This study examines the influence of sustainability expenditures on firm value, with firm size as a mediating variable and ownership structure as a moderating factor, focusing on the Indonesian palm oil industry. Using a quantitative associative approach, the research investigates whether sustainability investments contribute positively to firm growth and valuation. The findings reveal that sustainability expenditures significantly enhance firm size, which in turn partially mediates their effect on firm value. Interestingly, as firm size increases, the direct impact of sustainability investments on firm value becomes less pronounced, indicating diminishing returns in larger firms. Furthermore, institutional ownership moderates this relationship by strengthening the influence of sustainability expenditures on firm size. Companies with concentrated ownership structures tend to experience a more pronounced effect, suggesting that governance dynamics play a critical role in shaping the benefits of sustainability practices. These results underscore the importance of integrating environmental and social investments into corporate strategies, particularly for firms operating in emerging markets. The study contributes to the literature by highlighting that firm-specific characteristics, namely size and ownership, can alter the effectiveness of sustainability initiatives. Overall, the research supports the strategic value of sustainability expenditures and calls for greater attention to governance and scale effects when assessing their financial implications. These insights are vital for managers, investors, and policymakers aiming to foster long-term value through sustainable practices.
Martinus Hutauruk (Sun,) studied this question.