The Impact of ESG Disclosure and Firm Value on Profitability: Evidence from Companies Listed in the Jakarta Islamic Index
Sigit Munandar, M.Ak (a*), Alvionia Filda Sari Mareta, S.E., M.Ak (c), Rara Tyas Ghaniiyya(b)

a) Vocational School, Diponegoro University
Jalan Prof. H. Soedarto, S.H., Semarang 50275, Indonesia
*sigitmunandar[at]lecturer.undip.ac.id
b) Vocational School, Diponegoro University
Jalan Prof. H. Soedarto, S.H., Semarang 50275, Indonesia
c) Vocational School, Diponegoro University
Jalan Prof. H. Soedarto, S.H., Semarang 50275, Indonesia

Abstract

This study aims to examine the effect of Environmental, Social, and Governance (ESG) disclosure and Earning per Share (EPS) on the profitability of companies listed in the Jakarta Islamic Index (JII). Profitability is proxied by Return on Assets (ROA). The research employs secondary data derived from the annual reports of JII-listed companies during the 2021-2023 period. Multiple linear regression analysis was applied, preceded by classical assumption tests to ensure the validity of the model. The empirical results reveal that ESG disclosure has a positive and significant effect on ROA, indicating that a higher level of ESG disclosure enhances the companiss profitability. In contrast, EPS does not have a significant effect on ROA, suggesting that earnings per share do not necessarily reflect the overall profitability of a company. Classical assumption testing confirmed that the regression model is free from multicollinearity and heteroscedasticity issues, ensuring the reliability of the estimates.

These findings highlight the importance of sustainability practices through ESG disclosure in improving financial performance, particularly for firms operating under sharia-compliant principles. The study contributes to the literature by providing evidence from the Indonesian capital market context, particularly Islamic-based indices. Practically, the results suggest that managers, regulators, and investors should pay closer attention to ESG initiatives as they represent not only a commitment to sustainability but also a driver of long-term financial performance.

Keywords: ESG disclosure, EPS, ROA, profitability, Jakarta Islamic Index

Topic: Economic Welfare in Terms of Islamic Perspective