The Effect of Green Finance on Firm Value with Profitability as a Mediating Variable in Infrastructure Sector Companies

Volume 6, Number 1, 2025 https://ijble.com/index.php/journal/index The Effect of Green Finance on Firm Value with Profitability as a Mediating Variable in Infrastructure Sector Companies Adita Asma Ningsi1, Muhsin N Bailusy2, Rusandry3 Khairun University undergraduate student1, Khairun University lecturer2,3 Corresponding Author: , , ABSTRACT This study aims to determine and analyze the effect of green finance on firm value with profitability as a mediating variable. This study has a total sample of 16 companies with a purposive sampling technique as a sampling method. The type of data used is secondary data obtained from annual reports, sustainability reports, and company financial reports for four consecutive years. The data analysis method in this study uses Structural Equation Modeling Partial Least Squares (SEM-PLS), and data processing techniques using SmartPLS 4.0 software assistance. The results of this study indicate that green finance affects firm value, green finance affects profitability, profitability affects firm value, and profitability cannot mediate the effect of green finance on firm value. Keywords: Green Finance; Firm Value; Profitability INTRODUCTION Kiwoom Sekuritas Head of Equity Research stated that the infrastructure sector will always be good in the future as the government invests heavily in infrastructure development to boost the economy in the long run. Furthermore, judging from the recent performance, the majority of stocks show growth opportunities for price movements. Although the infrastructure sector is considered to have good prospects this year, there are still many stocks from large infrastructure issuers that fall into the category of undervalued stocks. Undervaluation is a term used to describe an asset that is undervalued or purchased at a price lower than its intrinsic value (Almira & Widhiyanto, 2024). According to Hidayat & Khotimah (2022), the main goal of the company is to maximize profits or wealth, especially for its shareholders, manifested in the form of efforts to increase or maximize the market value of the company's share price. But in an era that is increasingly concerned about environmental issues, investors are increasingly considering environmental factors in making investment decisions (Harliani, 2024). Green finance is one of the crucial tools in addressing the impacts of climate change to achieve the Sustainable Development Goals (SDGs) set by the United Nations. Green acts as a financial service that promotes ecological sustainability, climate resistance, and energy efficiency. Green finance is one way to support businesses that care about the surrounding environment through the provision of funds or loans (Rahmanisa, 2023). In addition, Green finance guides industrial businesses to use less energy with the ability to manage financial resources to obtain economic and environmental benefits (Ronaldo & Suryanto, 2022). Gap research, namely the results of research conducted by Yusnia et al. (2024), Yulianti et al. (2024), and Baharudin & Arifin (2023), shows that green finance has a positive effect on firm value. But in contrast to the results of research conducted by Harliani (2024), Ningsi et al. (2024); Alfikri & Susyani, (2024) shows 673 Volume 6, Number 1, 2025 https://ijble.com/index.php/journal/index that green finance has no effect on firm value. This study uses profitability variables as mediating variables. According to Trisnawaty et al. (2024) profitability is an important indicator that reflects the ability of a company to generate profits. In addition, the level of profitability is also used to assess the effectiveness of management in managing company resources. The company's profit generated is an assessment of the performance of a company in fulfilling the company's obligations to investors and also as a way of creating value for the company which can show the company's prospects in the future (Dewi & Ekadjaja, 2020). A business is said to be successful if it makes a profit, because profit is part of the main goal of a company (Nugraha & Alfarisi, 2020). Research conducted by Harliani, (2024) shows that profitability is unable to mediate the relationship between green finance and firm value. Likewise, research conducted by Alfikri & Susyani, (2024) shows that profitability cannot moderate the relationship between green finance and firm value. 1. Signal Theory Signaling Theory was first proposed by Spence, (1973) in his research entitled "Job Market Signaling" which states that the sender (owner of information) gives a signal or signal in the form of information that reflects the condition of a company that is beneficial to the recipient (investor). Signaling theory provides a useful framework to understand how companies communicate their commitment to sustainability. Authentic and transparent signaling is essential for building trust among stakeholders and promoting sustainable growth. 2. Company Value An increase in firm value also indicates better company performance, and this indirectly indicates the company's ability to increase shareholder prosperity, which is the main goal of the company. High company value indicates that the company has good performance and its future prospects can be trusted by investors (Pambudi et al., 2022). One of the ratios used in this study is Price to Book Value (PBV), If PBV is high, it means that market confidence in the company's prospects is also high (Sudjiman & Sudjiman, 2022). 3. Green Finance Green Finance is a form of finance that aims to support economic activities and projects that are environmentally sustainable. According to Afifah et al., (2023) green finance involves the financial services sector that provides comprehensive assistance to encourage sustainable economic development by harmonizing environmental, social and economic concerns. Green finance in this study is measured using the Green Coin Rating (GCR) with 6 assessment indicators. 4. profitability Profitability is the ability of a company to generate profits. According to Sihono, (2024) investors will be motivated to place their funds in profitable companies because by investing in companies that have good performance, investors expect to get a greater return on their investment. The measurement in this study is profitability proxied by Return On Asset. The greater the Return On Asset obtained, the greater the level of profit achieved by the company and the better the position of the company in terms of asset usage (Palayukan et al., 2024). Suwarno & Hwihanus, (2024) state that the role of Environmental, Social and 674 Volume 6, Number 1, 2025 https://ijble.com/index.php/journal/index Governance as a strong signal that can increase the perception and value of the company in the eyes of stakeholders and investors. According to Jayathilake, (2019) green finance can increase the maximization of stakeholder value and shareholder value. The results of research conducted by Yulianti et (...truncated)