The Effect of Operating Efficiency, Leverage, and ESG on Stock Prices with Profitability as an Intervening Variable
Keywords:
Total Asset Turnover; Debt to Equity Ratio; ESG Score; Return on Assets; Stock PricesAbstract
This study aims to examine the effect of operational efficiency, leverage, and sustainability performance on stock prices with profitability as an intervening variable. Operational efficiency is proxied by Total Asset Turnover (TATO), leverage by Debt to Equity Ratio (DER), sustainability performance by ESG Score, profitability by Return on Assets (ROA), and stock price as the dependent variable. The research object consists of companies listed in the IDX ESG Leaders index during the 2021–2024 period. This study employs a quantitative approach using Structural Equation Modeling–Partial Least Squares (SEM-PLS). The results indicate that TATO and ESG Score have a positive and significant effect on stock prices, while DER has a negative and significant effect on stock prices. Furthermore, TATO has a positive and significant effect on ROA, whereas DER has a negative and significant effect on ROA. However, ESG Score does not have a significant effect on ROA. Profitability, as measured by ROA, is proven to have a positive and significant effect on stock prices. The indirect effect analysis shows that ROA mediates the relationship between TATO and stock prices as well as between DER and stock prices, indicating a partial mediation effect, as both TATO and DER retain significant direct effects on stock prices alongside their indirect effects through ROA, but does not mediate the effect of ESG Score on stock prices. These findings suggest that the capital market responds to operational efficiency and capital structure through improved profitability, consistent with signaling theory and agency theory. Meanwhile, corporate sustainability performance is perceived as a non financial signal that directly affects stock prices but has not yet contributed to short-term financial performance.
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