Abstract
This research attempts to investigate the predictive effect of carbon emissions disclosure on firm value both directly and through environmental performance and idiosyncratic risk. With data collected from all non-financial high-profile companies listed on the Indonesia Stock Exchange and testing through path analysis, findings reveal that carbon emissions disclosure has a positive significant effect on environmental performance, but not on idiosyncratic risk and firm value. Further statistics testing showed that both idiosyncratic risk and environmental performance have a positive and significant effect on firm value. We also used Sobel testing to test mediation role of environmental performance and idiosyncratic risk on the effect of carbon emissions disclosure on firm value. The results show that environmental performance plays a mediating role whereas idiosyncratic risk does not. The implications of this research study are discussed from both theoretical and managerial perspectives.
Highlights
In today’s competitive business environment, corporate sustainability and firm value have become more strategically significant
High company value is an achievement for company owners, because with high company value will be followed by high shareholder prosperity
On the basis of the results of the path analysis in Table 7, hypothesis 1 is rejected. This shows that the disclosure of carbon emissions has a positive and not significant effect on idiosyncratic risk
Summary
In today’s competitive business environment, corporate sustainability and firm value have become more strategically significant. Maximizing firm value is extremely important for the company, because by maximizing firm value means maximizing the prosperity of shareholders who are important things to be achieved by the management of the company. Maximizing the prosperity of shareholders, a company does focus on maximizing profitability at the expense of the environment or society (Lazonick & O’sullivan, 2000). Kuo et al (2012) stated that efforts to reduce carbon emissions made by the company as a form of corporate social responsibility in the environmental sphere can be known from the carbon emission disclosure Regulations issued by the Indonesian government such as article 4 Presidential decree No 61 year 2011, mention that the business actors participate in the efforts to reduce greenhouse gas emissions. Kuo et al (2012) stated that efforts to reduce carbon emissions made by the company as a form of corporate social responsibility in the environmental sphere can be known from the carbon emission disclosure
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