Research of Finance and Banking

What Drives Firm Value in Emerging Markets? Evidence from Indonesian Telecom Firms

Pardomuan Sihombing, Aditya Sabrian Amirullah — Thu, 07 May 2026 00:00:00 +0700

This study analyzes the effects of sustainability (ESG disclosure), business risk, dividend policy, and capital structure on firm value, with profitability as a mediating variable in telecommunications companies listed on the Indonesia Stock Exchange during 2020–2024. Although prior research has explored firm value determinants, findings on ESG disclosure and financial policies remain inconsistent, particularly in emerging markets, and few studies integrate these variables within a mediation framework. Using panel data analysis, the results indicate that ESG disclosure and dividend policy have a significant negative impact on firm value, suggesting that the market has not fully valued sustainability initiatives and views higher dividend payouts as limiting reinvestment opportunities. Conversely, capital structure and profitability show significant positive effects, emphasizing the importance of effective leverage management and strong earnings performance in influencing investor perceptions. Business risk has a positive but insignificant relationship with firm value. Mediation testing reveals that profitability mediates the relationship between capital structure and firm value, but does not mediate the effects of ESG disclosure, business risk, or dividend policy. These findings highlight the conditional role of profitability in linking financial decisions to firm value and suggest that ESG disclosure has not yet produced short-term valuation benefits in emerging markets.

Interpretable Machine Learning for Predicting Financial Distress in Emerging Market Insurance Sectors

Jahir Uddin Palas, Benazir Imam Majumder — Thu, 07 May 2026 00:00:00 +0700

This study develops an interpretable early-warning framework to predict financial distress among non-life insurers operating in a thin-premium market context. While prior studies widely rely on traditional models such as the Z-score, a critical research gap remains, as these models are not well-suited to the insurance industry due to its unique capital structures, regulatory requirements, and underwriting dynamics. Specifically, conventional distress prediction approaches tend to overlook operational characteristics such as reinsurance dependency, reserve adequacy, and expense management, which are central to insurer solvency. Addressing this gap, the study applies machine learning techniques combined with explainable artificial intelligence to enhance both predictive capability and transparency. Using firm-level panel data, the research incorporates key financial and operational indicators to construct a context-specific predictive framework. The methodology emphasizes balanced model evaluation, feature relevance, and interpretability to ensure practical applicability for supervisory authorities. By integrating explainability into predictive modeling, this study helps bridge the regulatory trust gap associated with black-box algorithms. The proposed framework offers a policy-relevant tool for early identification of vulnerable insurers and for facilitating timely intervention. Overall, this research advances the literature by aligning predictive accuracy with institutional usability in emerging insurance markets.

Sales Growth as a Value Catalyst: Financial Performance in Indonesian Manufacturing

Rizky Helmiza, Perdana Wahyu Santosa, Any Setianingrum — Sat, 09 May 2026 00:00:00 +0700

Indonesia's economic growth between 2017-2023 experienced increasing instability, influenced by various factors, including the pandemic. This condition adversely affected the financial performance of most industries, with many reporting significant losses. However, the consumer goods manufacturing sector demonstrated greater resilience compared to other sectors. This study posits that changes in financial performance influence firm value, which in turn affects stock price movements. As such, firm value is considered a critical indicator for investors in making investment decisions, as it reflects a firm's prospects and sustainability. This study aims to examine the effects of profitability, leverage, and firm size on firm value, with sales growth as a moderating variable, among manufacturing companies in the consumer goods sector listed on the Indonesia Stock Exchange (BEI) during the 2017–2023 period. A quantitative research approach was employed, using panel data regression analysis in e-Views 12. The study population comprised 52 companies, of which 28 were purposively selected, yielding 168 observations. The findings reveal that profitability, leverage, and firm size simultaneously affect firm value. Partially, profitability and sales growth do not have a significant effect on firm value, whereas leverage and firm size do.

Strategic Resilience in Agribusiness: Does CSR Moderate Financial Risks in Indonesian Palm Oil Firms?

Pardomuan Sihombing, Ratih Dwi Asmaranti — Sat, 09 May 2026 00:00:00 +0700

This study examines the critical role of Corporate Social Responsibility (CSR) in shaping firm value in the palm oil industry, a sector under intense global environmental and social scrutiny. As one of the most controversial resource-based industries, palm oil companies are frequently linked to deforestation, climate change, biodiversity loss, and social conflicts, which significantly influence stakeholder perceptions and investor confidence. These conditions create a fundamental problem: firms with strong financial performance may still experience a gap between their operational achievements and market valuation due to external pressures. Therefore, CSR in this context is no longer merely a symbolic or ethical obligation, but a strategic necessity to maintain legitimacy, enhance corporate reputation, and ensure long-term sustainability. This study examines how internal financial factors, including financial performance, capital structure, profit growth, and operating cash flow, affect firm value while incorporating CSR as a moderating variable. By doing so, the research provides a more comprehensive understanding of firm value that integrates both financial and non-financial dimensions. Ultimately, this study highlights that in high-risk industries such as palm oil, sustainable value creation depends not only on financial strength but also on a company's commitment to responsible environmental and social practices

How Green Lean Six Sigma and Environmental Dispositions Support Circular Economy Practices

Mohammad Herman Sulistiyo, Ana Noveria, Qaisar Ali — Thu, 21 May 2026 00:00:00 +0700

Despite growing interest in the circular economy (CE), strategic frameworks supporting its implementation in the financial sector remain underexplored. This limitation restricts banks’ ability to integrate circular principles with sustainability goals, operational efficiency, and long-term value creation. Previous studies have mainly focused on manufacturing and industrial sectors, with limited attention to how Green Lean Six Sigma (GLSS) and managers’ environmental beliefs support CE adoption in banking. Addressing this gap, this study investigates the direct effect of GLSS and the mediating role of managers’ environmental beliefs in facilitating CE implementation in banks, based on the Resource-Based View (RBV) theory. Data were collected from 713 managers in Malaysian banks and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results show that GLSS has a significant positive effect on CE implementation. Managers’ environmental beliefs significantly mediate the relationships between green and lean strategies and CE, while the mediation effect of Six Sigma is insignificant. These findings extend RBV theory by identifying GLSS as a strategic organizational resource and managers’ environmental beliefs as an important capability supporting CE implementation in the financial sector.