DOES ESG AFFECT FIRM PERFORMANCE? EVIDENCE FROM INDONESIA
Keywords:
Firm performance, ESG, Tobin's Q
Abstract
This study analyzes how Environmental, Social, and Governance (ESG) affects the value of companies listed on the Indonesia Stock Exchange (IDX). Researchers applied a purposive sampling method to select 86 companies that had a clear ESG score from Refinitiv and were listed on the IDX during the 2018–2022 period. It employs Ordinary Least Squares (OLS) for data analysis, to examine the relationships between the variables. Findings show that environmental and governance performance are negatively related to firm value, this tells that companies with high environmental and governance performance will has a higher spendings which will lower the company’s value, while social performance has a positive impact when considered alongside the other ESG components. A key limitation of this study is its exclusive focus on the Indonesian market, where distinctive regulatory frameworks, ESG disclosure practices, cultural factors, and investor preferences may shape the relationship between ESG performance and firm value in ways that differ from other countries, thereby limiting the extent to which the findings can be generalized to broader global contexts.
References
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Sandberg, H., Alnoor, A., & Tiberius, V. (2023). Environmental, social, and governance ratings and financial performance: Evidence from the European food industry. Business Strategy and the Environment, 32(4), 2471–2489. https://doi.org/10.1002/bse.3259
Seok, J., Kim, Y., & Oh, Y. K. (2024). How ESG shapes firm value: The mediating role of customer satisfaction. Technological Forecasting and Social Change, 208. https://doi.org/10.1016/j.techfore.2024.123714
Shahzad, F., Saeed, A., Asim, G. A., Qureshi, F., Rehman, I. U., & Qureshi, S. (2021). Political connections and firm performance: Further evidence using a generalised quantile regression approach. IIMB Management Review, 33(3). https://doi.org/10.1016/j.iimb.2021.08.005
Tania, K. S., & Hesniati, H. (2022). The effect of gender diversity on firm performance in Indonesia. Jurnal Manajemen Strategi Dan Aplikasi Bisnis, 5(2). https://doi.org/10.36407/jmsab.v5i2.667
Wooldridge, J. M. (2015). Introductory econometrics: A modern approach: Nelson Education. Scarborough, ON, Canada.
Yahya, H. (2023). The role of ESG performance in firms’ resilience during the COVID-19 pandemic: Evidence from Nordic firms. Global Finance Journal, 58. https://doi.org/10.1016/j.gfj.2023.100905
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Akhter, F., Hossain, M. R., Elrehail, H., Rehman, S. U., & Almansour, B. (2023). Environmental disclosures and corporate attributes, from the lens of legitimacy theory: a longitudinal analysis on a developing country. European Journal of Management and Business Economics, 32(3). https://doi.org/10.1108/EJMBE-01-2021-0008
Arı, G., Karacaer, M., & Karacaer, S. (2024). Socially responsible engagement and firm performance in emerging markets: Testing the mediating effect of intellectual capital. Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2024.07.012
Bahadori, N., Kaymak, T., & Seraj, M. (2021). Environmental, social, and governance factors in emerging markets: The impact on firm performance. Business Strategy and Development, 4(4). https://doi.org/10.1002/bsd2.167
Boulhaga, M., Bouri, A., Elamer, A. A., & Ibrahim, B. A. (2023). Environmental, social and governance ratings and firm performance: The moderating role of internal control quality. Corporate Social Responsibility and Environmental Management, 30(1). https://doi.org/10.1002/csr.2343
Candio, P. (2024). The influence of ESG score on financial performance: Evidence from the European health care industry. Strategic Change, 33(5), 417–427. https://doi.org/10.1002/jsc.2594
Chininga, E., Alhassan, A. L., & Zeka, B. (2024). ESG ratings and corporate financial performance in South Africa. Journal of Accounting in Emerging Economies, 14(3). https://doi.org/10.1108/JAEE-03-2023-0072
Dohrmann, M., Martinez-Blasco, M., Moring, A., & Margarit, J. C. (2024). Environmental performance and firm performance in Europe: The moderating role of board governance. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.2898
Escamilla-Solano, S., Fernández-Portillo, A., Sánchez-Escobedo, M. C., & Orden-Cruz, C. (2024). Corporate social responsibility disclosure: Mediating effects of the economic dimension on firm performance. Corporate Social Responsibility and Environmental Management, 31(1), 709–718. https://doi.org/10.1002/csr.2596
Firmansyah, E. A., Umar, U. H., & Jibril, R. S. (2023). Investigating the effect of ESG disclosure on firm performance: The case of Saudi Arabian listed firms. Cogent Economics and Finance, 11(2). https://doi.org/10.1080/23322039.2023.2287923
Handoyo, S., & Anas, S. (2024). The effect of environmental, social, and governance (ESG) on firm performance: the moderating role of country regulatory quality and government effectiveness in ASEAN. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2371071
Hardiningsih, P., Srimindarti, C., Anggana Lisiantara, G., & Kartika, A. (2024). How does environmental, social, governance disclosure and political connection performance affect firm value? An empirical study in Singapore. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2377764
Ho, L., Nguyen, V. H., & Dang, T. L. (2024). ESG and firm performance: do stakeholder engagement, financial constraints and religiosity matter? Journal of Asian Business and Economic Studies. https://doi.org/10.1108/JABES-08-2023-0306
Jha, M. K., & Rangarajan, K. (2020). Analysis of corporate sustainability performance and corporate financial performance causal linkage in the Indian context. Asian Journal of Sustainability and Social Responsibility, 5(1). https://doi.org/10.1186/s41180-020-00038-z
Jung, Y. L., & Yoo, H. S. (2023). Environmental, social, and governance activities and firm performance: Global evidence and the moderating effect of market competition. Corporate Social Responsibility and Environmental Management, 30(6), 2830–2839. https://doi.org/10.1002/csr.2518
Marie, M., Qi, B., Elgammal, M., & Elnahass, M. (2024). A more sustainable future: Can politically connected CEOs spur the nexus between ESG performance and firm financial performance? Journal of International Financial Markets, Institutions and Money, 102056. https://doi.org/10.1016/j.intfin.2024.102056
Mohammad, W. M. W., & Wasiuzzaman, S. (2021). Environmental, Social and Governance (ESG) disclosure, competitive advantage and performance of firms in Malaysia. Cleaner Environmental Systems, 2. https://doi.org/10.1016/j.cesys.2021.100015
Oduro, S., Umar, R. M., De Massis, A., & Haylemariam, L. G. (2024). Corporate social responsibility and family firm performance: A meta-analytic review. In Corporate Social Responsibility and Environmental Management. John Wiley and Sons Ltd. https://doi.org/10.1002/csr.3004
Primacintya, V. A., & Kusuma, I. W. (2025). Environmental, social and governance (ESG) performance and earnings management: the role of gender diversity. Asian Journal of Accounting Research. https://doi.org/10.1108/AJAR-12-2023-0414
Rahi, A. F., Akter, R., & Johansson, J. (2022). Do sustainability practices influence financial performance? Evidence from the Nordic financial industry. Accounting Research Journal, 35(2). https://doi.org/10.1108/ARJ-12-2020-0373
Sandberg, H., Alnoor, A., & Tiberius, V. (2023). Environmental, social, and governance ratings and financial performance: Evidence from the European food industry. Business Strategy and the Environment, 32(4), 2471–2489. https://doi.org/10.1002/bse.3259
Seok, J., Kim, Y., & Oh, Y. K. (2024). How ESG shapes firm value: The mediating role of customer satisfaction. Technological Forecasting and Social Change, 208. https://doi.org/10.1016/j.techfore.2024.123714
Shahzad, F., Saeed, A., Asim, G. A., Qureshi, F., Rehman, I. U., & Qureshi, S. (2021). Political connections and firm performance: Further evidence using a generalised quantile regression approach. IIMB Management Review, 33(3). https://doi.org/10.1016/j.iimb.2021.08.005
Tania, K. S., & Hesniati, H. (2022). The effect of gender diversity on firm performance in Indonesia. Jurnal Manajemen Strategi Dan Aplikasi Bisnis, 5(2). https://doi.org/10.36407/jmsab.v5i2.667
Wooldridge, J. M. (2015). Introductory econometrics: A modern approach: Nelson Education. Scarborough, ON, Canada.
Yahya, H. (2023). The role of ESG performance in firms’ resilience during the COVID-19 pandemic: Evidence from Nordic firms. Global Finance Journal, 58. https://doi.org/10.1016/j.gfj.2023.100905
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Published
2025-12-25
How to Cite
Hesniati, H., Richard, R., Suprapto, Y., & Candra, T. (2025). DOES ESG AFFECT FIRM PERFORMANCE? EVIDENCE FROM INDONESIA. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 9(3), 2783-2796. https://doi.org/10.31955/mea.v9i3.6651
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Articles
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