Following the increased concern on sustainability reporting in Indonesia, this study attempts to investigate whether the issuance of sustainability report is able to provide positive impact on bank reputation and market valuation for the reporting entity in subsequent period. We use unbalanced panel data that consist of 289 observations from 43 Indonesian listed banks throughout 2010-2017 reporting year while our analysis is performed with panel data regression with STATA statistics software. The findings demonstrate that the issuance of sustainability report positively affects bank reputation. Further, it also positively affects market valuation both directly and indirectly through the mediating role of bank reputation. Controlling for financial performance and bank size, we find that bank size demonstrates significant effect while financial performance does not, both for direct and indirect effect. This study provides several implications that support the regulation from the Indonesia Financial Service Authority to increase the participation of Indonesian banks in sustainability reporting. This study addresses the gap in Indonesian literature that is limited on determinant study by providing more insights on how sustainability reporting provides positive impact for bank reputation and market valuation.

Keywords: sustainability reporting, financial performance, bank size, bank reputation, market valuation.