The Moderating Effect of Profitability on the Impact of ESG Risk Rating on Firm Value: ESG Leaders Index

Risa Ratna Gumilang; Erpi Rahman; Dera Pebriyanti Pertiwi

doi:10.35877/soshum5159

Authors

Risa Ratna Gumilang Manajemen, Fakultas Ekonomi dan Bisnis, Universitas Sebelas April, Indonesia
Erpi Rahman Akuntansi, Fakultas Ekonomi dan Bisnis, Universitas Sebelas April, Indonesia
Dera Pebriyanti Pertiwi Manajemen, Fakultas Ekonomi dan Bisnis, Universitas Sebelas April, Indonesia

DOI:

https://doi.org/10.35877/soshum5159

Keywords:

ESG Risk Rating, Firm Value, IDX ESG Leaders Index, Profitability, Price-to-Book Value, Return on Equity

Abstract

Objectives: This study aims to examine the effect of ESG Risk Rating on firm value and to test the moderating role of profitability in this relationship in companies included in the IDX ESG Leaders index for the 2022–2025 period.

Methodology: This study applies a quantitative approach with a causal associative design. The sample was selected using purposive sampling, resulting in 18 companies and 72 observations. Data analysis was conducted using Moderated Regression Analysis (MRA) based on secondary data from financial statements, annual reports, and ESG Risk Rating scores.

Finding: The results show that ESG Risk Rating has a significant effect on firm value. Profitability, proxied by Return on Equity (ROE), is also found to negatively moderate this relationship, indicating that profitability weakens the effect of ESG Risk Rating on firm value.

Conclusion: These findings indicate that ESG risk is relevant information in investors’ valuation decisions, but its influence becomes relatively weaker in firms with higher profitability. The results support stakeholder theory and signaling theory.

Keywords: ESG Risk Rating; Firm Value; Profitability; Price to Book Value; Indeks ESG Leaders.