The Mediating Role of Investment Decisions in the Influence of Sustainability Reports and ERM on the Firm Value

Abstract

In the era of sustainability, there has been a shift in indicators for assessing company performance. Stakeholders are not only concerned with financial performance but pay great attention to non-financial performance in the form of sustainability performance and risk management. This study was conducted to find empirical evidence of whether investment decisions mediate the effect of the quality of sustainability reporting and ERM on company prices. We use a sample of 648 firm years of public companies listed on the Indonesia Stock Exchange. In general, the level of conformity of sustainability reports for public companies in Indonesia reaches 61.2% of the Global Reporting Initiative standard. By using multiple regression path analysis the results were obtained: first, sustainability reports and ERM have a direct positive effect on company value. Second, ERM has a direct positive effect on investment decisions but sustainability reports are not significant. Third, investment decisions mediate the impact of ERM on firm value. The implications of this study are important for company management to build quality sustainability reporting and effective ERM to maximize firm value. Keywords: sustainability report, ERM, investment decision, company value