Does Managerial Ownership Moderate the Determinants of Firm Value? Evidence from Indonesian Energy Companies

Abstract

This research examines the direct associations of green innovation, earnings management, and tax avoidance with firm value; tests whether managerial ownership moderates these associations; and provides conditional empirical evidence from an emerging-market energy context. Secondary data were extracted from annual and sustainability reports of 37 energy firms listed on the Indonesia Stock Exchange, yielding 185 firm-year observations (2020–2024). Green innovation was measured using environmental expenditure proxies; earnings management via the modified Jones model; tax avoidance by the effective tax rate gap; and firm value using Tobin’s Q. Managerial ownership was calculated as the percentage of shares held by management. Panel data regression with Moderated Regression Analysis was performed using EViews 13. Direct association tests reveal that green innovation and managerial ownership exhibit positive and significant associations with firm value. Earnings management shows a positive and significant association—a counterintuitive result possibly reflecting short-term market orientation. Tax avoidance exhibits a negative but non-significant association. For moderation effects, managerial ownership positively moderates the green innovation–firm value association, but does not significantly moderate the earnings management–firm value relationship. The tax avoidance moderation coefficient is significant, indicating a positive moderating effect where managerial ownership strengthens the relationship between corporate tax avoidance and firm value. This study contributes conditional evidence from Indonesia’s energy sector through a tripartite model integrating green innovation, earnings management, and tax avoidance, unexplored in prior research. Managerial ownership is positioned as a strategy-contingent mechanism whose moderating influence varies across earnings activities due to differing managerial risk horizons during sustainability transitions. These findings extend agency and stakeholder theory by demonstrating boundary conditions for ownership-based governance, offering insights for investors and regulators navigating sustainability transitions.