Firm Value of Indonesia Banking Subsectors: The Effect of Intellectual Capital and ESG

Abstract

Firm value represents investors’ assessment of a company’s performance and long-term prospects. In the banking industry, the effective management of intellectual capital and the implementation of Environmental, Social, and Governance (ESG) practices are considered important in creating competitive advantages and improving firm value. Nevertheless, empirical evidence regarding the influence of these factors remains inconclusive. This study investigates the effect of intellectual capital and ESG scores on the firm value of banking companies listed on the Indonesia Stock Exchange during the 2021–2024 period. A quantitative approach with an associative research design was employed using secondary data collected from annual reports and Refinitiv ESG Score data. The sample consisted of 12 banking companies selected through purposive sampling, generating 48 panel data observations. Panel data regression analysis was performed using the Random Effects Model (REM) in EViews 12. The results demonstrate that intellectual capital has a positive and statistically significant effect on firm value, whereas ESG score does not significantly influence firm value. However, intellectual capital and ESG score jointly have a significant effect on firm value. These findings highlight the importance of intellectual capital as a strategic resource for enhancing firm value and provide empirical evidence that may support investors, corporate managers, and future researchers in understanding the determinants of firm value within Indonesia’s banking industry.