Examining the Impact of Esg Dimensions on Corporate Financial Performance: Evidence from the Sustainable and Responsible Investment (Sri) Kehati Index
Abstract
This study aims to analyse the influence of the Environmental, Social, and Governance (ESG) dimension on financial performance for companies listed in the Sustainable and Responsible Investment (SRI) KEHATI Index on the Indonesia Stock Exchange (IDX) for the 2020-2024 period. This research provides an empirical contribution by examining differences in the influence of ESG aggregates and dimensions on the financial performance of sustainability-oriented companies in Indonesia. The research used a quantitative approach based on secondary data from Refinitiv and the financial statements of 22 companies selected through purposive sampling over five years of observation. The data was analysed using panel data regression. Financial performance is measured using indicators of firm value (Tobin’s Q) and profitability (Return on Assets). The results show that ESG in aggregate has a negative and significant effect on profitability (ROA). At the dimension level, social and governance dimension has a positive and significant effect on profitability (ROA), while the environmental has a positive and significant effect on the company’s market value as measured by Tobin’s Q, reflecting the company’s attention to risks and sustainability issues in improving financial performance. These findings provide implications for investors and management in formulating effective ESG strategies to improve company value and long-term financial performance.
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