Bridging Disclosure and Value: The Mediating Role of ESG Performance in Indonesian Manufacturing Firms

Abstract

This research seeks to empirically analyze and assess how Environmental, Social, and Governance (ESG) performance acts as a mediator in the structural linkage between sustainability reporting and corporate value, focusing on manufacturing firms listed on the Indonesia Stock Exchange (IDX) from 2020 to 2025. Amid escalating global demands for corporate transparency and the enforcement of national sustainable finance mandates, notably POJK No. 51/POJK.03/2017, understanding the economic efficacy of non-financial disclosures is paramount. Utilizing a quantitative explanatory framework, this paper analyzes secondary panel data from a balanced sample of 45 manufacturing companies meeting strict disclosure requirements. Data analysis and hypothesis evaluation were performed through Partial Least Squares Structural Equation Modeling (PLS-SEM) utilizing SmartPLS software. The empirical results demonstrate that sustainability disclosures have a direct, positive, and statistically significant impact on both operational ESG performance and market valuation indicators. Furthermore, the analysis confirms that ESG performance functions as a vital partial mediator, demonstrating that sustainability disclosures translate into maximized shareholder wealth and market capitalization more effectively when they are genuinely underpinned by substantive internal operational improvements. Theoretically, these outcomes reinforce stakeholder theory and signaling theory within emerging market economies. Practically, the insights provide strategic guidance for corporate management to prioritize authentic sustainability execution over superficial compliance, assist institutional investors in refining fundamental risk assessments, and offer actionable frameworks for regulatory authorities.