ESG IMPACTS ON FISCAL RESILIENCE: COST OF CAPITAL AND MANUFACTURING FIRM VALUE

Yosi Kurnia; Hafidh Abdullah Ashshidiqy; Khairul Faiz; Nofriadi

doi:10.30998/ebv9dg46

Authors

Yosi Kurnia Perintis Indonesia University Author
Hafidh Abdullah Ashshidiqy Universitas Muhammadiyah Madiun Author
Khairul Faiz Schmalkalden University of Applied Sciences Author
Nofriadi Perintis Indonesia University Author

DOI:

https://doi.org/10.30998/ebv9dg46

Keywords:

Cost of Capital, ESG Performance, Fiscal Resilience, Firm Value, Manufacturing Sector

Abstract

The global investment paradigm shift emphasizes the role of Environmental Social Governance (ESG) Performance in creating sustainable firm value, yet empirical evidence in emerging markets remains inconsistent. This study addresses this gap by simultaneously examining the effect of ESG on Firm Value (Tobin's Q) and the efficiency of the Cost of Capital (CoD and CoE), focusing on the high risk Indonesian Manufacturing Sector. Employing Fixed Effect Panel Data Regression on 225 observations from 2019–2023, the main results demonstrate that ESG positively and significantly affects Tobin's Q (supporting Signaling Theory) and negatively and significantly affects CoE (confirming Risk Mitigation). Conversely, ESG does not significantly affect CoD. The study's primary contribution is the simultaneous empirical validation of the effectiveness of ESG in value creation and equity cost savings in the Indonesian equity market post OJK regulation. The policy implications highlight that ESG is a core financial strategy for management and underscore the need for regulatory intervention to internalize ESG in bank credit risk models

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Author Biographies

Yosi Kurnia, Perintis Indonesia University

Faculty of Economics, Business, and Social Sciences

Digital Business Program

Perintis Indonesia University
Hafidh Abdullah Ashshidiqy, Universitas Muhammadiyah Madiun

Muhammadiyyah Madiun University

Faculty of Social and Political Science
Khairul Faiz, Schmalkalden University of Applied Sciences

Schmalkalden University of Applied Science

Intertational Business and Economics
Nofriadi, Perintis Indonesia University

Faculty of Economics, Business, and Social Sciences (FEBIS)

Digital Business Program

Perintis Indonesia University

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