ANALYSIS OF ENVIRONMENT, SOCIAL, GOVERNANCE (ESG) ISSUES AND THEIR INFLUENCE ON STOCK RETURNS WITH RETURN ON ASSET (ROE) AS AN INTERVENING VARIABLE FOR MINERAL AND COAL MINING COMPANIES IN INDONESIA

• Main Author: Rahmi, Anisa
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/87903
• Institution: Institut Teknologi Bandung

In the contemporary business world, there is an increasing awareness of the significance of sustainability, alongside financial aspects such as profitability. Non-financial aspects, including environmental, social, and governance (ESG) issues, have become a primary concern for stakeholders in recent years.The distinction in characteristics between mineral and coal mining results in divergent impacts on ESG issues. Consequently, companies must ascertain which ESG issues are prioritised and most significant for ESG assessment. The present study aims to ascertain the relative importance of ESG issues in the assessment of ESG scores in mineral and coal mining companies, and to explore the relationship of these ESG issues with stock returns through the mediation of Return On Equity (ROE) value. The present study employs three distinct methodologies. Firstly, the machine learning Artificial Neural Network (ANN) method is utilised to ascertain the relative priority of ESG issues within the context of mineral and coal mining. Secondly, the multiple linear regression Ordinary Last Square (OLS) method is employed. Thirdly, path analysis is employed to discern the relationship between ESG issues and stock returns, with the company's ROE taken into consideration. The results of this study demonstrate that the hierarchy of ESG issues in mineral mining is as follows: Occupational Health Safety Management (OHSM), Board of Commissioners (BC), and Energy Management (EM), while in coal mining, the hierarchy is as follows: Greenhouse Gases (GHG), Board of Commissioners (BC), and Occupational Health Safety Management (OHSM). The findings further demonstrate that, within the coal sector, the issues of Audit (A), Board Compensation (BC), and Greenhouse Emission (GHG) exert a substantial influence on stock returns through ROE as an intervening variable. Conversely, in the mineral sector, ESG issues that directly impact stock returns are Audit (A), Ecological Impact (EcI), Waste Management (WASM), and Greenhouse Gases (GHG).