The Effect of ESG Disclosure on Firm Value with Profitability as a Moderating Variable
DOI:
https://doi.org/10.22437/proca.v2i3.60028Keywords:
ESG Disclosure, Firm Value, Profitability, Mining Sector, Sustainability Report, Index GRIAbstract
Background: The mining sector faces significant ecological and social scrutiny. Consequently, Environmental, Social, and Governance (ESG) practices have become crucial for global investors in determining a company's market valuation, especially amid environmental controversies. Objective: This study examines the direct influence of ESG disclosures on firm value and evaluates the moderating role of profitability. Methods: This study employs a quantitative causal design. The population comprised mining companies listed on the Indonesia Stock Exchange (IDX) from 2021 to 2024. Using purposive sampling, 21 companies yielding 84 observations were selected based on annual and sustainability report availability. ESG variables were measured using the Global Reporting Initiative (GRI) framework. Data were analyzed using a Random Effect Model (REM) and Moderated Regression Analysis (MRA). Results: Environmental disclosure positively and significantly impacts firm value, whereas social disclosure exerts a negative and significant effect. Governance disclosure and profitability demonstrate no significant direct effect. Furthermore, profitability does not significantly moderate the relationship between any ESG components and firm value. Conclusions: Investor responses to sustainability practices in the mining sector are independent of short-term profitability fluctuations. Mining entities must prioritize environmental transparency to mitigate long-term risks and strategically evaluate social expenditures to avoid market perceptions of cash inefficiency.
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Copyright (c) 2026 Muhammad Rakha Athaya, Ratih Puspitasari, Dessy Evianti
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