Articlegold2024

Environmental, social and governance disclosure and firm value in the energy sector: The moderating role of profitability

22 citations0/0 files storedProblems and Perspectives in Management

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Corporate Social Responsibility Reporting Financial Reporting and Valuation Research Corporate Governance and Financial Management

Abstract

Environmental, social, and governance (ESG) performance is critical in mitigating climate change. Energy companies must include ESG practices in their business plans because they can determine firm value. This study investigates the impact of ESG and firm size on firm value in Indonesian energy sector, which is moderated by profitability through return on assets. This study uses a sample of 19 energy companies listed on the Indonesia Stock Exchange from 2016 to 2022. A panel data regression model is applied to estimate the impact of ESG practices and firm size on firm value with the moderating role of return on assets. The study results found that ecological, social, and governance disclosure in the model with return on assets as a moderator independently positively impacts firm value but not vice versa. The interaction between return on assets and ESG practices has no impact on firm value, which means that the role of return on assets as a moderator cannot strengthen the influence of ESG and firm size on firm value. Return on assets positively impacts firm value if it acts as an independent variable without a moderator. Firm size independently has a negative impact on firm value but has no effect if it interacts with return on assets. The implications of the empirical findings provide recommendations for policymakers, corporate management, investors, and academics. Environmental, social, and governance disclosure practices are essential to pay attention to as they can improve sustainability performance and firm value in the energy sector of Indonesia. AcknowledgmentAcknowledgments are expressed to the Directorate General of Higher Education, Research, and Technology, Ministry of Education, Culture, Research and Technology for the Funding Assistance for the Master’s Thesis Research Grant Scheme [Contract Number: 01-1-4/675/SPK/VII/2024].

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2017ESG performance and firm value: The moderating role of disclosure 2001Does the Market Value Environmental Performance?2002Assessing the impact of environmental management systems on corporate and environmental performance 2022Impact of ESG performance on firm value and profitability 2017The impact of environmental, social, and governance disclosure on firm value: The role of CEO power 2018Do environmental, social, and governance activities improve corporate financial performance?2017Does ESG performance have an impact on financial performance? Evidence from Germany 2022Sustainable development, ESG performance and company market value: Mediating effect of financial performance

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