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All Journal Jambura Science of Management JURNAL EKOBIS DEWANTARA Jurnal Eksplorasi Akuntansi (JEA) Agroteksos Journal of Business, Social and Technology Indo-Fintech Intellectuals: Journal of Economics and Business Riwayat: Educational Journal of History and Humanities Jurnal Akuntansi, Keuangan, Perpajakan dan Tata Kelola Perusahaan Gudang Jurnal Pengabdian Masyarakat Jurnal Pengabdian Masyarakat Ekonomi dan Bisnis Digital Journal of Islamic Economics and Finance
Syahfitri Suryaningsi Welkom
Department Of Management, Faculty Of Economics And Business, University Of Al-Azhar Indonesia
Religion Agriculture, Biological Sciences & Forestry Humanities Biochemistry, Genetics & Molecular Biology Decision Sciences, Operations Research & Management Economics, Econometrics & Finance Education Industrial & Manufacturing Engineering Languange, Linguistic, Communication & Media Social Sciences Other

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The Effect of ESG Risk Rating on Corporate Profitability: The Role of Firm Size and Leverage as Moderating Variables Syurmita Syurmita; Syahfitri Suryaningsi Welkom; Khansa Chikita Rayesha
Journal of Business, Social and Technology Vol. 7 No. 2 (2026): Journal of Business, Social and Technology
Publisher : Politeknik Siber Cerdika Internasional

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.59261/jbt.v7i2.613

Abstract

Background: Sustainalytics ESG Risk Rating has been identified as a determinant of corporate financial performance. However, its effect on profitability—particularly for developing markets like Indonesia—remains underexplored. This study examines how ESG risk relates to profitability and whether firm size or leverage moderates their relationship. Objective: This study seeks to determine the influence of ESG risk on profitability, with firm size and leverage as moderating variables. Methods: A quantitative study employing Moderated Regression Analysis (MRA) was conducted using 76 firms listed on the Indonesia Stock Exchange (IDX) in 2024. The proxy for profitability was Net Profit Margin (NPM), and ESG Risk Ratings were obtained from Sustainalytics. Results: ESG Risk Ratings negatively affect profitability (B = −2.418; p = 0.005), whereby higher sustainability risk impairs net profit margins. This negative effect is moderated by firm size (B = 0.094; p = 0.001), as larger firms are better equipped to manage ESG risks. Conversely, higher leverage strengthens the negative effect of ESG risk on profitability (B = −0.839; p = 0.001), as highly leveraged firms are less capable of addressing sustainability pressures. Conclusion: The results underscore the need for both ESG risk disclosure and governance. Larger firms cope with ESG risk more effectively than highly leveraged firms. Further research is warranted with a longer observation period and additional measures of profitability.
Co-Authors Abdurrahman Azfa Nabhan Kamil Allysa Azzarah Welkom Allysa Azzarah Welkom Anggun Pratiwi Anggun Pratiwi Anggun Pratiwi Aufa Dzihni Imanina Baarsyah, Muhammad Ivan Pramudya Dina Riyanti Putri Ditha Riyansa Ditha Riyansa Khansa Chikita Rayesha Kuncoro Hadi Kurniawan, Rizky Fernanda Mega Parwati Meliana Rahmawati Muhamad Emil Rachman Muhammad Raihan Rahmi, Asri Noer Sukarmin Hidayat syurmita