Does Sustainability Pay? Evidence on the Profitability-Mediated Connection Between ESG Reporting, Audit Quality, and Market Value

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🔬研究者:This study provides empirical evidence from an emerging market on the direct and mediated effects of sustainability reporting on firm value, contributing to stakeholder and legitimacy theories.

🏢実務担当者:Corporate sustainability teams can use these findings to justify GRI-based reporting as value-relevant, even if profitability is not a mediator.

🏛政策担当者:For regulators in emerging markets, the results suggest that mandating sustainability reporting may enhance firm value, but audit committee reforms need careful contextual calibration.

This research investigates the effects of corporate sustainability reporting and audit committee characteristics on company value, with the mediating variable being profitability. The research focuses on Indonesian listed companies to understand how sustainability practices and governance mechanisms influence firm valuation in an emerging market context. The research uses a quantitative methodology using panel data from 89 Indonesian publicly listed companies over the period 2021–2023, resulting in 267 firm-year observations. Corporate sustainability reporting is measured using a comprehensive Global Reporting Initiative (GRI)-based disclosure index, while audit committee effectiveness is assessed through independence, expertise, and activity frequency. Tobin’s Q ratio is used to calculate company value, and return on assets quantifies profitability. To test the direct and indirect connections, mediation analysis applies bias-corrected bootstrap procedures suitable for panel data. The results indicate a significant positive impact of sustainability reporting on firm value, with no significant mediation by profitability. Audit committee characteristics demonstrate a negative association with firm value and profitability, counter to established theory, suggesting contextual factors in the Indonesian market. Findings extend stakeholder and legitimacy theories, emphasizing value creation beyond immediate profitability.   Received: 18 August 2025 | Revised: 4 January 2026 | Accepted: 23 January 2026   Conflicts of Interest The authors declare that they have no conflicts of interest to this work.   Data Availability Statement Data are available on request from the corresponding author upon reasonable request.   Author Contribution Statement Widaryanti Widaryanti: Conceptualization, Methodology, Validation, Formal analysis, Investigation, Resources, Data curation, Writing - original draft, Writing - review & editing, Visualization, Project administration. Luhgiatno Luhgiatno: Resources, Writing - review & editing, Supervision, Project administration. Riana Sitawati: Conceptualization, Methodology, Validation, Formal analysis, Investigation,  Writing - review & editing.

• semanticscholar https://doi.org/10.47852/bonviewglce62027249first seen 2026-05-05 23:05:44