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Do Environmental Disclosure and Financial Distress Affect Firm Value? The Moderating Role of Market Capitalization
Maria Jacinta Vanessa Joga, Nabila Tri Hermawan, Risda Apriana Pratiwi, Linda Kusumaning Wedari

Last modified: 2022-06-06


This study examines environmental disclosure and financial distress among Indonesian Environmentally Sensitive Industries (ESI) firms and their impacts on firm value. To do so, we investigate the potential moderating variable of market capitalization in strengthening the relationship between environmental disclosure, financial distress, and firm value. We measure the environmental disclosure using content analysis with GRI 300 sustainability reporting standards, the environmental dimension, as the benchmark. To measure the financial distress prediction, we utilize the Taffler z-score model and Price to Book Value (PBV) as the proxy of firm value. Using a sample of 59 companies on Indonesian ESI’s firm data for the years 2018 – 2020, a period of issuance regarding sustainability reports in Indonesia, our regression results show that most companies have a low level of environmental disclosure. We also find a negative relationship between environmental disclosure and firm value. Moreover, we find that market capitalization can strengthen the relationship between financial distress and firm value. In contrast, we find no association between financial distress and firm value as well as the interaction of market capitalization between environmental disclosure and firm value link.


Environmental Disclosure; Financial Distress; Firm Value; Market Capitalization; Sustainability

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