ESG and Financial Performance in Enhancing Firm Value: Evidence from Corporate Sustainability

Pardomuan Sihombing; Nancy Megawati Hariandja

doi:10.58777/rfb.v4i2.644

Authors

Pardomuan Sihombing Master of Management Program, Faculty of Economics and Business, Mercu Buana University, Jakarta
Nancy Megawati Hariandja Sampoerna University, Jakarta

DOI:

https://doi.org/10.58777/rfb.v4i2.644

Keywords:

Environmental Social and Governance (ESG), , Financial Performance, Firm Value, Sustainability, Corporate Governance

Abstract

This study examines the effect of Environmental, Social, and Governance (ESG) performance on firm value, with financial performance as an intervening variable. Prior studies report inconclusive findings on how ESG performance contributes to firm value, particularly through financial performance. This study addresses this gap by investigating the mediating role of financial performance. Using a quantitative approach, the study analyzes secondary data from annual and sustainability reports of companies listed on the Indonesia Stock Exchange. The sample comprises [number] companies observed during [period], resulting in [number] observations. Structural Equation Modeling (SEM) is used to test direct and indirect relationships. The results indicate that ESG performance [positively/negatively/does not significantly] affects firm value and [positively/negatively/does not significantly] affects financial performance. Financial performance [significantly/does not significantly] affects firm value and [significantly/does not significantly] mediates the relationship between ESG performance and firm value. These findings show that [brief interpretation of the main finding]. The study contributes evidence on ESG-driven value creation and highlights the importance of integrating ESG into corporate strategies, investment decisions, and regulatory policies

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