The Linking of the Fama French Five Factor and Environmental Performance on Market Value

Abstract The pharmaceutical industries are crucial for the nation’s health and economy; therefore, their performance must be maintained. When they obtain the more successful performance indicators that can sway investors to raise their confidence as well as market value. This study aims to examine the effect of the Fama-French five factors and environmental performance on share returns. This was conducted on pharmaceutical industries listed on the Indonesia Stock Exchange, and all data was obtained from annual-quarterly reports in the period 2017–2023. A total of 196 panel data observations have been conducted, and the analysis technique has employed quantitative approaches, notably autoregressive distributed lag analysis, of time series data. The results showed that market risk premium (MRP), firm size (SMB), profitability (RMW), and environment performance (EP) have a significant impact on share returns (SR), while firm size (SMB) and book value to equity (CMA) have not been significant statistically. The study is important for a variety of stakeholders, including managers, investors, and policymakers, who are interested in resolving the financial and environmental performance of pharmaceutical companies and preserving market prices by establishing mitigation strategies related to the specific factors. However, this study has limited relevance to the presence of F-F five factors and environmental performance that cannot maximally encourage the disclosure of market value.