This study aims to examine the influence of Environmental, Social, and Governance (ESG) disclosure on Company Value proxied using Tobin's Q, as well as to test the role of profitability as a moderation variable in companies listed on the Indonesia Stock Exchange (IDX) for the 2020-2024 period. The study used an explanatory quantitative approach with panel data consisting of 117 companies during the observation period, resulting in 574 observations (unbalanced panels). The model selection was carried out through the Chow Test, the Hausman Test, and the Lagrange Multiplier (LM) Test. The test results showed that the Chow Test (p=0.0000), the Hausman Test (p=0.0407), and the LM Test (p=0.0000) directed the best model to the Fixed Effect Model (FEM). The results of the estimate show that ESG has a coefficient of -0.044 (p=0.823) so that it does not have a significant effect on the Company's Value. The ESG ROA moderation variable also showed a coefficient of -0.161 (p=0.856) so it was not proven to moderate the relationship between ESG and Company Value. However, the model is simultaneously significant with an F-statistic value of 8.239 and Prob(F-statistic)=0.0000, so the model is considered feasible to use. An Adjusted R2 value of 0.599 indicates that the model is able to explain 59.9% of Tobin's Q variations. These results are in line with Patima et al. (2024) which found that environmental disclosure did not have a significant effect on the company's value in the basic materials sector on the IDX.
Company value is an investor's perception of the success rate of a company which is often associated with the company's stock price and ability to create prosperity for its shareholders. The higher the value of the company, the more prosperous the owner will be, so that the company's value is the main indicator for investors in making capital allocation decisions (Brigham & Houston, 2019).
One comprehensive proxy for measuring a company's value is Tobin's Q, which describes how much the market values a company's assets relative to the cost of its successor (Chung & Pruitt, 1994). Tobin's Q value above 1 indicates that the market appreciates a company's assets beyond its book value, reflecting high growth expectations and investor confidence.
In the modern business paradigm, the achievement of optimal company value no longer relies solely on conventional financial fundamentals. The Environmental, Social, and Governance (ESG) framework has evolved into a comprehensive evaluation tool used by global institutional investors to assess a company's non-financial risks and long-term potential (Friede et al., 2015). ESG disclosure includes three main dimensions: environmental dimension which includes carbon emission management, energy efficiency, and waste management; social dimension which includes employment practices and community involvement; and the governance dimension which includes transparency and risk management. On the other hand, profitability measured by Return on Assets (ROA) remains a fundamental indicator that reflects management's efficiency in generating profits from the total assets owned (Hanafi, Mamduh M.; Halim, 2016).
The period 2020 to 2024 is an anomalous era as well as a momentum for global economic recovery due to the COVID-19 pandemic. The Indonesia Stock Exchange (IDX) experienced significant volatility in this period, with the Jakarta Composite Stock Price Index (JCI) plummeting drastically before gradually recovering. Theoretically, companies that regularly disclose ESG practices and have high profitability will get a positive response from the market (Friede et al., 2015). However, research in developing countries found that Indonesian investors are still pragmatic and more concerned with short-term financial returns than ESG commitments (Garcia et al., 2017). Research Patima et al. (2024) conducted on the IDX also found that environmental disclosure does not have a significant effect on company value, showing that this phenomenon is not limited to one sector or variables only.
The inconsistency of previous research results encourages the need for empirical retesting. Squirting (2020) find the positive influence of ESG on company value, while Chairiyati et al. (2025) found insignificant results in the issuer of the IDX ESG Leader Index. Similar inconsistencies are found in profitability, where Wardana et al. (2025) confirmed the positive effect of ROA on Tobin's Q in normal periods, while Waruwu & Hendrajaya (2025) finding the opposite result in the mining sector. This research gap is increasingly relevant to be studied considering the changes in post-pandemic macroeconomic conditions that dominated the 2020-2024 period.
Therefore, this study aims to: (1) examine the influence of ESG disclosure on Company Value (Tobin's Q); and (2) examining the role of Profitability moderation (ROA) on the relationship between ESG disclosure and Corporate Value in companies listed on the IDX for the 2020-2024 period. The contribution of this research lies in: the use of the post-pandemic period that has not been comprehensively studied, a more comprehensive moderation approach in explaining the dynamics of ESG valuation, and its relevance to the development of sustainability regulations in Indonesia.
Theoretical Foundations
Stakeholder Theory: Stakeholder Theory developed Freeman et al. (2010) emphasizing that the company cannot operate behind closed doors just to maximize the wealth of shareholders, but must accommodate the interests of all parties affected by its operations-including employees, customers, communities, and the environment. This theory is the main cornerstone of why ESG disclosure is considered important: ESG implementation is a tangible form of fulfilling obligations to stakeholders, which in turn builds a company's long-term reputation and trust in the eyes of the market.
Signaling Theory: Signaling Theory Spence (1973) Explaining that in the condition of asymmetric information between the company's management and external parties, management can give a 'signal' to the market through observable actions. ESG disclosures are a signal of management's commitment to sustainable business practices, while a high ROA is a signal of the quality of asset management. Rational investors will interpret these signals as indicative of a company's good prospects, so they are willing to pay a premium reflected in Tobin's Q increase (Connelly et al., 2011).
Agency Theory: Agency Theory Jensen & Meckling (1976) Explain the agency relationship between the company owner (principal) and management (agent) which can give rise to conflicts of interest and agency costs. ESG disclosure in this theoretical perspective serves as a monitoring mechanism that reduces information asymmetry between management and shareholders, thereby suppressing the potential for opportunistic management behavior.
| Researcher | Title/Variable | Method | Sample | Key Findings |
|---|---|---|---|---|
| Friede et al. (2015) | ESG and financial performance – meta-analysis >2000 study | Meta-analysis | Global | 90% of studies show a non-negative ESG–financial performance relationship; majority positive. |
| Garcia et al. (2017) | ESG in sensitive industries – emerging markets | Regression panel | Emerging markets | Sensitive industries show better ESG results; the influence of heterogeneous ESG in developing countries. |
| Patima, Helmi & Rusmita (2024) | Environmental accounting and corporate value – profitability as an intervening variable | Path analysis & Sobel test | 18 IDX companies in the basic materials sector (2021–2023) | Cost and environmental performance have a positive effect on the company's value; environmental disclosure has no significant effect; profitability fails to mediate. |
| Chairiyati et al. (2025) | ESG and corporate value – IDX ESG Leader Index | Regression panel | Issuers of IDX ESG Leader Index | ESG has no significant effect on the company's value in Indonesia's ESG Index. |
| Wardana et al. (2025) | Profitability and liquidity against market valuation – Tobin's Q LQ45 | Regression panel | LQ45 Q1 2021–Q3 2024 | Profitability has a significant positive effect on Tobin's Q in normal periods. |
| Waruwu & Hendrajaya (2025) | Financial performance and dividend policy on the value of companies in the mining sector | Multiple regression | IDX mining sector | Financial performance does not always have a positive effect on a company's value in a particular sector. |
| Squirting (2020) | Systematic review of SRI and ESG metrics | Systematic literature review | Global | ESG has a positive influence on the company's overall value, but the market context determines the direction of influence. |
| Veronieka & Rusmita (2025) | Green Accounting, CSR, Independent Commissioner of Corporate Value: Audit Quality as Moderation | Linear Regression & MRA (EViews 13) | 22 IDX companies (2022–2024) | Green accounting has a significant positive effect on the company's value; audit quality is not as significant as moderation. |
This study uses an explanatory quantitative approach as described Sugiyono (2019). The data used is secondary data in the form of data panel. The data sources come from annual financial statements, sustainability reports, and Bloomberg ESG databases accessed through the Indonesia Stock Exchange (IDX) and the company's official website for the 2020-2024 period.
The research population includes all companies listed on the Indonesia Stock Exchange (IDX) for the 2020-2024 period. The sampling technique uses purposive sampling. The application of criteria resulted in a final sample of 117 companies, so that the total observations analyzed were 574 observations (unbalanced panel: 117 companies × 5 years).
The ESG variable has a mean of 0.493. The Tobin's Q variable has an average of 1,421. The selection of the best model is carried out through a tiered procedure: Chow Test, Hausman Test, and the Lagrange Multiplier (LM) test. Based on the tests, the Fixed Effect Model (FEM) was determined as the best model.
Hypothesis Testing:
Hypothesis 1 (H1): The ESG coefficient is -0.044 with a probability of 0.823 (<0.05), so H1 is rejected.
Hypothesis 2 (H2): The ESG ROA coefficient is -0.161 with a probability of 0.856 (<0.05), so H2 is rejected.
| Variable | Mean | Std. Dev. | Minimum | Maximum |
|---|---|---|---|---|
| ESG | 0.493109 | 0.269826 | 0 | 1 |
| Tobin's Q | 1.421069 | 1.319489 | 0.131997 | 15.6844 |
| Moderation | 0.032953 | 0.067043 | -0.296531 | 0.602469 |
| Observations | 574 | 574 | 574 | 574 |
| Test | Statistics | Value | Prob. | Verdict |
|---|---|---|---|---|
| Chow Test | Cross-section F | 7.8057 | 0 | FEM > EMF |
| Hausman Test | Chi-square | 6.4019 | 0.0407 | FEM > REM |
| LM Breusch-Pagan Test | Cross-section BP | 310.356 | 0 | REM > EMC |
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| Variable | Coefficients | Std. Error | t-Statistics | Prob. | Ket. |
|---|---|---|---|---|---|
| C | 1.448279 | 0.102461 | 14.13486 | 0 | Significant |
| ESG | -0.044442 | 0.198485 | -0.223904 | 0.8229 | Insignificant |
| ESG×LONG | -0.160689 | 0.883996 | -0.181776 | 0.8558 | Insignificant |
| Adjusted R² | 0.598513 | ||||
| F-statistic | 8.238933 |
|
0.0000 | Significant | |
| Durbin-Watson | 1.724711 |
| H | Hypothesis Statement | Prob. | α = 5% | Verdict |
|---|---|---|---|---|
| H1 | ESG Disclosure has a Positive and Significant Effect on Company Value | 0.8229 | > 0.05 | Rejected |
| H2 | Profitability (ROA) moderates the influence of ESG on Company Value | 0.8558 | > 0.05 | Rejected |
The results show that the ESG variable has a coefficient of -0.044 with a probability of 0.823 (<0.05), so H1 is rejected. These results show that ESG disclosure has not been able to increase the Company Value proxied using Tobin's Q. These findings are in line with research Chairiyati et al. (2025).
The results showed that the ESG ROA moderation variable had a coefficient of -0.161 with a probability of 0.856 (<0.05), so H2 was rejected. These results show that profitability has not been proven to strengthen the influence of ESG on Company Value.
The results show that the ESG variable has a coefficient of -0.044 with a probability of 0.823 (>0.05), so H1 is rejected. These results show that ESG disclosure has not been able to increase the Company Value proxied using Tobin's Q. These findings are in line with research Chairiyati et al. (2025).
The results showed that the ESG ROA moderation variable had a coefficient of -0.161 with a probability of 0.856 (>0.05), so H2 was rejected. These results show that profitability has not been proven to strengthen the influence of ESG on Company Value.