What Makes Firm Value Stronger? Sustainability, Governance or Profitability?
Abstract
Purpose: The purpose of this research is to examine the effect of Sustainability Reporting and Good Corporate Governance (GCG) based on ASEAN Corporate Governance Scorecard to Firm Value, and to test the function of profitability as moderating variable.
Design/Methodology/Approach: This study employed an explanatory quantitative research design. The research population consists of 113 companies that are in the Basic Materials sector listed on the Indonesia Stock Exchange for the period 2021-2024. From the purposive sampling technique used, a sample of 19 companies was obtained with 76 observations. Corporate Sustainability Reporting was measured by Sustainability Reporting Disclosure Index refer to Global Reporting Initiative; Good Corporate Governance was assessed using the ASEAN Corporate Governance Scorecard; profitability was measured by ROA (Return on Assets); and firm value was assessed by PBV (Price to Book Value). The data were analysed with the method of multiple linear regression and moderated regression analysis was reviewed by IBM SPSS Statistics.
Findings: Sustainability Reporting positively and significantly impacted firm value by coefficient of 0.734 and significance level of 0.025. Good Corporate Governance also positively and significantly impact with coefficient 4.129 and significance level of 0.003. Profitability and Sustainability Reporting did not interact with statistical significance (?= -10.741; p = 0.128), while Good Corporate Governance interacted with profitability with a positive effect and statistical significance (? = 61.381; p = 0.030). Moderation model explains 43.0% of variation of Firm Value.
Research Limitations/Implications: This research data set consists of only companies from the Basic Materials industry. The research method used was content analysis, which could potentially lead to researchers’ subjective interpretation. Additional future studies might investigate disclosure quality in more depth and consider using control variables and panel data techniques.
Practical Implications: Firms should integrate the sustainability disclosure with substantive governance and a focus on profitability. Investors may evaluate a company's future potential based on the combination of sustainability, governance and profitability information.
Originality/Value: The research novelty lies in the integration of GRI-based Sustainability Reporting and ACGS-based Good Corporate Governance measurements in the profitability moderation model on Indonesian Basic Materials.
Paper Type: Research Paper
Keywords: Sustainability Reporting; Good Corporate Governance; ACGS; Profitability; Firm Value
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