ESG Performance on Investment-Cash Flow Sensitivity: Case Study of Non-Financial Companies Listed on the Indonesian Stock Exchange

Novi Anri; Cynthia Afriani Utama

doi:10.35877/454RI.qems2323

Authors

Novi Anri Master of Management Study Program, Faculty of Economics and Business, University of Indonesia, Depok, Indonesia
Cynthia Afriani Utama Master of Management Study Program, Faculty of Economics and Business, University of Indonesia, Depok, Indonesia

DOI:

https://doi.org/10.35877/454RI.qems2323

Keywords:

investment-cash flow sensitivity, ESG performance, company investment, company ownership structure, agency problem, overinvestment, asymmetric information, underinvestment.

Abstract

This research aims to analyze the influence of ESG performance on Investment - Cash Flow Sensitivity of non-financial companies listed on the Indonesia Stock Exchange for the 2017-2022 period. ESG performance was measured using ESG ratings from Sustainalytics' ESG Research and Ratings, obtained from the Bloomberg Terminal database. Testing process was carried out on 50 registered non-financial companies in Indonesia for six years with a total of 300 observations obtained through purposive sampling techniques. The results of research employed panel balance data and the OLS method found that there are still phenomena Investment – Cash Flow Sensitivity occurred and good ESG performance could reduce Investment – Cash Flow Sensitivity. Thus, it can be indicated that companies implementing good ESG performance can more easily obtain funding sources.

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