The Impacts of Green Investment and Firm Value: Exploring from the Mediation Role of Sustainability Performance

This study empirically analysed the role of sustainability performance in mediating the influence of green investment on firm value.The sample comprises 191 firm-years of energy and basic materials companies listed on the Indonesian Stock Exchange from 2016 to 2022. The research used secondary data sourced from the OSIRIS database, as well as annual and sustainability reports. The direct effect analysis tool and analysis with mediator variables were used with Hayes PROCESS model 4, namely, simple mediation contained in SPSS. The results prove that green investment has a significantly positive effect on firm value and that sustainability performance mediates the effect of green investment on firm value. The practical implication of this study, first, this study provides new insights into the development of stakeholder and legitimacy theories. Second, it proves that stakeholders currently consider sustainability performance to be a mediator from the non-financial side of the company. Third, it is important for companies to focus on aspects that need to be considered while investing. Fourth, this research can provide advice on the importance of sustainability performance in companies as disclosed in their annual or sustainability reports. This study finds a new cycle in which a company’s green investment actions through sustainability performance which are reported in accordance with applicable regulations, produce output, thus increasing firm value.