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All Journal Journal of Management - Small and Medium Enterprises (SME's)
Yandi Suprapto
Department of Management Faculty of Business and Management, Universitas Internasional Batam
Economics, Econometrics & Finance

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Environmental, social, and governance (ESG) performance and firm perfomance: Does sharia compliance matters? Yandi Suprapto; Derrick Sebastian; Isnaini Nuzula Agustin
Journal of Management Small and Medium Enterprises (SMEs) Vol 19 No 2 (2026): JOURNAL OF MANAGEMENT Small and Medium Enterprises (SME's)
Publisher : Universitas Nusa Cendana

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.35508/jom.v19i2.28747

Abstract

This study aims to examine the influence of Environmental, Social, and Governance (ESG) Performance on Firm Performance and the moderating role of Shariah Compliance in companies in Indonesia. The study uses a quantitative approach with an explanatory research design and utilizes panel data of 305 company observations during the 2019–2024 period. The analysis was conducted using a regression model with Return on Equity (ROE) and Tobin’s Q as proxies for Firm Performance, and Shariah Compliance as a moderating variable. The results show that ESG Performance has a positive and significant effect on ROE, but does not significantly affect Tobin’s Q. At the same time, Shariah Compliance has a direct negative effect on firm performance, but is proven to strengthen the relationship between ESG Performance and Firm Performance. These findings indicate that ESG implementation supported by compliance with sharia principles can improve company performance more optimally, both in terms of profitability and firm value. Therefore, companies need to integrate ESG practices with sharia principles as a strategy to improve long-term performance, strengthen corporate legitimacy, and increase investor confidence. Keywords: ESG Performance; Firm Performance; Sharia Compliance; ROE; Tobin’s Q
Co-Authors Derrick Sebastian Isnaini Nuzula Agustin