Do Financial Performance, Market Activity, and Capital Structure Drive Corporate Sustainability Performance? Evidence from Indonesia’s Energy Sector
Abstract
This study examines the drivers of Corporate Sustainability Performance in Indonesia’s energy sector, focusing on financial performance, market activity, and capital structure. Drawing on signaling theory, it employs a quantitative approach using panel data from energy companies listed on the Indonesia Stock Exchange from 2021 to 2024. Structural Equation Modeling-Partial Least Squares (SEM-PLS) tests the proposed relationships. Financial performance is assessed using ROA, ROE, and NPM; market activity by PER and trading volume; and capital structure by DER. Sustainability Performance is measured using ESG scores from Refinitiv/LSEG. Results indicate that financial performance and market activity positively and significantly affect Corporate Sustainability Performance, highlighting that profitability and investor responsiveness serve as key signals of ESG commitment. However, capital structure shows no significant effect, implying that internal financing primarily supports sustainability efforts in emerging markets. This research enhances understanding by linking internal and external signaling to Corporate Sustainability Performance, offering valuable insights for policymakers and investors seeking to promote green finance.
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