ESG performance is a measure of how well a company manages and optimises its impact on various environmental, social and governance factors. In addition, ESG serves as a significant catalyst for changing and improving economic structures, as well as promoting national economic development. The purpose of this study is to investigate the mediating role of green innovation in the relationship between ESG performance and company value, using companies listed on the Indonesia Stock Exchange.
Panel data were collected from 64 companies during the period 2018–2023. Hayes’ Method No. 4 was used for mediation analysis.
The findings show that ESG performance has a significant effect on green innovation and firm value. This indicates that ESG performance can encourage companies to innovate in an environmentally friendly manner and also increase company value. Other findings also provide evidence that green innovation has a negative effect on company value. This means that green innovation in the short term cannot have a maximum effect on company value. However, additional analysis using the Hayes process shows that green innovation can mediate the relationship between ESG performance and company value.
The number of observations is still relatively limited, from companies listed on the Indonesian stock exchange. The total number of samples used in this study is 384 company-year observations.
Investment in companies that integrate environmental sustainability aspects into the manufacturing value chain, such as green innovation, is considered an added value that will increase investor welfare.
This study links ESG performance and green innovation to company value in the context of the Indonesian market, which is underrepresented in international literature.
