THE INFLUENCE OF ESG ON COMPANY VALUE: DOES INSTITUTIONAL OWNERSHIP STRENGTHEN THE RELATIONSHIP?

Abstract

This study examines the influence of Environmental, Social, and Governance (ESG) disclosure on company value and investigates whether institutional ownership moderates this relationship in banking sector companies listed on the Indonesia Stock Exchange during the 2022–2024 period. The study is motivated by the critical role of the banking sector in the Indonesian financial system, accounting for approximately seventy-three percent of total national financial assets, as well as the persistent inconsistency in previous research findings regarding the effect of ESG disclosure on firm value. The sample consists of one hundred and forty-four firm-year observations obtained from banking companies selected using purposive sampling with criteria including the consecutive publication of annual reports and sustainability reports during the observation period. Panel data regression analysis with the Fixed Effect Model was employed to test the proposed hypotheses. The results indicate that ESG disclosure does not have a significant effect on company value, suggesting that sustainability information has not been optimally integrated into investors' valuation assessments in the Indonesian banking sector. Furthermore, institutional ownership does not moderate the relationship between ESG disclosure and company value, implying that institutional investors' supervisory function has not effectively enhanced the credibility or market relevance of ESG information. Among the control variables, firm size has a significant negative effect on company value, while profitability does not significantly influence company value. These findings suggest that investors in the Indonesian banking sector still prioritize traditional financial performance over non-financial sustainability information, and institutional ownership alone is insufficient to strengthen the market response to ESG disclosure.