Financial Reporting Quality, Green Accounting, and Firm Value in Emerging Markets: Evidence from Indonesia

This study investigates the impact of environmental management systems (ISO 14001) and greenhouse gas emission disclosures (ISO 14064) on firm value, with financial reporting quality (FRQ) as a mediating factor, using a sample of 143 non-financial companies listed on the Indonesia Stock Exchange between 2020 and 2022. Employing path analysis, the findings reveal that ISO 14001 positively affects both FRQ and firm value, suggesting that environmental management certification enhances market trust. ISO 14064, while improving FRQ, exerts a negative influence on firm value, indicating that investors may interpret carbon disclosures as cost burdens or risk exposures. FRQ itself does not significantly influence firm value and does not mediate the relationship between environmental practices and firm valuation. These results highlight a paradox in emerging markets: sustainability practices are recognized, yet their valuation depends on how disclosures are communicated and interpreted. The study contributes to stakeholder and signaling theory by providing evidence from an emerging economy and offers practical insights for companies, investors, and regulators to strengthen the integration of green accounting into financial reporting frameworks.