Financial performance, specifically profitability, remains the primary determinant of firm value in Indonesia's mining sector, outweighing the impact of Environmental, Social, and Governance (ESG) practices. These findings were revealed by Anindya Cresentia Bariq and Krisdiana from Universitas Swadaya Gunung Jati in a study published in June 2026. The research highlights that in the mining sector, investors still tend to rely on traditional financial indicators rather than sustainability information when making investment decisions.
Background and Context
The mining sector faces significant pressure regarding climate change and carbon emissions. Although regulations such as OJK Regulation Number 51/POJK.03/2017 mandate the implementation of sustainable finance, there is ongoing debate over whether ESG disclosure truly increases firm value or is merely perceived as an additional cost burden. This study aimed to examine the role of ESG as a mediating variable between financial factors (profitability and leverage) and firm value.
Research Methodology
The study employed a quantitative causal-associative approach involving 14 companies in the coal, metal, and mineral sub-sectors listed on the Indonesia Stock Exchange from 2020 to 2024. The total data observation amounted to 70 samples. Analysis was conducted using Structural Equation Modeling-Partial Least Squares (SEM-PLS) to test direct and indirect relationships between variables.
Key Research Findings
The analysis results indicate the following dynamics:
- Profitability: Has a positive and significant effect on firm value.
- Leverage: Does not have a significant effect on firm value, but it significantly influences the improvement of ESG disclosures.
- ESG Disclosure: Does not have a significant effect on firm value and is unable to mediate the influence of profitability or leverage on firm value.
Implications for Industry and Investors
These results indicate that the Indonesian stock market, particularly for the mining sector, remains heavily oriented toward profitability. For corporate management, operational efficiency and the ability to generate profit remain the primary strategies to increase firm value. Meanwhile, for investors, ESG is not yet considered a signal capable of increasing firm value in the short term. However, in line with increasing global demands and regulations, this study suggests that ESG factors should begin to be integrated into long-term investment analysis.
Author Profile:
- Anindya Cresentia Bariq: Researcher at Universitas Swadaya Gunung Jati.
- Krisdiana: Lecturer and researcher at Universitas Swadaya Gunung Jati, specializing in financial management and accounting.
Research Source:
- Article Title: The Effect of Profitability and Leverage on Firm Value With ESG Disclosure as a Mediating Variable in Coal, Metal and Mineral Sub-Sector Companies
- Journal Name: Indonesian Journal of Business Analytics (IJBA)
- Publication Year: 2026
- DOI/URL:
https://doi.org/10.55927/ijba.v6i3.16519
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