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Sustainable investing drive by ESG performance evidence of companies listed on the Indonesian Capital Market

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  • Etty Indriani

    (Economic & Business Faculty, Dharma AUB University, Mr. Sartono Street 46, Surakarta, Indonesia)

Abstract

ESGs, or sustainable business practices, are becoming more and more popular as more stakeholders, regulators, and investors want to conduct business in a way that helps address urgent global issues like environmental degradation, climate change, ethical supply chains, and global well-being. Consequently, while making investment decisions, environmental, social, and governance (ESG) factors are given more weight in the operational and strategic objectives of the organization. The purpose of this research is to determine the relationship between a company's financial success and market value and its environmental, social, and governance (ESG) performance. This research uses financial performance as a mediating impact and integrates the risk mitigation element, which is the foundation of sustainability. Data from publicly traded businesses on the Indonesia Stock Exchange with ESG risk from Sustainalytics and ESG ratings from Refinitiv were used in the study. Purposive sampling was the sampling approach utilized to acquire 48 observation firms for empirical testing. The results indicate that only the individual environmental ESG score has a positive and significant impact on financial performance and company value, whereas the composite ESG score has a positive and substantial impact on financial performance. The finding of this study is that the improvement of corporate ESG performance can increase corporate value, and corporate financial performance provides an obvious mediating effect. The findings further show that low-risk ESG scores have an impact on increasing firm value with financial performance as the mediation. Key Words:ESG Performance, Profitability, Firm Value

Suggested Citation

  • Etty Indriani, 2024. "Sustainable investing drive by ESG performance evidence of companies listed on the Indonesian Capital Market," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 13(3), pages 309-322, April.
    • Handle: RePEc:rbs:ijbrss:v:13:y:2024:i:3:p:309-322
    DOI: 10.20525/ijrbs.v13i3.3287
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    References listed on IDEAS

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    1. Shiyu Wu & Xinyi Li & Xiaosen Du & Zexin Li, 2022. "The Impact of ESG Performance on Firm Value: The Moderating Role of Ownership Structure," Sustainability, MDPI, vol. 14(21), pages 1-22, November.
    2. Yu-Jin Chang & Byung-Hee Lee, 2022. "The Impact of ESG Activities on Firm Value: Multi-Level Analysis of Industrial Characteristics," Sustainability, MDPI, vol. 14(21), pages 1-17, November.
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