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The value relevance of environmental performance: evidence from Indonesia

Author

Listed:
  • Susi Sarumpaet
  • Melinda Lydia Nelwan
  • Dian Nirmala Dewi

Abstract

Purpose - This paper aims to extend previous developed market-based research on the value relevance of environmental performance by testing the relationship between share prices of Indonesian-listed corporations and their environmental performance ratings. Design/methodology/approach - The sample consists of 60 listed firms which are rated by the Indonesia Ministry of Environment between 2002 and 2012, resulting in a sample of 246 observations. The Ohlson (1995) model was utilized and modified by including environmental ratings. Findings - The research finds that superior environmental performance is associated with higher share price, whereas inferior environmental performance is value irrelevant to the market. Research limitations/implications - Considering the significance of PROPER, this research did not observe other types of corporate environmental performance, such as those released by the press and reported in the company annual reports and websites. These limitations are not controlled for in the tests, and this might confound inferences. Originality/value - The paper addresses a gap in the literature by providing insight on how a developing capital market values both superior and inferior environmental performance. It also provides implication on the effectiveness of environmental monitoring policy in providing incentives for firms to improve their environmental performance

Suggested Citation

  • Susi Sarumpaet & Melinda Lydia Nelwan & Dian Nirmala Dewi, 2017. "The value relevance of environmental performance: evidence from Indonesia," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 13(4), pages 817-827, October.
    • Handle: RePEc:eme:srjpps:srj-01-2017-0003
    DOI: 10.1108/SRJ-01-2017-0003
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    Citations

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    Cited by:

    1. Siti Amalia & Dadang Lesmana & Yanzil Azizil Yudaruddin & Rizky Yudaruddin, 2022. "The Impact of Board Structure on Voluntary Environmental and Energy Disclosure in an Emerging Market," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 430-438, July.
    2. Fitra Dharma & Maran Marimutu & Liza Alvia, 2024. "Profitability and Market Value Effect on Carbon Emission Disclosures: The Moderating Role of Environmental Performance," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 463-472, May.
    3. Shreekant Gupta & Bishwanath Goldar & Shubham Dang, 2019. "Environmental Performance And Capital Markets--Evidence From India," Working papers 303, Centre for Development Economics, Delhi School of Economics.
    4. Ali Meftah Gerged, 2021. "Factors affecting corporate environmental disclosure in emerging markets: The role of corporate governance structures," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 609-629, January.
    5. Ali Meftah Gerged & Khaldoon Albitar & Lara Al‐Haddad, 2023. "Corporate environmental disclosure and earnings management—The moderating role of corporate governance structures," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2789-2810, July.
    6. Renato Camodeca & Alex Almici & Umberto Sagliaschi, 2018. "Sustainability Disclosure in Integrated Reporting: Does It Matter to Investors? A Cheap Talk Approach," Sustainability, MDPI, vol. 10(12), pages 1-34, November.
    7. Marius Sorin Dinca & Mara Madaleno & Mirela Camelia Baba & Gheorghita Dinca, 2019. "Environmental Information Transparency—Evidence from Romanian Companies," Sustainability, MDPI, vol. 11(18), pages 1-22, September.
    8. Mohamad Nur Utomo & Sugeng Wahyudi & Harjum Muharam & Maximus Leonardo Taolin, 2018. "Strategy To Improve Firm Performance Through Operational Efficiency Commitment To Environmental Friendliness: Evidence From Indonesia," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 9(1).

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