The impact of corporate governance on environmental reporting: Evidence from the Indonesian manufacturing industry

Abstract

Environmental reporting is the preparation, presentation, and dissemination of information on how the company interacts with the natural environment. The report is commonly presented to its stakeholders in the company’s annual report. The purpose of this study is that empirically examine the impact of corporate governance practices on environmental reporting. The corporate governance characteristics utilized in the study are audit committee effectiveness, board size, and ownership concentration. While size and profitability is the control variable of the study. One hundred and two manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2015 to 2017 were used as a sample, resulting in 306 company observations. Employing data panel regression analysis, the results indicate that audit committee effectiveness and board size positively influence environmental reporting. These results suggest that the more effective the audit committee is, and the higher the number of commissioners in the company, the higher the company’s encouragement to provide environmental information in the company’s annual report. The study also found that size positively associate with environmental disclosure. The study offers additional perspectives on factors that can affect the listed companies to report environmental reporting within the G4 environmental framework of the Global Reporting Initiative (GRI). Hence, the capital market authority agency may strengthen the regulation related audit committee to improve environmental awareness in IDX.