Does ESG Initiatives Affect Market Value and Profitability for Public Listed Companies in Indonesia?

Minaldi Loeis () and Dennis Alexander
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Minaldi Loeis: Bina Nusantara University, Business Management & Marketing, Binus Business School
Dennis Alexander: Bina Nusantara University, Mathematics and Statistics Department, School of Computer Science

A chapter in Proceedings of the 1st Bengkulu International Conference on Economics, Management, Business and Accounting (BICEMBA 2023), 2023, pp 90-94 from Springer

Abstract: Abstract This study examines 246 listed companies in the Indonesian Stock Exchange (IDX) having reported their economic, social, and governance (ESG) disclosure in 2021with the aim to evaluate whether its ESG initiatives impacted the companies’ market value and profitability. Sustainability investing, specifically based on ESG reporting of public listed companies has reached USD 71.1 billion globally between April and June of 2020. This shows ESG reporting has become an important factor for investors throughout the world. The Indonesian Financial Services Authority (OJK) introduced a circular in 2021 obliging public listed companies to include ESG reporting for their routine reporting to the public and financial authorities. This reporting requirement has increased the number of listed companies in IDX disclosing their ESG activities in 2021. Recent studies of ESG reporting in other markets shows that there is a positive relationship between ESG activities of publicly listed companies and their market value as well as their profitability. Using regression analysis, this study examines the economic, social, and governance disclosed initiatives of the 246 samples of the listed companies and the measure of market value using Tobin’s Q and the measure of profitability using ROA. The findings shows that there are negative relationships between ESG disclosure and market value as well as profitability for listed companies in the IDX. This finding can be beneficial for stakeholders to improve their sustainability strategies and planning to increase the companies’ attractiveness to green investors.

Keywords: ESG; market value; profitability; Indonesia (search for similar items in EconPapers)
Date: 2023
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DOI: 10.2991/978-94-6463-328-3_11

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