The large number of companies listed on the Indonesia Stock Exchange makes it challenging for firm managers to determine effective strategies for enhancing company value. Firm value reflects investors' assessment of a firm's success and typically correlates strongly with its stock price (Deswarti et al., 2023). These notions are crucial for investors as they act as standards for the entire evaluation of the firm by the market (Sa’diah et al., 2023). Book value per share can be used to measure the changes in profit that the firm aims to attain in the future, and Price Book Value (PBV) also compares the stock market (Indriastuti & Kartika, 2021). A PBV ratio exceeding one or increasing is interpreted by investors as a sign of growing firm value, indicating that the stock price exceeds the book value per share (Jihadi et al., 2021). A high Price to Book Value ratio suggests the company has effectively created fundamental and operational value, benefiting its shareholders. Conversely, a low PBV means the value per share is lower than the book value per share.

Providing fundamental materials is a nation's economy's essential and strategic sector. Almost all downstream industries require essential basic materials, including metals, minerals, and chemicals, supplied by tis sector (Savitri et al., 2020). An ample provision from the fundamental materials sector would significantly enhance economic expansion. Hence, the viability and efficacy of enterprises in this industry are of utmost importance (AL-Janabi et al., 2024). Firm value is a critical performance indicator for a company. A high firm value indicates positive business prospects, investor confidence, and effective resource allocation by management.

Figure 1. illustrates that the majority of the primary materials sector's companies have relatively unstable PBV values, and some of them also experienced substantial declines from 2019 to 2022. More specifically, during this period, companies like INTP, SMGR, and BRPT experienced consecutive substantial declines. INCO, TINS, SMCB, ANTM, and INRU demonstrated fluctuations from year to year. Conversely, the PBV values of only BRMS and GGRP underwent an increase. This implies that the firm's securities are relatively undervalued, which results in low selling prices. Even in 2022, PT Aneka Tambang Tbk encountered a 19.92% decline. Due to a 0.265 percent decrease in stock price from 2,250 in 2021 to 1,985 in 2022, this is the case. A PBV ratio below one suggests the stock trades below book value, indicating investors perceive limited growth potential relative to the company's net assets (Rustiarini & Suryandari, 2021).

Investors' interest in the building materials sector will be adversely affected by the ongoing declines in PBV, as highlighted in the table. This is because a low PBV implies that the market is valuing the company's net assets at a lower rate than their book value, which suggests potential undervaluation (Rachmadianti & Iswajuni, 2020). The firm's value and future growth prospects are adversely affected by this, as external signals are inherently detrimental. Consequently, this will result in capital constraints that will reduce the potential for innovation and expansion. A firm's value can be affected by a wide range of internal and external factors (Handayani et al., 2020). Governance, Risk management, Compliance (GRC), and profitability are internal factors that may contribute to the decline in firm value.

Governance, Risk Management, and Compliance (GRC) is a comprehensive and integrated strategy that guarantees that the organization operates ethically and according to the relevant internal policies, external regulations, and risk levels (Andini et al., 2023). This method entails the integration of human resources, technology, processes, and strategies to enhance efficiency and effectiveness. GRC encompasses three interconnected components: Governance, which pertains to the framework of regulations, procedures, and methods that guide and oversee a company; Risk Management, which entails the identification, evaluation, and ranking of potential risks; and Compliance, which relates to a company's adherence to legal requirements, regulations, and ethical principles (Pertiwi & Muslih, 2023).

In contrast to previous research, this research specifically examines the impact of each variable within the context of the basic materials industry, which possesses unique characteristics pertaining to environmental and social risks. The utilization of more comprehensive governance proxies, encompassing the audit committee, managerial ownership, institutional ownership, and independence of the board of commissioners, provides a more profound understanding of governance practices within this sector.

Furthermore, this research develops an ERM disclosure index tailored to the specific risks inherent in the basic materials sector, while also evaluating the implementation of GRI standards within the context of this industry—aspects that have been insufficiently explored in extant literature. The 2019-2022 timeframe enables an analysis of the COVID-19 pandemic's impact on the connection between these variables and firm value, thereby offering novel insights into corporate resilience in the face of a global crisis.

This research's results enhance academic knowledge and offer practical implications. The policy recommendations derived from this research are expected to assist companies in the basic materials sector in optimizing their value through improvements in governance practices, risk management, sustainability reporting, and profitability. Consequently, this research offers a novel perspective on understanding and enhancing corporate value in a sector that is critical to both the economy and the environment.

This research adopts agency theory and signaling theory as its theoretical foundations to investigate the relationships among governance, ERM disclosure, GRI standard implementation, profitability, and firm value in the basic materials sector. This research employs a quantitative methodology, analyzing secondary data from financial reports and corporate disclosures of selected basic materials companies over the specified period. The study's objective is to elucidate the impact of these factors on firm value.

This research focuses on empirical evidence from Indonesia's basic materials industry spanning the years 2019 through 2022. The framework this research is structured as follows:

This quantitative study uses secondary data from annual reports of IDX-listed companies (2019-2022), sourced from the IDX and official company websites. The research population comprises IDX-listed companies in the basic materials sector. This sector was chosen because it is a crucial pillar of the Indonesian economy and plays a significant role, particularly in driving economic development and generating national revenue. Purposive sampling yielded 15 companies meeting the criteria. This research employs descriptive statistics and panel data regression for analysis. The hypotheses in this research were tested using the T-test, F-test, and coefficient of determination test, which were performed using the Eviews 12.0 software.

This research initially obtained 60 data samples that met the criteria. However, outliers were found in PT Merdeka Copper Gold Tbk, PT Lautan Luas Tbk, and PT Chandra Asri Pacific Tbk, which were excluded. As a result, the number of observation data was reduced to 35 samples.

Based on Table 2, the results of descriptive statistical analysis and classic assumption tests. The normality test, conducted using the Jarque-Bera method as part of the classical assumption tests, yielded a probability of 0.260 > 0.05, indicating that the data was normally distributed. The autocorrelation test, performed using the Durbin-Watson method, resulted in a value of 0.6514 > 0.05, suggesting no autocorrelation is present. The multicollinearity test results, based on the centered VIF (Variance Inflation Factor) values, reveal that VIF values all variables are <10, indicating no multicollinearity occurring. The heteroskedasticity test using the Glejser test shows a test result of 0.9235>0.05, indicating no heteroskedasticity occurring.

Table 3. presents the results of the panel data regression using the random effect model (REM) estimation:

PBV = -4,26389 + 0,43851 X1 – 0,93548 X2 – 0,67800 X3 + 1,65210 X4 + 3,78618 X5 + 1,54418 X6 + 0,77247 X7 + e

The equation above has a constant value of -4.26389, indicating that when the independent variables are valued at one unit, the dependent variable, firm value, is -426389. The audit committee variable has a coefficient of 0.43851, indicating that a one-unit increase in the audit committee size will lead to a 0.43851 increase in firm value. The managerial ownership variable has a coefficient of -0.93548, indicating that a one-unit rise in managerial ownership will result in a 0.93548 decrease in firm value. The institutional ownership variable has a coefficient of -0.67800, indicating that a one-unit increase in institutional ownership will lead to a 0.67800 decrease in firm value. The independent board of commissioners’ variable has a coefficient of 1.65210, indicating that a one-unit rise in the independent board size will result in a 1.65210 increase in firm value. The risk management variable has a coefficient of 3.78618, indicating that a one-unit increase in risk management will lead to a 3.78618 increase in firm value. The compliance variable has a coefficient of 1.54418, indicating that a one-unit rise in compliance will result in a 1.54418 increase in firm value. The profitability variable has a coefficient of 0.77247, indicating that a one-unit increase in profitability will lead to a 0.77247 increase in firm value.

Table 3 indicates that the coefficient of determination (R-squared) is 0.356083, or 35.60%. This suggests that the independent variables, comprising governance factors (audit committee, managerial ownership, institutional ownership, independent board of commissioners), risk management, compliance, and profitability, can explain 35.60% of the variation in the dependent variable, firm value. The remaining 64.40% is attributed to other variables not included in the study.

The F-test results show a prob value of 0.006377<0.05. This indicates that governance, risk management, compliance, and profitability variables have a significant effect on the firm value of basic materials sector companies listed on the IDX from 2019 to 2022.

According to the statistical analysis, the hypothesis testing yielded the following results:

This research investigates how governance, enterprise risk management, compliance (GRC), and profitability affect firm value in basic materials companies listed on the Indonesia Stock Exchange from 2019 to 2022. These findings suggest that companies can use these variables collectively as references for internal considerations to enhance their firm value.

This research's findings provide multiple implications regarding firm value from different viewpoints. Firstly, a higher number of audit committee members in companies will provide tighter oversight in financial reporting. Secondly, managers with significant ownership tend to act in their own interests, such as obtaining higher compensation. Thirdly, the increasing presence of institutional investors with majority ownership tends to align with management to prioritize personal interests over minority shareholder interests. Fourthly, Enhanced supervision from the board of commissioners will foster more cautious and thorough corporate management. This approach ensures adherence to regulations and good corporate governance principles, thereby minimizing the likelihood of misconduct. Fifthly, the high level of information disclosure regarding enterprise risk management in firm financial reports sends a positive signal, as comprehensive exposure of risk management elements will enhance the firm's value. Sixthly, disclosing sustainability reports with GRI standards signals that the firm has been managed with attention to non-financial aspects, which is a preference for many investors. Seventhly, higher profitability results in lower dividends distributed to shareholders, thus leading to a less favorable investor perception of the firm.

This research has several limitations. Firstly, future research should expand the research scope beyond the basic materials sector and extend the observation period beyond four years. This expansion would yield more statistically robust results and overcome the limitations of restricted sample size. Secondly, the dependent variable in this study only accounts for 35.61% of the firm value, the other 64.39% of firm value variability is influenced by factors not considered within the parameters of this research. Future researchers are encouraged to use independent variables other than those examined in this study, such as leverage, firm size, liquidity, intellectual capital, etc. Thirdly, future researchers are advised to re-examine profitability using other measures such as net profit margin, or earnings per share, return on equity.