ESG and firm value: The moderating role of environmental performance and profitability in Indonesia’s mining sector

Angelina Metta Arilia Oktadewi; Ni Nyoman Ayu Diantini

doi:10.21744/irjmis.v12n4.2536

Authors

Angelina Metta Arilia Oktadewi
ariliangelina@gmail.com
Udayana University, Denpasar, Indonesia
Ni Nyoman Ayu Diantini Udayana University, Denpasar, Indonesia

Keywords:

environmental performance, ESG performance, firm value, mining sector, profitability

Abstract

This study examines the relationship between Environmental, Social, and Governance (ESG) performance and firm value in Indonesia’s mining sector, with a focus on the moderating roles of environmental performance and profitability. ESG performance is proxied by the Sustainable Report Disclosure Index (SRDI), firm value is measured using Tobin’s Q, environmental performance is measured using the PROPER rating, and profitability is represented by Return on Assets (ROA). The research sample comprises 10 mining companies listed on the Indonesia Stock Exchange (IDX) that consistently publish sustainability reports and participate in the government’s PROPER environmental compliance rating program, observed over 4 years (2020–2023), resulting in 40 firm-year observations. The study employs panel data regression with a random effects model, based on the results of the Chow, Hausman, and Lagrange Multiplier tests. The findings reveal that ESG performance has a negative and statistically significant effect on firm value. Furthermore, profitability significantly moderates the relationship between ESG and firm value, while environmental performance does not show a moderating effect. These results suggest that investors may view ESG initiatives as costly when not supported by strong financial performance.

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