The Effect of Carbon Emission Disclosure and Financial Performance on Firm Value

Abstract

Growing awareness of sustainability issues has encouraged companies to disclose carbon emission information as part of their environmental accountability and corporate transparency practices. However, previous empirical evidence regarding the effect of carbon emission disclosure on firm value remains inconclusive, particularly when compared with traditional financial determinants such as profitability and leverage. This study aims to examine the effects of carbon emission disclosure, profitability, and leverage on firm value among industrial sector companies listed on the Indonesia Stock Exchange during the 2022–2025 period. A quantitative research approach was employed using secondary data obtained from companies' annual reports and sustainability reports. The sample consisted of 86 firm-year observations selected through purposive sampling. Panel data regression analysis was conducted using EViews software. The findings reveal that profitability has a positive and statistically significant effect on firm value, whereas carbon emission disclosure and leverage do not significantly influence firm value. These results indicate that investors continue to place greater emphasis on firms' financial performance than on environmental disclosure when making investment decisions. This study contributes to the sustainability and corporate finance literature by providing empirical evidence that profitability remains the primary determinant of firm value, while the capital market has not yet fully incorporated the economic value of carbon emission disclosure into firm valuation.