The Effect of Corporate Governance and ESG Disclosure on Firm Value: Evidence from Non-Financial Companies Listed on the Indonesia Stock Exchange
Keywords:
Corporate Governance; ESG Disclosure; Firm Value; Panel Data Regression; Random Effect Model; Indonesia Stock Exchange.Abstract
Purpose This study examines the influence of corporate governance and ESG disclosure on firm value among non-financial companies listed on the Indonesia Stock Exchange (IDX). The research addresses the inconsistent findings regarding the effectiveness of corporate governance mechanisms in enhancing market valuation and investigates whether ESG disclosure contributes directly to firm value within an emerging market characterized by increasing sustainability reporting requirements.
Methods This study employed a quantitative explanatory research design using balanced panel data from PT Unilever Indonesia Tbk, PT Astra International Tbk, PT Telkom Indonesia Tbk, PT Indofood CBP Sukses Makmur Tbk, and PT Kalbe Farma Tbk during the 2021–2023 period, producing 15 firm-year observations selected through purposive sampling. Firm value was measured using Tobin’s Q, while corporate governance was represented by Board Independence, Board Size, Audit Committee Size, and Institutional Ownership. ESG disclosure was assessed using an ESG Disclosure Index derived from annual and sustainability reports. Panel data regression was applied following the Chow, Breusch–Pagan Lagrange Multiplier, and Hausman tests, with the Random Effect Model identified as the most appropriate specification.
Findings The empirical results demonstrate that Board Independence, Institutional Ownership, and ESG Disclosure have significant positive effects on firm value, whereas Board Size and Audit Committee Size do not significantly influence market valuation. The regression model explains 74.1% of the variation in firm value (R² = 0.741), indicating substantial explanatory power. The findings suggest that governance effectiveness depends primarily on monitoring quality and sustainability transparency rather than the numerical composition of governance structures.
Research Implications The findings provide practical implications for corporate managers, investors, and regulators by emphasizing the importance of strengthening board independence, institutional monitoring, and ESG disclosure quality to improve firm value and long-term market confidence.
Originality This study contributes to the corporate governance and ESG literature by providing recent evidence from Indonesian non-financial companies using an integrated panel data framework that simultaneously evaluates governance mechanisms and ESG disclosure as complementary determinants of firm value in an emerging market.
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