The Effect of Sustainability Performance, Growth Opportunity, and Free Cash Flow on Energy Sector Firm Value Moderated by Institutional Ownership

Abstract

Background: Energy-sector firm value remains volatile amid sustainability demands, while prior evidence concerning ESG, Growth Opportunity, and cash flow factors remains inconsistent. Objective: This study analyzes the effects of Sustainability Performance, as measured by Environmental Score, Social Score, and Governance Score, as well as Growth Opportunity and Free Cash Flow on firm value in the Indonesian energy sector. The study also examines the role of Institutional Ownership as a moderating variable. Methods: The study employs a quantitative approach with an associative-causal design. Secondary data were obtained from audited financial reports, annual reports, sustainability reports, and the Indonesia Stock Exchange. The sample was selected through purposive sampling of 27 energy sector companies on the IDX Main Board during 2021–2024, yielding 108 firm-year observations. Analysis was conducted using panel data regression and moderated regression analysis with EViews 13. Results: The results show that Social Score has a significant negative effect, Free Cash Flow has a significant positive effect, Environmental Score and Governance Score have positive but insignificant effects, while Growth Opportunity has an insignificant negative effect on firm value. Institutional Ownership has a positive but insignificant direct effect on firm value. In the moderation analysis, Institutional Ownership strengthens the effect of Free Cash Flow, weakens the effect of Social Score and Growth Opportunity, and does not moderate the effect of Environmental Score and Governance Score on firm value.  Conclusion: These findings indicate that financial and sustainability factors have varying effects on firm value, while Institutional Ownership can strengthen or weaken these relationships in energy sector companies.