Institutional Investors and CSR Strengthen Sharia Company Value in Indonesia
Companies listed on Indonesia’s Sharia stock market gained stronger market value when backed by institutional investors and effective Corporate Social Responsibility (CSR) programs, according to new research published in 2026 by researchers from Indonesian universities. The study analyzed companies included in the Indonesian Sharia Stock Index (ISSI) from 2017 to 2024 and found that institutional ownership and CSR consistently improved firm value before, during, and after the COVID-19 pandemic.
The research was conducted by Mohamad Tohir, Yohannes Indrayono, and Retno Martanti and published in the Indonesian Journal of Economic & Management Sciences. The findings are significant because they show how investor confidence and corporate social responsibility became critical drivers of business resilience during one of the most volatile economic periods in recent history.
The study also highlights the growing importance of Indonesia’s Islamic capital market, which continues expanding despite global economic disruptions. By 2024, the Indonesian Sharia Stock Index reached a market capitalization of IDR 6,825.30 trillion, reflecting strong long-term growth in the country’s Islamic financial sector.
Sharia Stock Market Continues Growing After the Pandemic
Indonesia’s stock market experienced severe pressure during the COVID-19 crisis. The paper noted that the Indonesia Stock Exchange declined by 37.49 percent between December 2019 and March 2020 after the World Health Organization officially declared COVID-19 a global pandemic.
Despite the disruption, Indonesia’s Sharia stock market showed continued expansion over the following years. The number of Sharia-listed companies increased steadily between 2017 and 2024, accounting for roughly 63 to 72 percent of all issuers listed on the Indonesia Stock Exchange.
Researchers said the resilience of Sharia-based investments reflects increasing investor interest in companies considered financially stable, ethically managed, and socially responsible.
The study focused on two major factors believed to influence company value:
- Institutional ownership
- Corporate Social Responsibility (CSR)
Institutional ownership refers to shares owned by large financial institutions such as investment firms, pension funds, insurance companies, and banks. CSR refers to corporate programs related to environmental, social, and community responsibility.
Analysis of 43 Indonesian Sharia Companies
The researchers used a quantitative panel-data regression approach to analyze 43 companies listed on the Indonesian Sharia Stock Index between 2017 and 2024.
The study examined three economic phases:
- Before COVID-19 (2017–2019)
- During COVID-19 (2020–2022)
- After COVID-19 (2022–2024)
Researchers collected secondary data from annual company reports, financial statements, stock market information, and CSR disclosures. Firm value was measured using Tobin’s Q ratio, a widely used indicator comparing market value with company asset value.
The analysis found that institutional ownership and CSR positively influenced company value throughout all research periods.
Institutional Ownership Strongly Increased Firm Value
One of the strongest findings involved institutional investors.
Across the entire 2017–2024 period, institutional ownership showed a highly significant positive effect on company value, with a statistical coefficient of 0.611874. The relationship remained strong before, during, and after the pandemic.
According to the researchers, institutional investors improve company oversight and corporate governance because they monitor management more effectively than smaller shareholders.
The paper explained that institutional investors also reduce agency problems by ensuring company executives act in shareholders’ interests.
During the post-pandemic recovery period, the influence of institutional ownership became even stronger. Researchers believe this reflects growing investor preference for companies with stronger governance and long-term business stability.
According to Mohamad Tohir and colleagues, strong institutional ownership also sends a positive signal to the market that a company has credible management and good future prospects.
CSR Became More Important During Economic Recovery
The research also found that CSR significantly increased firm value across all periods studied.
Companies with stronger CSR disclosure received higher market valuations because investors viewed them as more sustainable, responsible, and trustworthy.
The effect of CSR weakened slightly during the peak of the COVID-19 crisis but strengthened again during the economic recovery phase after 2022.
Key CSR-related findings included:
- CSR positively affected company value throughout all study periods
- Companies maintaining social programs during the pandemic gained stronger market appreciation
- Investors increasingly valued companies with long-term sustainability commitments
- CSR strengthened public trust and corporate reputation
The researchers stated that companies continuing CSR initiatives during the pandemic received better market responses because they demonstrated social commitment during a national crisis.
The study supports legitimacy theory and stakeholder theory, which argue that companies gain stronger public trust when their operations align with broader social expectations.
According to the researchers, CSR is no longer viewed only as a public relations strategy. Investors increasingly treat CSR performance as an indicator of long-term business sustainability and lower operational risk.
Implications for Indonesian Businesses and Investors
The findings provide important lessons for Indonesian businesses, investors, and policymakers.
For companies, the research suggests that improving firm value requires more than financial performance alone. Strong governance, credible institutional investors, and effective CSR strategies all contribute to stronger market confidence.
The paper recommends that companies:
- Improve operational efficiency
- Develop innovative business models
- Attract credible institutional investors
- Integrate CSR into long-term business strategy
- Create shared value for both companies and society
For investors, the study suggests that companies with strong governance structures and active CSR programs may offer better long-term resilience, particularly during periods of economic uncertainty.
The findings are also relevant to policymakers promoting sustainable finance and Islamic investment growth in Indonesia. The study shows that ethical business practices and social responsibility can support market stability and investor trust.
Research Highlights Growing Importance of Ethical Investment
The research reflects a broader global shift toward sustainable investing and Environmental, Social, and Governance (ESG)-based investment strategies.
Indonesia’s Sharia capital market combines financial performance with ethical business principles, making it increasingly relevant in global discussions about sustainable finance.
The authors concluded that the Indonesian Islamic capital market increasingly rewards companies with strong fundamentals, responsible governance, and sustainable social commitments.
Author Profile
Mohamad Tohir is a researcher specializing in corporate finance, Islamic capital markets, and corporate governance. He collaborated with Yohannes Indrayono and Retno Martanti on research examining institutional ownership, CSR, and firm value in Indonesian Sharia-listed companies.
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