The Role of Profitability in Mediating the Effect of ESG Disclosure on Post-Pandemic Stock Returns (2021-2023)

Abstract

This research is motivated by increasing investor attention to corporate sustainability practices reflected through Environmental, Social, and Governance (ESG) disclosures. The study aims to analyze the effect of ESG Disclosure on stock returns and examine the role of profitability as a mediating variable. The research uses a quantitative approach with secondary data obtained from annual reports and sustainability reports of sample companies. Analytical methods include linear regression and path analysis, as well as the Sobel test to test the significance of mediation. The results show that ESG Disclosure affects profitability, profitability affects stock returns, but ESG Disclosure has no direct effect on stock returns. The Sobel test proves that profitability significantly mediates the effect of ESG Disclosure on stock returns. This research is expected to contribute to the development of literature on ESG and finance, as well as provide consideration for companies and investors in making sustainable investment decisions.