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The Impact of ESG Risk Scores on Firm Value: Foreign Ownership as A Moderating Role
Abstract
The objective of this research is to determine the effect of Environmental, Social, and Governance (ESG) risk scores on firm’s value (Tobin's Q) and determine the role of foreign ownership in the relationship between ESG risk scores and firm’s value as a moderating variable. This study also uses control variables such as firm age, firm size, profitability proxied by return on assets (ROA), and leverage proxied by debt to equity ratio (DER) to minimize other effect from outside besides the independent variables. The sample of the data is 70 firms listed in the Indonesia Stock Exchange (IDX) and has an ESG risk score by Sustainalytics for the 2021 observation year. Research data processing used E-views 12 software. Multiple linear regression analysis method is used to prove the research hypothesis. The results showed that the ESG risk score has a significant negative effect on firm’s value, it means that the higher ESG risk score owned by the company will lower the firm value. Meanwhile foreign ownership has not been able to moderate the relationship between ESG risk score and firm’s value.
DOI: https://doi.org/10.26905/afr.v6i1.10109
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DOI: https://doi.org/10.26905/afr.v6i1.10109
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