Prior empirical studies revealed that firms with high environmental performance tend to be\r\nprofitable, but questions persist about the nature to the relationship. Those questions are referred\r\nto: ââ?¬Å?Does stronger environmental performance really lead to better financial performance?ââ?¬Â\r\nAlternatively, ââ?¬Å?Is the observed relationship the outcome of some other underlying firm attributes?ââ?¬Â\r\nThe long debate about the relationship between environmental performance and firm performance\r\nin emerging economies still remain inconclusive and offer further explorations, especially in the\r\ncontext of emerging countries, which its rapid growth does not only carry social progress but also\r\nenvironmental challenges. Recent heuristic findings reveal that on average, while 42% of emergingmarket\r\ncompanies support environmental commitments in the form of policies or statements, they\r\nremain weaker on implementation and progress tracking. Little empirical research into the effect of\r\nenvironmental disclosure together with environmental performance on firm performance is done\r\nin Southeast Asian countries. This study extends the literature that has been done mostly in\r\nwestern societies by proposing a further linkage between environmental disclosure, environmental\r\nperformance, and financial performance, which is rarely investigated in developing societies. The\r\nstudy analyzed 33 Indonesian manufacturing firms that were listed in Indonesian Stock Exchange\r\n(IDX) and reported their environmental performance assessment to the Ministry of Environment\r\nIndonesia. Statistic methods used for testing the hypothesis were T-test and multivariate\r\nregression model. The empirical results reveal that environmental performance has significantly\r\ninfluenced financial performance of the Indonesian manufacturing firm. However, one striking\r\nfinding in this study is the insignificant influence of environmental disclosure on firm''s financial\r\nperformance. Meanwhile, environmental performance and disclosure simultaneously have\r\nsignificant effect on firm''s financial performance. These results explicitly show how firms in\r\nemerging countries are going to be more concerned with environmental sustainability and long-run\r\nprofitability.
Loading....