The Effect of Corporate Governance on Corporate Performance Mediated by Environmental, Social, and Governance (ESG) Factors

Abstract

This study aims to analyze the impact of corporate governance on the performance of mining companies in Indonesia and to examine the role of Environmental, Social, and Governance (ESG) as a mediating variable. The study population includes all mining sector companies listed on the Indonesia Stock Exchange during the 2020–2024 period. Using purposive sampling, a sample of 20 companies with a total of 100 observations was obtained. The data analysis techniques used were path analysis and the Sobel test to examine the mediating effect. The results indicate that, simultaneously, corporate governance (GCG), ESG, and the control variables capital structure and asset management have a significant impact on firm performance, as proxied by Return on Assets (ROA) and Return on Equity (ROE). However, GCG does not have a significant effect on either ROA or ROE. The results of the Sobel test confirm that ESG does not act as a mediating variable in the relationship between corporate governance and firm performance. This indicates that in the mining sector in Indonesia, the implementation of ESG has not yet been able to bridge the influence of corporate governance on firms’ short-term profitability.