SUSTAINABILITY AND EFFICIENCY: DO EFFECTS DIFFER BETWEEN SHARIA AND NON-SHARIA FIRMS?

Abstract

This study examines the impact of circular economy practices, environmental performance, and environmental investment on management efficiency, with financial risk as a moderating variable, while comparing sharia-compliant and non-sharia firms. This research employs a quantitative approach using panel data from energy sector companies listed on the Indonesia Stock Exchange during 2020–2024. Using purposive sampling, 185 observations were obtained, consisting of 160 sharia-compliant and 25 non-sharia firm observations. Data was analyzed using panel data regression and Moderated Regression Analysis (MRA) with E-Views 13. The results show that circular economy practices and environmental performance positively affect management efficiency, while environmental investment does not significantly influence efficiency outcomes. Financial risk moderates several sustainability and efficiency relationships, although the direction and significance of its effects vary across efficiency dimensions. The findings further indicate differences between sharia-compliant and non-sharia firms, suggesting that institutional characteristics influence how sustainability practices are translated into management efficiency. These findings support the Resource-Based View, legitimacy theory, and stakeholder theory by demonstrating that the effectiveness of sustainability practices depends on organizational capabilities, financial conditions, and firm characteristics. From a practical perspective, firms should integrate sustainability initiatives with financial risk management and resource allocation strategies to improve efficiency outcomes. The novelty of this study lies in integrating multiple sustainability dimensions and financial risk within a management efficiency framework while providing comparative evidence between sharia-compliant and non-sharia firms in the energy sector.