The Effect of Environmental Performance on Firm Value with Mediating Role of Financial Performance in Manufacturing Companies in Indonesia

Abstract

The purpose of this study is to investigate the determinants of firm value by formulating the relationship between environmental performance and the intervening variable of financial performance. This study analyzes how public companies in Indonesia comply with environmental responsibility and use it as a basis for increasing corporate value. Using the sampling of purposive sampling method, the research was conducted by examining 64 basic industries and mining companies listed on the Indonesia Stock Exchange during 2016-2018. Empirical testing is done by path analysis. The results of the study suggest that firms are more likely to be able to increase the utility of environmental performance by mediating effects of financial performance. This means that the environmental performance effect is more likely in firms that have superior financial performance. Practically speaking, the results have implications that the implementation of environmental responsibility supported by adequate financial resources can significantly affect the perception of sustainability by company stakeholders and ultimately increase firm value.

Received: 20 September 2021 / Accepted: 8 April 2022 / Published: 5 May 2022