Does carbon emission disclosure and environmental performance increase firm value? Evidence from highly emitted industry in Indonesia

Abstract

Whether investors take into account the company's information related to carbon emission mitigation and the company's environmental ranking in their investment decisions is an interesting research avenue. The objective of this study is twofold. First, it tests whether the level of carbon emissions disclosure differs by industry sector. Second, it examines whether carbon emission disclosures as reported by companies and their environmental performance affect the value of the firm. This study utilizes 102 companies in 2022 that are included in highly polluting industries as a sample, which is divided into 4 different sectors: consumer goods, energy, basic industry, and miscellaneous industry. The results of the analysis of variance (ANOVA) test reveal that the extent of carbon emissions reporting is different across industry sectors. Meanwhile, the multivariate regression results reveal that carbon emission disclosures positively influence the value of the firm. Environmental performance, however, does not impact firm value. This study informs the company's management that promoting higher levels of carbon emission mitigation and reporting would boost the company's reputation, which would in turn increase its value.