The Effect of Environmental, Social, and Governance (ESG) Performance on Firm Value: The Moderating Role of Institutional Ownership (An Empirical Study of Companies Listed on the SRI-KEHATI Index)

Venny Ratnasari Narulita; Endri Endri

doi:10.59261/inkubis.v8i3.437

Authors

Venny Ratnasari Narulita Universitas Mercu Buana
Endri Universitas Mercu Buana

DOI:

https://doi.org/10.59261/inkubis.v8i3.437

Keywords:

Corporate Value, Institutional Ownership, SRI KEHATI, Corporate Sustainability, ESG

Abstract

Background: The average market valuation of SRI-KEHATI firms declined during 2020–2024, raising questions about whether investors value environmental, social, and governance performance differently.

Objective: This study examines the separate effects of environmental, social, and governance performance on firm value and whether institutional ownership moderates each of these relationships.

Methods: A balanced panel of 15 SRI-KEHATI companies, comprising 75 firm-year observations from 2020 to 2024, was analyzed using fixed-effects regression with interaction terms. ESG scores were obtained from Refinitiv, while data for Tobin’s Q, institutional ownership, firm size, leverage, and return on assets were derived from annual reports, sustainability reports, and Indonesia Stock Exchange publications. White cross-section robust standard errors with a degrees-of-freedom correction were applied.

Results: Environmental performance had no statistically significant effect on firm value (β = −0.000487; p = 0.9642), whereas social performance (β = 0.015321; p = 0.0360) and governance performance (β = 0.008767; p = 0.0342) had significant positive effects. Institutional ownership negatively moderated the relationship between environmental performance and firm value (β = −0.189269; p = 0.0009), while positively moderating the relationships involving social performance (β = 0.116430; p = 0.0171) and governance performance (β = 0.130764; p = 0.0014).

Conclusion: The findings indicate that social and governance performance are more strongly associated with firm value than environmental performance among SRI-KEHATI companies, while institutional ownership has dimension-specific moderating effects.

Downloads

Download data is not yet available.

References

Aydoğmuş, M. S., Gülay, G., & Ergün, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22(3), 278–292.

Bashir, Y., Zhao, Y., Qiu, H., Ahmed, Z., & Yau, J. T. (2023). ESG performance and value creation in product markets: Evidence from emerging economies. Journal of Risk and Financial Management, 16(517), 1–19.

Behl, A., Kumari, P. S. R., Makhija, H., & Sharma, D. (2022). Exploring the relationship of ESG score and firm value using cross-lagged panel analyses: Case of the Indian energy sector. Annals of Operations Research, 313(1), 231–256. https://doi.org/10.1007/s10479-021-04189-8

Buallay, A. (2019). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality: An International Journal, 30(1), 98–115. https://doi.org/10.1108/MEQ-12-2017-0149

Bursa Efek Indonesia. (2024). ESG leaders and SRI KEHATI factsheet 2024.

Chau, L., De Silva, T., & Pham, H. (2025). Valuing ESG: How financial markets respond to corporate sustainability. International Business Review, 34(1), 1–15.

Dorothy, P., & Endri, E. (2024). ESG disclosure and firm value in the energy sector: The moderating role of profitability. Problems and Perspectives in Management, 22(2), 56–67.

Erol, I., Unal, U., & Coskun, Y. (2023). ESG investing and the financial performance: a panel data analysis of developed REIT markets. Environmental Science and Pollution Research, 30(36), 85154-85169.

Fuadah, L., Setiati, A., & Handayani, S. (2022). Ownership structure and ESG disclosure: Audit committee as moderating variable. Economies, 10(314), 1–14.

Gillan, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889.

Giordino, D., Sestino, A., Zàmek, D., & Yahiaoui, D. (2026). The impact of institutional ownership structure on corporate ESG performance. Review of Managerial Science, 29(1), 1–27.

Krishnamoorthy, R. (2021). Environmental, social, and governance (ESG) investing: Doing good to do well. Open Journal of Social Sciences, 9(7), 189–197. https://doi.org/10.4236/jss.2021.97013

Kustodian Sentral Efek Indonesia. (2024). Monthly statistics report December 2024.

Li, Q., Li, M., & Zhang, L. (2024). Revisiting the relationship between ESG, institutional ownership, and corporate innovation. Corporate Social Responsibility and Environmental Management, 31(2), 211–230.

Naeem, N., Cankaya, S., & Bildik, R. (2022). Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets. Borsa Istanbul Review, 22, S128–S140. https://doi.org/10.1016/j.bir.2022.11.014

Otoritas Jasa Keuangan. (2021). Roadmap keuangan berkelanjutan tahap II (2021–2025).

Safitri, R. N., & Paramita, V. S. (2025). The influence of ESG, profitability, and capital structure on firm value in IDX ESG leaders. Sinergi International Journal of Economics, 4(2), 23–33. https://doi.org/10.61194/economics.v3i1.410

Seok, J., Kim, Y., & Oh, Y. K. (2024). How ESG shapes firm value: The mediating role of customer satisfaction. Technological Forecasting and Social Change, 200(5), 124–139. https://doi.org/10.1016/j.techfore.2024.123714

Shiyu, W., Li, D., & Du, F. (2022). The impact of ESG performance on firm value: The moderating role of ownership structure. Sustainability, 14(21), 14507.

Yoo, S., & Managi, S. (2022). Disclosure or action: Evaluating ESG behavior towards financial performance. Finance Research Letters, 44, 102108. https://doi.org/10.1016/j.frl.2021.102108