Digital Transformation and Firm Value in Indonesia: Unpacking the Roles of Environmental, Social, and Governance Performance and Corporate Innovation

Digital transformation alone does not necessarily enhance firm value among Indonesian listed companies, as its impact depends on how effectively firms manage complementary capabilities. An analysis of 748 firm-year observations from 84 firms during 2014–2023 found no significant direct relationship between digital transformation and firm value. Instead, digital transformation reduced ESG performance, which subsequently lowered firm value, indicating that ESG fully mediates the relationship. Corporate innovation did not strengthen this effect. The findings suggest that firms should align digital initiatives with ESG objectives and strategic resource allocation to generate sustainable long-term value.

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