Carbon Emission Disclosure and Profitability on Firm Value

Research Aims: This study aims to examine the effect of Carbon Emission Disclosure (CED) and profitability on firm value in the energy sector listed on the Indonesia Stock Exchange during the 2021–2023 period. Design/methodology/approach: A quantitative approach was employed using panel data regression. The Random Effect Model was selected based on the results of the Chow test, Hausman test, and Lagrange Multiplier test. The sample consisted of 40 companies meeting the criteria for sustainability reporting and complete financial data, resulting in 120 firm-year observations. Research Findings: The results indicate that CED has a significant but negative effect on firm value (p = 0.046), suggesting that carbon disclosure may increase operational costs without providing direct financial returns. Conversely, profitability, measured by Return on Assets (ROA), shows a positive but statistically insignificant relationship with firm value. Theoretical Contribution/Originality: This study contributes to signaling and legitimacy theory by showing that in emerging markets, carbon disclosure is not always perceived positively by investors. The findings challenge the assumption that environmental transparency inherently enhances firm value and highlight the nuanced investor response to sustainability efforts. It also reflects that profitability alone is insufficient to significantly influence firm value in the energy sector. Research limitation and implication: The study is limited to the energy sector and a three-year observation period. Future research should consider broader sectors and longer timeframes to gain deeper insights into the relationship between carbon disclosure, profitability, and firm value. This study offers important implications for sustainability discourse, especially regarding the financial impact of environmental disclosure in developing markets.