405	0.175508
CETR	−0.5654987	−0.594794	−0.5936711
CG	0.0165646	−0.051801	−0.055548
OWN	−1.442119	−1.497052	−1.291736 *
ROA	12.58089 ***	12.38133 ***	12.449 ***
FSIZE	−0.0802254	−0.0927661	−0.0721033

*** p < 0.01, * p < 0.1. Source: The author’s work.

.

For nonpolitically connected firms, female directors do not significantly influence green innovation across all levels of female representation. This aligns with the upper echelon theory, suggesting that female directors are more risk-averse than their male counterparts. In politically connected firms, however, female directors have a negative impact on green innovation when their presence is either below 20% or above 40%. These results are inconsistent with prior research, which indicates that a critical mass of 20-40% female representation enables women to participate more actively and to influence organizational outcomes considerably (De Masi et al., 2021).

4.1.2. Analyzing the Effect of Green Innovation on ESG in Politically and Nonpolitically Connected Firms

One possible explanation of why green innovation does not affect firm value in politically connected firms is that firm value in these contexts may be more influenced by political favoritism, access to state resources, or regulatory forbearance than by environmental performance or innovation (Faccio, 2010; Xiao & Shen, 2022). Thus, this paper does additional analysis to analyze whether the absence of the effect of green innovation disclosure on firm value is due to symbolic disclosure or other explanations. To explore whether the green innovation disclosure in politically connected firms is symbolic, this paper analyzes the effect of green innovation on ESG score in both subsamples. The ESG scores used in this research are retrieved from Thomson Reuters. The results of the test are shown in

Table 11. The Impact of Green Innovation on ESG.

Variables	Politically Connected Firms	Non-Politically Connected Firms
GIN	30.31	94.49 ***
	(26.89)	(0.563)
CETR	1.742	24.18 ***
	(16.11)	(4.643)
CG	35.59 ***	−35.70 ***
	(10.45)	(6.514)
OWN	166.348 **	4.032 ***
	(72.497)	(93.33)
ROA	−32.02	241.0 ***
	(62.30)	(9.029)
FSIZE	−7.238	14.60 ***
	(5.568)	(0.574)
Constant	247.2	−485.7 ***
	(190.9)	(17.02)
Observations	22	11
Number of No	9	6

Standard errors in parentheses *** p < 0.01, ** p < 0.05.

.

The results show that within politically connected firms, green innovation does not significantly impact ESG scores. This suggests that, unlike nonpolitically connected firms, green innovation efforts may not mainly aim to enhance ESG performance but might instead be used for rent-seeking activities. The findings support the main result that politically connected firms use green innovation for rent-seeking and that female directors tend to reduce green innovation to lower rent-seeking.

4.1.3. Analyzing the Effect of Female Boards on ESG

An alternative view on the insignificant results related to female directors and green innovation suggests that female directors might not focus on green innovation initiatives. To better understand the relationships being studied, this study also examines the direct impact of female directors on ESG scores and how political connections influence this relationship, thus adding to the earlier analysis of green innovation’s mediating role. The results of the test are shown in

Table 12. The Impact of Female Directors on ESG.

Variables	Results
WOM	46.67 *
	(25.12)
PC	10.14 *
	(5.938)
WOMPC	−67.34 **
	(30.80)
GIN	61.69 ***
	(13.66)
CETR	9.049
	(26.41)
CG	36.70
	(25.77)
ROA	7.609
	(34.16)
FSIZE	−0.402
	(2.333)
Constant	−0.0296
	(77.32)
Observations	33
Number of No	13

Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Source: The author’s own work.

.

The results indicate that female directors positively influence ESG scores. However, the interaction between female directors and political connections is significantly negative, suggesting that the effect of female directors on ESG is diminished when the firm has political ties. The findings also show that while female directors care about the sustainability score, they do not support green innovation in politically connected firms, which is seen as a rent-seeking activity.

Women are often appointed as family representatives or to fulfill gender diversity procedures without holding significant responsibility in patriarchal environments with family-owned corporate structures and lax environmental regulations. Family-oriented women typically steer clear of confrontations with powerful stockholders, which prevents them from advocating for sustainability concerns that could upend established power structures. Additionally, Indonesia’s strong patriarchal society tends to view women as domestic caregivers rather than strategic leaders, making their opinions on environmental issues frequently seen as secondary (Cahyani & Pujiningsih, 2025).

That does not imply, however, that female directors are indifferent to green innovation. They believe they do not need to expand the green innovation disclosure when they believe it is currently substantive. However, they feel compelled to take action to safeguard the interests of the stakeholders when the green innovation disclosure is symbolic. Female directors may view substantive green innovation—genuine and impactful sustainability practices—as inherently valuable without the need for excessive promotion or external validation in a patriarchal setting. Rather than actively highlighting or “shouting out” these efforts, they may expect that the authenticity and integrity of such disclosures will speak for themselves. This approach reflects a broader cultural tendency in Indonesia, where individuals, particularly women, are often socialized to show modesty and avoid overt displays of achievement or influence (Susanti et al., 2023).

Therefore, while female directors are likely to support substantive green innovation in practice, their influence may be less visible in terms of formal disclosures. They may prefer to let the action of sustainability initiatives, rather than their disclosure, serve as evidence of the firm’s commitment to long-term environmental goals. This cultural expectation may result in a lack of direct effect of female directors on the extent of substantive green innovation disclosure, even though they are likely to influence the underlying strategy of such innovations.

4.2. Robustness Test Results

4.2.1. Endogeneity Problem

To address the potential endogeneity problem, this paper employs two research models. Following previous research, the first model is using dummy variable of female directors and the second model is using lag female directors (Lestari & Soewarno, 2023). To reduce potential endogeneity concerns, the study employs a dummy variable indicating the presence of female directors. Unlike the proportion-based measure, this binary specification minimizes simultaneity bias, as board composition tends to be relatively stable and predetermined before firm outcomes occur. While this approach cannot completely eliminate endogeneity, it helps mitigate biases related to simultaneity and measurement error. The results are shown in

Table 13. Endogeneity Test.

	First Model		Second Model
WOM→ GIN	PC	Non-PC	PC	Non-PC
WOMD	−0.0815621 **	0.0232346
LAGWOM			−0.2746005 **	0.0713355
WOM, GIN —> TOBIN
GIN	0.939872	1.044059 **	0.8619531	1.450393
WOMD	−0.0938007	0.1354699
LAGWOM			−0.0964238	0.0027351
CETR	−0.5842376	−0.0865711	0.9288273	−0.5839357
CG	0.000734	−1.156911	−0.7820874	−1.570823
OWN	−1.469007 *	−0.9028392	−0.6151386	−0.5100823
ROA	12.59512 ***	7.349746 ***	11.6311 ***	8.107904 ***
FSIZE	−0.0646387	−0.0102624	−0.0508423	0.043051

*** p < 0.01, ** p < 0.05, * p < 0.1. Source: The author’s work.

and the results are statistically the same as main results. The results of the endogeneity test show that there are no endogeneity problems in this study.

The test results on the first model show that the WOMD variable has a negative and significant coefficient in the group of companies with political connections (PC) of −0.0815621 (p < 0.05). This indicates that an increase in the proportion of women on the board of directors is associated with a decrease in green innovation disclosure. Conversely, in the Non-PC group, the effect of WOMD is not significant (coefficient 0.0232346), so there is no evidence of an influence on green innovation disclosure.

In addition, the lag of the WOM variable (LAGWOM) also shows a negative coefficient in the PC group (−0.2746005, p < 0.05), which indicates that the effect of WOMD on GIN is consistent even when tested using the lag value as an instrument. The consistency of direction and significance between WOMD and LAGWOM strengthens the conclusion that the WOMD variable is not endogenous to GIN in the context of politically charged companies. Thus, the estimation in this model can be considered free from simultaneity bias.

In the second model, the relationship between WOMD and firm value (TOBIN) shows insignificant results for both PC and Non-PC groups (WOMD coefficients are −0.0938007 and 0.1354699, respectively). This indicates that female involvement in the board does not directly affect firm value. The lag of the variable (LAGWOM) is also insignificant in both the PC and Non-PC groups, further supporting the finding that there is no endogeneity problem in this model.

4.2.2. Placebo Test

This test’s validity depends on the premise that political connections drive the effect of female directors on firm value through green innovation. Recognizing inherent distinctions between politically connected and non-politically connected firms, a placebo test is performed using randomized placebo political connection data to assess the robustness of the results. The results of the test are shown in

Table 14. Placebo Test Result.

WOM→ GIN	Placebo PC	Placebo Non-PC
WOM	−0.1471884	−0.0814126
WOM, GIN —> TOBIN
GIN	1.343358 ***	0.9643793 *
WOM	−0.0563883	0.5092892
CETR	−0.398855	0.0929019
CG	−0.1877943	−1.083899
OWN	−1.268234	−0.261559
ROA	9.46123 ***	9.570389 ***
FSIZE	−0.0992764	−0.0094512

*** p < 0.01, * p < 0.1. Source: The author’s work.

.

Table 14 demonstrates that the results obtained under conditions of randomized political connections deviate from the central findings of the primary analysis. This discrepancy suggests that the political connection variable is a significant factor in the main test results.

4.2.3. Bootstrapping Test Results

To ensure the stability and reliability of the regression model estimation results, this study conducted a bootstrapping test using a resampling method with 5000 repetitions. This method was used to obtain more accurate estimates of the standard error and confidence intervals. The bootstrapping test also serves as a robustness check for the main model, ensuring that the regression coefficient results are not sensitive to specific sampling distributions. The complete results of the bootstrapping test are presented in

Table 15. Bootstrapping Test Results for Politically Connected Firms.

Path	Original Sample	T Statistic	p-Value (Bootstrapped)
WOM → GIN → TOBINS	−0.046	1.068	0.286
WOM → GIN	−0.411	3.990	0.000
GIN → TOBIN	0.113	1.175	0.240

Source: The author’s own work.

and

Table 16. Bootstrapping Test Results for Nonpolitically Connected Firms.

Path	Original Sample	T Statistic	p-Value (Bootstrapped)
WOM → GIN → TOBINS	0.183	0.183	0.855
WOM → GIN	0.003	0.199	0.842
GIN → TOBIN	0.177	2.170	0.030

Source: The author’s own work.

below.

Overall, the bootstrapping test results demonstrate consistency with the main test. These results confirm that the model estimates are robust and stable across sample variations, thus credibly reflecting the empirical role of political connections in moderating the influence of female directors on firm value through green innovation disclosure. This study found that in companies without political connections, the presence of female directors did not significantly affect green innovation disclosure. However, green innovation increased firm value. Conversely, in firms with political connections, the presence of female directors negatively affected green innovation disclosure, while green innovation disclosure had no impact on firm value.

4.2.4. Other Measurement of Firm Performance

To ensure the reliability of the main findings, a robustness test was conducted by replacing Tobin’s Q with an accounting-based measure of firm performance, namely Return on Equity (ROE). ROE captures internal profitability and reflects management’s effectiveness in generating returns for shareholders, providing a complementary perspective to market-based performance indicators. The structural model was re-estimated using ROE as the dependent variable across both politically and nonpolitically connected subsamples. The results, shown in

Table 17. Structural Equation Model for Alternative Measurement of Firm Performance.

WOM→ GIN	Politically Connected	Nonpolitically Connected
WOM	−0.367 ***	0.019
WOM, GIN —> ROE
GIN	0.104	0.030 *
WOM	0.239 ***	0.132 ***
CETR	0.044	−0.062
CG	−0.076	0.076
OWN	0.171 *	−0.091
FSIZE	−0.015 *	0.011 *

*** p < 0.01, * p < 0.1. Source: The author’s work.

, remain statistically consistent with the main analysis: in nonpolitically connected firms, green innovation continues to exhibit a positive and significant association with firm performance, while in politically connected firms, the relationship remains insignificant. Similarly, the indirect effects of female directors through green innovation follow the same pattern observed in the baseline model. These findings confirm that the study’s conclusions are robust to alternative measures of firm performance, reinforcing the validity of the distinction between symbolic and substantive green innovation disclosure.

5. Conclusions

This research examines whether politically connected firms make substantive or symbolic green innovation disclosure and how female directors respond on those kinds of disclosures. It concentrates on manufacturing firms in Indonesia, given the country’s strong political influence and prevalent male leadership. Results indicate that green innovation disclosures in nonpolitically connected firms are substantive disclosures. Thus, female directors do not directly encourage the substantive green innovation disclosure. In contrast, the green innovation disclosures in politically connected firms are symbolic disclosures, resulting in negative response of female directors.

This study has limitations: measuring green innovation through content analysis remains subjective and relies on the researcher’s judgment. Therefore, future research could explore more objective methods for assessing green innovation. This study is also limited to Indonesia, so the findings cannot be broadly generalized. Recommendations for future research include using samples from different countries, especially those with varying political ties. This study has limitations in addressing potential endogeneity issues because it uses dummy variables for female directors. This approach can help reduce measurement bias caused by differences in board size or gender composition across companies. However, it cannot fully address other forms of endogeneity, such as simultaneity bias or omitted-variable bias. Therefore, future research should consider using more robust econometric techniques, like instrumental variables (IV), two-stage least squares (2SLS), or the generalized method of moments (GMM), to better examine causal relationships and ensure that results are not influenced by simultaneity bias or omitted variables.

While this study employs a group-split approach to test the moderated mediation model, we acknowledge that more sophisticated methods, such as multi-group SEM or interaction models, could provide additional robustness checks and insights. Future research may benefit from these approaches to further refine our understanding of how political connections influence green innovation disclosure. However, the group-split approach remains appropriate for this study given the clear theoretical distinction between politically connected firms, which are expected to engage in symbolic disclosure, and nonpolitically connected firms, which are more likely to pursue substantive innovation. The simplicity of this method enhances the clarity of our findings, ensuring a direct comparison between these two groups.

This study also has limitations in its analytical depth, especially in distinguishing between high-level (central/national) and low-level (local) political connections. Therefore, further research is recommended to better differentiate between high-level (central/national) and low-level (local) political connections, enabling more thorough identification of their distinct levels. This approach is expected to offer a more comprehensive understanding of how the influence of political connections varies depending on the level of power or political position of the individuals involved. Additionally, this research has limitations, including the potential for reverse causality. For instance, firms performing well might be more likely to appoint female directors or invest in innovation, meaning the observed relationships may not directly demonstrate that board gender diversity causes better performance or innovation. Future studies could implement robustness tests, such as using lagged independent variables, to mitigate this issue.