Industry Sensitivity as a Moderator of the Effect of Environmental, Social, and Governance (ESG) Performance on Company Value

Abstract

The study explores the influence of Environmental, Social, and Governance (ESG) performance on company value, with a focus on non-financial companies listed on the Indonesia Stock Exchange (IDX) between 2014 and 2023. This research aims to evaluate both the individual and combined impact of ESG dimensions on company value and to assess whether industry sensitivity moderates these effects. Using panel data regression and moderated regression analysis (MRA), the study analyzes the relationship between ESG performance, company value, and industry characteristics. The results indicate that ESG performance, both collectively and individually, has a significant negative effect on company value. This suggests that increases in ESG performance are associated with a decrease in company value. However, industry sensitivity was found to positively moderate the relationship, especially in sectors with higher environmental sensitivity, where the negative impact of ESG on company value tends to weaken, or even become positive. The study highlights the need for strategic ESG implementation, considering both long-term sustainability and market perceptions. This research contributes to understanding the dynamics between ESG performance and company value, particularly in the context of Indonesia’s non-financial sector.