Page 212 - SUSTAINABILITY ISSUES & COVID-19

33 Association among Financial
Performance, Environmental Cost, and

Environmental Disclosure of Mining and

Energy Companies in Indonesia

Rima Kusuma Rini, Desi Adhariani

ABSTRACT

PURPOSE

This study aims to examine the impact of financial performance to environmental cost and environmental disclosure
of mining and energy companies in Indonesia. According to prior study, environmental disclosure has positive impact
to financial performance that indicates corporate reporting regarding environmental issues resulted in heightened
financial performance (Al-Tuwaijri, Christensen, & Hughes Ii, 2004; Lu & Taylor, 2018), on the contrary this study
examines whether financial performance impacted the environmental cost and voluntary environmental disclosure
since the reason of firm with high profit are able to allocate their spending to many aspects and more information to
disclose (Qiu, Shaukat, & Tharyan, 2016).

DESIGN/METHODOLOGY/APPROACH

To estimate the association among financial performance, environmental cost and environmental disclosure, this study
employs simultaneous equations to test the hypothesis. The samples are mining and energy companies that listed on
the Indonesia Stock Exchange. Content analysis approach is adopted to collect data from sustainability reports and
annual reports for period of three years from 2017-2019.

FINDINGS

This study expected to explain how financial performance impact to allocation of environmental cost and environmental
disclosure. Financial performance indicates the profitability that used as a basis to engage in environmental activities.

PRACTICAL IMPLICATION

This study has significant implication for wider stakeholder that include investors, managers and policy makers.
Stakeholder will understand how financial performance affected allocation of environmental cost and environmental
disclosure.

ORIGINALITY/VALUE

Few studies explore and identification environmental cost in the relationship between financial performance and
environmental disclosure. Unlike previous literature that analyse the impact of environmental disclosure to financial
performance, this study contributes to literature that addressed how financial performance impacted environmental
cost and environmental disclosure.

Keywords
financial performance, environmental performance, environmental disclosure.

JEL Classification
F65, M14, Q56

International Conference on Sustainability 211
(5 Sustainability Practitioner Conference)
Th