The effect of company growth on sustainable performance: A moderating perspective of stock mispricing in Indonesia and Japan

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The adoption of environmental, social, and governance (ESG) measures to realize socially responsible companies continues to accelerate, becoming a trend amid global uncertainty due to climate change and the COVID-19 pandemic. This study aims to examine the effect of company growth on sustainable performance, moderated by company stock mispricing in Indonesia and Japan, representing a developing and a developed country, respectively. This study uses panel data regression, namely the Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM), to test hypotheses. With a total of 42 observations from companies listed on the Indonesia Stock Exchange (IDX) and 112 observations from companies listed on the Japan Stock Exchange (JPX) during 2019–2020, the results show that a company’s growth has a negative effect on sustainable performance in Indonesia, while in Japan it has no effect. Stock mispricing strengthens the negative effect of company growth on sustainable performance in Indonesia but has no effect in Japan. This study found that companies in Indonesia place more emphasis on internal growth than on ESG implementation compared to companies in Japan. The implication of this study is that the implementation of ESG shows different dynamics when comparing two countries. Indonesia needs to evaluate the regulations governing socially responsible businesses in order to encourage further improvement of ESG performance. Meanwhile, in Japan, ESG practices have been running voluntarily, so enforcement from regulators is relatively less necessary.

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    • Table 1. Sample of Indonesian and Japanese companies
    • Table 2. Variable measurements
    • Table 3. Descriptive statistics
    • Table 4. Market-to-book prediction to estimate stock mispricing
    • Table 5. Descriptive statistics of Indonesia and Japan
    • Table 6. Regression test results – Statistical model 1 in Indonesia
    • Table 7. Regression test results – Statistical model 1 in Japan
    • Table 8. Regression results – Statistical model 2 in Indonesia
    • Table 9. Regression statistical model 2 results in Japan
    • Conceptualization
      Leddy Teresa Kristianthy, Erni Ekawati
    • Data curation
      Leddy Teresa Kristianthy
    • Formal Analysis
      Leddy Teresa Kristianthy, Erni Ekawati
    • Funding acquisition
      Leddy Teresa Kristianthy, Erni Ekawati
    • Investigation
      Leddy Teresa Kristianthy, Erni Ekawati
    • Methodology
      Leddy Teresa Kristianthy, Erni Ekawati
    • Project administration
      Leddy Teresa Kristianthy, Erni Ekawati
    • Resources
      Leddy Teresa Kristianthy, Erni Ekawati
    • Software
      Leddy Teresa Kristianthy
    • Supervision
      Leddy Teresa Kristianthy, Erni Ekawati
    • Validation
      Leddy Teresa Kristianthy, Erni Ekawati
    • Visualization
      Leddy Teresa Kristianthy, Erni Ekawati
    • Writing – original draft
      Leddy Teresa Kristianthy
    • Writing – review & editing
      Leddy Teresa Kristianthy, Erni Ekawati