ANALYZING THE IMPACT OF ESG ON COMPANY VALUE THROUGH CAPITAL STRUCTURE

Abstract

The application of Environmental, Social, and Governance (ESG) principles is increasingly important in the modern business world because it reflects a company's commitment to sustainability, social responsibility, and good governance. ESG is not just a moral obligation, but an important strategy in creating long-term value for the company and supporting economic sustainability in general. This study aims to analyze the effect of Environmental, Social, and Governance (ESG) disclosure on company value, with capital structure as a mediating variable. This study uses a quantitative approach with secondary data from companies listed on the Indonesia Stock Exchange (IDX) and have an IDXLeaders index during the period 2021 to 2024. The sampling technique in this study uses purposive sampling with the criteria for companies included in the IDXLEADERS category. The number of samples obtained was 14 companies. ESG measurement is carried out by looking at the IDXLeaders index on the IDX, capital structure is measured by Debt to Equity Ratio, and Company value is measured by Tobins Q. Data analysis was carried out using Smart PLS 4. The results of the study show that (1) ESG disclosure has no effect on company value. In emerging markets such as Indonesia, investors tend to focus more on short-term financial performance than ESG practices. As a result, even though companies have good ESG scores, this is not always reflected in increased company value. (2) ESG is proven to have a positive effect on capital structure. The positive effect of ESG on capital structure may reflect a company's strategy in utilizing their ESG reputation to access financing to support growth and sustainability initiatives. (3) capital structure has an effect on company value. This indicates that optimal use of capital can increase company value and reflect good financial policies. (4) capital structure is not proven to mediate the effect between ESG and company value.