THE INFLUENCE OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) DISCLOSURE ON FIRM VALUE WITH PROFITABILITY AS A MODERATING VARIABEL

Abstract

This study aims to analyze the effect of Environmental, Social, and Governance (ESG) disclosure on firm value, with profitability as a moderating factor. The study comprises 111 observations from 43 companies over the 2021–2023 period, resulting in an unbalanced panel data set. Secondary data were sourced from financial statements, annual reports, and sustainability disclosures available on the IDX and respective company websites. The analysis was conducted using moderated regression analysis through EViews 13. The results indicate that, among the ESG dimensions, only governance disclosure exhibits a significant negative relationship with firm value, while environmental and social disclosures show no substantial effect. Moreover, profitability measured using return on assets (ROA) does not moderate the ESG–firm value relationship. Instead, it demonstrates a direct and significant positive impact on firm value when evaluated independently. These findings indicate that profitability acts more as an independent variable than a moderator. Companies should communicate governance more strategically and authentically, beyond mere compliance. Improving operations, revenue, and financial transparency is also key. Future studies should broaden the sample, extend the period, and explore other factors influencing firm value.