THE EFFECT OF ENVIRONMENTAL INVESTMENT AND FIRM ENVIRONMENTAL PERFORMANCE ON FIRM VALUE: AN EMPIRICAL STUDY IN INDONESIA
DOI:
https://doi.org/10.21512/jafa.v9i1.8306Keywords:
Environemental Investment, Environmental Performance, PROPER, Firm ValueAbstract
This study examines the effect of environmental investment and firm environmental performance on firm value. The method used is a quantitative method with secondary data. This study used panel data from firms' financial statements sensitive to environmental issues. The sample was companies sensitive to environmental issues, such as mining, plantation, and manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2014-2017. The results of this study indicate that investment in the environmental sector and firm environmental performance have a positive but not significant effect on firm value. This result shows that the investment in environmental conservation conducted by companies was effective for improving the firm value but not significant; this is because the investment in the environmental sector companies spend in Indonesia is still minimal. The results of this study also show that environmental performance has a positive but insignificant effect; this is because, based on existing data, not many companies in Indonesia have received gold and green ratings. The implications of this study are (a) the company's efforts in preserving the environment because their business activities are not only beneficial for the surrounding society, but this will improve the firm's environmental performance and sustainability, and (b) investment in the environmental sector is essential for companies to achieve good environmental performance, and (c) for accounting standard setters (IAI) and the Government, more binding rules are needed for companies to disclose the costs of environmental conservation.
Plum Analytics
References
Ainy, R., N., & Barokah, Z. (2019). Corporate Governance, Environmental Responsibility and Firm Value: An Empirical Study in Indonesia and Malaysia. Journal of Accounting and Investment, 20(2), 59-75.
Anggraeni, Yuni Dian. (2015). Greenhouse Gas Emission Disclosure, Environmental Performance, and Firm Value Disclosure. Indonesian Journal of Accounting and Finance. 12(2):188-209.
Central Bureau of Statistics. 2015. Indonesia's Energy Balance 2010-2014. Jakarta
Central Bureau of Statistics. 2016. Indonesian Environmental Statistics 2016. Jakarta
Haninun. Lindrianasari. Denziana, Angrita. (2018). The Effect of Environmental Performance and Disclosure on Financial Performance. International Journal Trade and Global Markets. 11:138-148
PCC, 2014: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
Ministry of Environment of the Republic of Indonesia. 2012. How the Gold PROPER Award Drives Five Companies to Achieve Innovation, Value Creation and Environmental Excellence. Jakarta.
Kuo, Lopin. Shihping, Kevin Huang.Yen-Chun Jim Wu. (2010). Operational efficiency integrating the evaluation of environmental investment: the case of Japan. Management Decision. 48(10):1596–1616.
Nakamura, Eri. (2011). Does Environmental Investment Really Contribute to Firm Performance? An Empirical Analysis Using Japanese Firms. Eurasian Bussiness Review. 1(2): 91-111.
Sarumpaet, Susi. Nelwan, Lydia. Melinda. Dewi, Nirmala. Dian. (2017). The value relevance of environmental performance: evidence from Indonesia. Social Responsibility Journal. DOI.10.1108/SRJ-01-2017-0003
Tambunan, Sihar Tigor Benjamin. (2007). Kerangka Kerja Penilaian Investasi Lingkungan (Environmental Performance Appraisal). Jurnal Teknik Industri. 9(2):152-160.
The Ministry of Environment and Forestry of the Republic of Indonesia. Available at: http//www.menlhk.go.id
Yadav, Lal. Prayag. Han, Hun. Seung and Rho, Jeung. Jae. (2015). Impact of Environmental Performance on Firm Value for Sustainable Investment: Evidence from Large US Firms. Business Strategy and the Environment. DOI: 10.1002/bse.1883
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
