Rida Rahim

Type of the article: Research Article

Abstract
This study examines the effect of two-tier board characteristics on firm value, with corporate reputation, proxied by Return on Assets (ROA), as a mediating variable. The research focuses on the Indonesian two-tier governance context, where the Board of Commissioners supervises management under concentrated ownership structures. The study uses panel data from 333 firm-year observations of non-financial companies listed on the Indonesia Stock Exchange (IDX) and included in the Kompas 100 Index over the 2019–2023 period. Data were analyzed using panel regression models with the Sobel test applied to evaluate the mediating effect. The results reveal that among the six examined board attributes, namely independence, size, tenure, education, meeting frequency, and age, only board meeting frequency shows a significant positive effect on firm value (p < 0.01). Board size positively affects ROA, indicating that a larger supervisory board enhances operational efficiency, while board education exhibits a negative influence, suggesting a potential mismatch between academic qualifications and practical business needs. However, ROA does not significantly affect firm value (p > 0.05), indicating that corporate reputation, when proxied by financial performance, fails to mediate the relationship between board characteristics and firm value. These findings underscore the crucial role of board meetings as a formal mechanism for effective supervision in Indonesia’s two-tier system. Moreover, they highlight that financial reputation alone is insufficient to drive firm value in emerging markets where direct governance mechanisms are more influential.

Acknowledgment
This research was conducted without financial support from any public, commercial, or nonprofit funding agency.

Type of the article: Research Article

Abstract
This study examines whether Environmental, Social, and Governance (ESG) performance enhances stock returns directly or indirectly through firm fundamentals in an emerging market context. The analysis focuses on non-financial firms listed on the Indonesian Stock Exchange (IDX) over the period 2014–2023, following the expansion of sustainability reporting regulations in Indonesia. The final sample comprises 4,037 firm-year observations, of which 477 contain available ESG scores obtained from a third-party rating database. Panel data regression models with firm-level controls and mediation analysis are employed to test both direct and indirect relationships. The empirical results indicate that ESG performance has a positive and statistically significant effect on total factor productivity (TFP) and return on assets (ROA), suggesting that sustainability practices are associated with improvements in operational efficiency and profitability. In turn, both TFP and ROA exhibit positive and significant effects on stock returns. However, ESG does not demonstrate a statistically significant direct effect on stock returns after controlling for firm fundamentals. Mediation analysis confirms that ESG influences stock returns indirectly through productivity and profitability channels, with productivity emerging as the stronger transmission mechanism. These findings suggest that, in the Indonesian capital market, ESG operates primarily as a fundamental value-enhancing mechanism rather than as an independent pricing signal. Sustainability performance contributes to shareholder value when it strengthens firms’ internal efficiency and financial resilience, highlighting the importance of fundamental performance channels in emerging markets.