ESG Performance and Ownership Structure on Cost of Capital and Research & Development Investment

Abstract

This study aims to determine the effect of ESG performance, institutional ownership, insider ownership, block holder ownership, and foreign ownership on the cost of capital and investment of research and development (R&D). The sample of this study is companies listed on the Indonesia Stock Exchange (BEI) for 2016-2020. The sample selection uses the purposive sampling method and collects through the Thomson Reuters Database and annual report. The results of this study indicate that ESG performance, institutional ownership, and foreign ownership have a negative significant effect on the cost of capital, insider ownership has a positive significant effect on the cost of capital, but block holder ownership does not show a significant relationship to the cost of capital. As for the relationship to research and development investment, only ESG performance, institutional ownership, and foreign ownership have a positive significant effect, the other two types of ownership have a negative and significant effect.

The Impact of Research and Development Expenditures on Esg Model in the Global Economy

“…Startups that are more ESG compliant also have greater ability to maximize RDE having better patent utilization (Jacob & Arcot, 2023) The investment in RDE and innovation does not necessarily generate positive effects on the environment in Asian countries: i.e. while on one side traditional innovation improves carbon emissions, on the other side only environmental innovation has a positive impact on environmental sustainability ( Khalil et al, 2022) ESG performance has a positive effect on RDE for companies listed in Indonesia Stock Exchange in the period 2016-2020 (Lutfiani & Hidayah, 2022) RDE is positively appreciated by stakeholders' investors in an ESG framework in the case of companies listed in the 100 Euronext index (Coluccia et al, 2020) R&D intensity is negatively associated to Return on Assets-ROA, and positively associated to Return on Equity-ROE and Tobin's Q in a set of 510 firms with ESG scores in 17 countries in the period 2010-2018 (Shaikh, 2022) RDE improve the probability to achieve the Sustainable Development Goals-SDG in EU 16 countries during the period 1997-2014 (Adedoyin et al, 2022). RDE has a positive effect in increasing the productivity of maize crop in Pakistan, India, and China (Ullah et al, 2022).…”

“…RDE andFinance Laureti et al, 2020;Anidebe et al, 2021. RDE andESG Teplov et al, 2022;Jacob & Arcot, 2023;Khalil et al, 2022;Lutfiani & Hidayah, 2022;Coluccia et al, 2020;Shaikh, 2022;Adedoyin et al, 2022, Ullah et al, 2022. To determine the value of RDE in the context of the ESG variables of the World Bank dataset, we used a set of econometric tools and techniques, namely: Pooled OLS, Panel Data with Random Effects, Panel Data with Fixed Effects, and WLS.…”

The Impact of Research and Development Expenditures on ESG Model in the Global Economy

“…while on one side traditional innovation improves carbon emissions, on the other side only environmental innovation has a positive impact on environmental sustainability [28]. ESG performance has a positive effect on RDE for companies listed in Indonesia Stock Exchange in the period 2016-2020 [29]. RDE is positively appreciated by stakeholders' investors in an ESG framework in the case of companies listed in the 100 Euronext index [30].…”

Voluntary disclosure with the International Integrated Reporting Council (IIRC) framework and value relevance

“…This can serve as a guide for companies and regulators to mandate IR reporting. Previous research conducted by related researchers on voluntary reporting centered on ESG performance regarding the cost of capital and investment in development and research (Lutfiani, 2022). However, that study only emphasized non-financial reports without considering financial reports.…”