ESG, Sustainable Growth, and Firm Value: Does Foreign Ownership Matter?

Abstract

Purpose: This study examines the effects of Environmental, Social, and Governance (ESG) disclosure and Sustainable Growth Rate (SGR) on firm value and investigates the moderating role of foreign ownership.Research Methodology: This quantitative study uses panel data from 10 companies listed in the IDX ESG Leaders Index during 2015–2023. The data were analyzed using the Fixed Effect Model (FEM) based on the Chow and Hausman tests, with EViews 12 used for statistical analysis.Results: The findings indicate that Environmental, Social, And Governance (ESG) disclosure and foreign ownership do not have significant direct effects on firm value. In contrast, the Sustainable Growth Rate (SGR) has a significant negative effect on firm value, suggesting that higher growth does not necessarily lead to higher market valuation. Furthermore, foreign ownership significantly and positively moderates the relationship between SGR and firm value, indicating that foreign participation can influence how the market interprets corporate growth.Conclusions: The findings suggest that investors do not automatically perceive ESG disclosure and high growth as positive signals. Growth that is not adequately supported by financial fundamentals may increase perceived risk and reduce firm value. However, foreign ownership can strengthen the market's response to corporate growth.Limitations: This study is limited to 10 companies in the IDX ESG Leaders Index and relies on Bloomberg ESG data with limited coverage of the sample.Contributions: This study contributes to the ESG, corporate finance, and sustainable growth literature by highlighting the role of foreign ownership in the relationship between sustainable growth and firm’s value.