Duffin
Accounting Study Program, Institute of Business Information Technology
and Business
daufquest@gmail.com
Abstract
This research aims to
determine the influence of environmental cost and environmental performance
towards company’s value. This study also examines the moderating effect of
managerial ownership and institutional ownership on environmental cost and
environmental performance towards company’s value. The object of this research
is the participants of PROPER assessment that participates three years
consecutively from year 2019-2021 that also listed in Indonesia Stock Exchange
(IDX). The data analysis technique used in this study are the multiple linear
regression and residual test. The results are: (1) environmental cost has
negative and no significant influence towards company’s value, (2) environmental
performance has positive and significant influence towards company’s value, (3)
managerial ownership has moderating effect only on environmental cost
relationship towards company’s value, and (4) institutional ownership has
moderating effect only on environmental cost relationship towards company’s
value. The theoretical implication is managerial and institutional ownership
can strengthen environmental cost disclosure towards company’s value. The
practical implications are the board of directors must consider optimum
ownership structure to monitor and ensure that environmental cost disclosure is
mandatory and make sure the operation of the companies is all according to the
PROPER assessment standards.
Keywords: Environmental
cost; environmental performance; company’s value; ownership structure; PROPER
assessment
Introduction
Public companies who actively traded
shares in the capital market, company’s value is one of the determinants of
stock prices. Current
and potential investors are most likely to assess the profitability of those
companies in determining their investment decisions. However, as environmental
activists and societies sound the emergence of the environmental issues loudly
in these past several years, not only investors, but also other stakeholders of
companies are concerned with the companies’ contributions to save the
environment where they operate and to minimize the effects of global warming
that pose a serious threat to the live being.
The led to accounting, as one the producer of
financial statements, must fulfill the needs of stakeholders of the information
related to the environment friendly actions taken by the companies, in which
this information is not provided by the usual financial accounting process.
Green accounting or called as environmental accounting, includes the cost and
benefits of the environmental-related activities of a company into the
financial report of a company. Its purpose is to communicate about a company’s
action regarding environmental safety to the community and stakeholder (Hendratno,
2016).
Therefore, this will fulfill the needs of the stakeholders regarding the
information needed about the environmental activities of the company. By
providing such information, this will establish the goodwill of a company that
is being seen as serious in maintaining the environment safety while operating
its business. This will signal investors that the company will be sustainable
in its operations. Thus, the company’s value will be increased as the investors
respond to the signal.
In response to the needs of the stakeholders
about environmental activities, the Financial Services Authority (Otoritas Jasa
Keuangan) issued the Financial Services Authority Policy POJK No.
51/POJK.03/2017 about Implementation of Sustainable Finance for Financial
Services Organization, Emiten and Publicly Traded Company that requires
publicly-traded companies in Indonesia to issue sustainability report to
complement the annual report as integral part of the reports needed to be
published.
The information of environmental
accounting can be found in the environmental cost disclosure of companiesin its
sustainability report. Recognizing such cost is a wise management decision, as
it will help a company to perform more accurate costing and other strategic
management decisions (Rounaghi, 2019). By being aware
of environmental cost, the companies may invest in more eco-friendly
technologies that will benefit the future of the company, thus becoming
sustainable for future global environment challenges. Besides protecting the
environment, the company’s value can increase with the good image built on
being concerned with environmental issues. The influence of environmental cost
towards company’s value is confirmed by (Agustia, Sawarjuwono, & Dianawati, 2019) research, where
environmental cost has significant influence towards company’s value. However, (Carandang
& Ferrer, 2020) found
that environmental cost has no significant influence towards company’s value.
Companies engaged in environmental
accounting will be measured with its environmental performance (Moesono,
Beoang, Prayogo, & Samosir, 2021). In
Indonesia, companies will get Company Performance Rating Program in
Environmental Management (PROPER) by the Ministry of Environment (KLH), which
is a rating based on an assessment of a company’s commitment on protecting the
environment. Based on the rating, the companies will be assessed and classified
to certain category which shows the performance of the companies in protecting
the environment of its business operations, ranging from the lowest (black) to
the highest (gold) category.
By reaching the highest category, it
shows how every operation of a company is integrated with environmental
concerns, therefore, shows how responsible the company is in sustainability of
the environment to the internal and external stakeholders. If environmental
performance is reported through environmental disclosure, the stakeholders will
support the environmental activities of the company, which will increase the
company’s value, reflected through the increasing share price (Rinsman
& Prasetyo, 2020).
According to (Yadav, Han, & Rho, 2016) research, they
found that environmental performance has significant influence towards
company’s value. Meanwhile, according to Calderon, (Pérez-Calderón,
Milanés-Montero, & Ortega-Rossell, 2012) research,
environmental performance has no significant influence towards company’s value.
As they are valuable information besides
the financial information, environmental cost and environmental performance
information are disclosed as part of sustainability report as mandated by the
Financial Services Authority every year. The urgency of this informationis
risingat the point of the creation of International Sustainability Standards
Board (ISSB) by IFRS Foundation at COP 26 held on 3 November 2021. The Board
will be responsible for creating standards that will create high quality,
transparent, reliable and comparable reporting by companies on climate and on
environmental, social and governance (ESG) matters. Therefore, companies
especially publicly traded ones must prepare to implement the sustainability
standards in preparing sustainability report that includes environmental cost
and environmental performance in order to show its responsiveness to climate
change and environmental activities. This will help the companies to increase
their value through non-monetary performance (Sa’diyah
& Hilabi, 2022).
Inconsistencies in research results lead
to other factors that may help environmental cost and environmental performance
to further influence the company’s value, which is ownership structure. It is
one of the good corporate governance proxies that can influence the company's
value (Adinegara
& Sukamulya, 2021).
Ownership structure comprises of managerial ownership and institutional
ownership. Jensen and Meckling in (Herawaty,
2008) stated
that managerial ownership successfully becomes a mechanism to reduce agency
problems by aligning managers’ interest with shareholders (Mowen,
Hansen, & Heitger, 2022). Their
research showed that if the managers own more shares of the company, they will
follow the interest of the shareholders as the shareholders action may affect
the stock prices that the managers own. It means that the managers will ensure
that the sustainability reporting of environmental cost and environmental
performance are reported well. This will increase the company’s value as
stakeholders will seek such information to measure the commitment of the
company regarding environmental activities. Meanwhile, institutional ownership
can increase the controlling towards a company to prevent opportunistic
behavior from the managers (laela Ermaya & Mashuri, 2018). The
institutional investor will monitor the company and it will reduce the agency
problem. The institutional investor will make sure that the company complies
with the Financial Services Authority Policy in reporting the sustainability
report every year. Thus, if the company always follows the wants of the
institutional investor in sustainability reporting that includes environmental
cost and environmental performance, they will always have the access for such
information in assessing the company’s commitment in environmental activities.
This will increase the company’s value in the long term. Therefore, both
ownership structure can influence the interest of the management investing in
eco-friendly technologies that can reduce the environmental cost in the future
and integrates its action with environmental concerns to increase its environmental
performance.
The research has the purpose in contributing the
findings of the influence of environmental cost and environmental performance
towards company’s value to solve the inconsistencies of research and to test
the potential of ownership structure to moderate the environmental cost and
environmental performance influence towards company’s value as ownership
structure can influence the disclosure of both information that are important
in sustainability reporting which has been an obligation for publicly traded
companies in Indonesia.
Research Methods
The research is conducted using quantitative methods. The
data used is secondary type data, in the form of annual report and
sustainability report of companies listed in PROPER assessment from year 2019-2021.
The data source is from www.idx.co.id and from the respective companies’
website. The sampling technique used in this research is non-probability
sampling method, specifically purposive sampling technique. The sample in this
research is chosen by using these criteria:
1. The company is listed in IDX for three years
consecutively from 2019 – 2021.
2. The company is listed in PROPER assessment for
three years consecutively from 2019 – 2021.
3. The company submits annual report and
sustainability report for three years consecutively from 2019 – 2021.
Table 1. Sample Determination according to Criteria
|
No |
Criteria |
Total |
|
1 |
Companies
of listed in IDX for three years consecutively from 2019 – 2021 |
79 |
|
2 |
Companies
which do not listed in PROPER assessment for three years consecutively from 2019
– 2021 |
(12) |
|
3 |
Companies
which do not submit annual report and sustainability report for three years
consecutively from 2019 – 2021 |
(43) |
|
Total of Sample |
24 |
|
|
Total of Data Observation (3 years) |
72 |
|
|
Data of Companies with Negative Net Income for the Year |
(8) |
|
|
Sample Used in the Data Processing |
64 |
|
Source: Processed Data by
the Writer (2022)
This
research will use multiple linear regression, specifically using the ordinary
least square (OLS) regression. To ensure that the regression model is free from
classical assumption problems, some of the classical assumption tests will be
conducted:
a. Normality test,
conducted using Kolmogorov-Smirnov test.
b. Heteroscedasticity
test, conducted using scatterplot.
c. Multicollinearity
test, conducted using tolerance and variation inflation factor (VIF) test.
d. Autocorrelation test,
conducted using Durbin-Watson test.
This
research will use 5% significance value and the coefficient of determination
will be determined with Adjusted R Square percentage. For hypothesis test, the
test that will be conducted is t-test which is to show the significance of an
independent variable towards dependent variable. Besides that, there will be
t-test conducted to test the moderating effect of the moderating variables on
independent variables towards the dependent variables. The regression models
are shown below:
Q = α + β1EC
+ β2EP + e
Information:
Q = company’s value
α = constant
β1 –
β2 = multiple regression
coefficient
EC = environmental cost
EP = environmental performance
To measure
the moderating effect of managerial ownership and institutional ownership, it
will be tested by using the residual method. The residual analysis will test
the deviation influence of a model with lack of fit focus among independent
variables (Kurniasari
& Ghozali, 2013). If the significance and the
coefficient of regression is negative when the regression of dependent variable
is tested towards the absolute residuals of the regression between independent
variables towards moderating variables, then it can be concluded that the
moderating variables has influence in moderating the independent variables
towards dependent variable. The Moderated Regression Analysis (MRA) is not used
for this research as it will cause multicollinearity issues in the regression
model (Fassott,
Henseler, & Coelho, 2016). The models to test the moderating
effect of managerial ownership and institutional ownership towards the
influence of environmental cost and environmental performance towards company’s
value are as follows:
Model 2:
MO = α + β3EC
+ e
| e | = α + β3Q
Model 3:
MO = α + β4PROPER
+ e
| e | = α + β4Q
Model 4:
IO = α + β5EC
+ e
| e | = α + β5Q
Model 5:
IO = α + β6PROPER
+ e
| e | = α + β6Q
Information:
Q = company’s value
α = constant
β3 –
β6 = multiple regression
coefficient
EC = environmental cost
EP = environmental performance
MO = managerial ownership
IO = institutional ownership
e = residual
Hasil dan Pembahasan
Descriptive Statistics
The descriptive analysis
for this research showed the analysis of each variable’s mean, standard
deviation, minimum value, and maximum value. The table below showed each
variable’s descriptive statistics analysis:
Table 2. Descriptive Statistics
|
Variables |
N |
Min |
Max |
Mean |
Std. Dev. |
|
EC |
64 |
0.00 |
73.74 |
1.47 |
9.29 |
|
PROPER |
64 |
3 |
5 |
3.59 |
0.75 |
|
MO |
64 |
0.00 |
0.32 |
0.03 |
0.07 |
|
IO |
64 |
0.44 |
1.00 |
0.71 |
0.17 |
|
Q |
64 |
0.57 |
664.42 |
28.14 |
119.35 |
Source: Processed Data from SPSS
(2022)
Table 3 showed that:
1. For environmental cost (EC) variable, the
average is 1.4711. It means that on average, the companies’ CSR cost is 1.4711
times from their net income after tax. The standard deviation of the variable
is 9.28972. The minimum value is 0.00. The maximum value 73.74. The data for
environmental cost is heterogenous as the standard deviation is more than the
average.
2. For environmental performance (PROPER)
variable, the average is 3.59. It means that on average, the PROPER rank
achieved by the companies is Blue rank. The standard deviation of the variable
is 0.750. The minimum value is 3. The maximum value 5. The data for
environmental performance is homogenous as the standard deviation is less than
the average.
3. For managerial ownership (MO) variable, the
average is 0.0269. It means on average, the companies’ managerial ownership
percentage is 2.69%. The standard deviation of the variable is 0.07284. The
minimum value is 0.00. The maximum value is 0.32.The data for managerial
ownership is heterogenous as the standard deviation is more than the average.
4. For institutional ownership (IO) variable, the
average is 0.7106. It means on average, the companies’ institutional ownership
percentage is 71.06%. The standard deviation of the variable is 0.17264. The
minimum value is 0.44. The maximum value is 1.00.The data for institutional
ownership is homogenous as the standard deviation is less than the average.
5. For company’s value (Q) variable, the average
is 28.1377. It means that on average, the companies’ value is 28.1377 times of
its assets’ book value. The standard deviation of the variable is 119.34646.
The minimum value is 0.57. The maximum value is 664.42. The data for company’s
value is heterogenous as the standard deviation is more than the average.
Classical Assumption Tests
Classical assumption
tests are used to determine whether in an ordinary least square (OLS)
regression has classical assumption problems or not. Below are some of the
classical assumption tests results on model 1 before testing the hypothesis:
Normality Test
Normality test is a test
conducted with the purpose to measure the data distribution of a set of data,
whether the data is normally distributed or not. Normality test can be
conducted by using Kolmogorov-Smirnov test, where the data is normally
distributed if the residual of the regression has significance value more than
0.05. The result of the Kolmogorov-Smirnov test is shown at table below:
Table 3. Normality Test using Kolmogorov-Smirnov Test
|
|
Unstandardized Residual |
|
N |
63 |
|
Test Statistic |
0.107 |
|
Asymp. Sig. (2-tailed) |
0.072 |
Source: Processed Data from SPSS
(2022)
As shown by table 4
above, the significance value of the residual is 0.072, which is more than
0.05. This means that the data is normally distributed. The number of data
tested is 63, this is because the data are going through lag transformation to
produce more stable data to be used in the multiple regression analysis.
Heteroscedasticity Test
Heteroscedasticity test
is a test to determine whether the regression model has difference in the
variance of the residuals from one data to another. If the residuals are
homogenous, then there is no heteroscedasticity problem in the regression
model. This research use scatterplot to show whether the residuals are
homogenous or not. The figure below shows the scatterplot of the regression
model:
Figure 1. Heteroscedasticity Test using Scatterplot
Source: Processed Data from SPSS
(2022)
As shown by the figure
above, the points are scattered randomly and they are not showing regular
patterns, therefore there is no heteroscedasticity for the residuals.
Multicollinearity Test
Multicollinearity test is
conducted to test whether there is correlation among independent variables in
the regression model. To test whether there is multicollinearity problem in a
regression model, the tolerance value and variance inflation factor (VIF) test
are used. If the tolerance value of each independent variable is more than 0.10
and the VIF value is less than 10, then there is no multicollinearity problem
on the independent variables. The result of tolerance value and VIF value are shown
below:
Table 4. Multicollinearity Test using Tolerance Value and VIF Value
|
Variables |
Collinearity Statistics |
|
|
Tolerance |
VIF |
|
|
EC |
0.961 |
1.040 |
|
PROPER |
0.961 |
1.040 |
Source: Processed Data from SPSS
(2022)
As shown by the table
above, each independent variable has tolerance value of more than 0.10 and VIF
value of less than 10. It means that there is no multicollinearity problem on
the independent variables.
Autocorrelation Test
Autocorrelation test is a
test to detect whether the residual is independent from one observation to
another. A good regression model must be free from autocorrelation. One way to
test the whether the autocorrelation exist or not is by using Durbin-Watson
test. If the Durbin-Watson (DW) value is between dU
and 4 – dU, then the regression model is free from
autocorrelation. The table below shows the DW value of the regression model:
Table 5. Autocorrelation Test using Durbin-Watson Test
|
Model |
Durbin-Watson |
|
1 |
1.806 |
Source: Processed Data from SPSS
(2022)
As shown by table 6 above,
the Durbin-Watson value is 1.806. The total independent variables of model 1 is
two variables, so k = 2. Then, the number of data (n) is 63. Therefore, based
on the DW 5% table, the dU value is 1.6581 and 4 – dU value is 2.3419. Thus, it can be concluded that the DW
value is between dU and 4 – dU,
means that the model is free from autocorrelation.
Hypothesis Test
In multiple linear
regression analysis, t-test is used to show the partial impact of each
independent variable towards the dependent variable. The t-test is used to test
H1and H2 of this research. Meanwhile for H3a,
H3b, H4a, and H4b will be tested by using
residual test, which is to test the moderating capability of the moderating
variables on independent variables towards the dependent variable. With 95%
degree of confidence, the hypothesis will be rejected if tcount
is less than ttable and accepted if tcount is more than the ttable.
Below is the result of t-test for model 1:
Table 6. t-Test Result on Model 1
|
Variables |
tcount |
Sig. |
|
EC |
-0.354 |
0.724 |
|
PROPER |
2.415 |
0.019 |
Source: Processed Data from SPSS
(2022)
As shown by table 7
above, the environmental cost (EC) variable has tcount
of -0.354, which is more than ttable of
-1.99897, and the significance value is 0.724, which is more than 0.05. The coefficient
of regression is negative. It means that environmental cost has negative and no
significant influence towards company’s value. Thus, H1 is rejected.
Meanwhile for environmental performance (PROPER) variable, has tcount of 2.415, which is more than ttable of 1.99897, and the significance value is
0.019, which is less than 0.05. The coefficient of regression is positive. It
means that environmental performance has positive and significant influence
towards company’s value. Thus, H2 is accepted.
To test the moderating
effect of managerial ownership and institutional ownership on each of
independent variables (environmental cost and environmental performance)
towards dependent variable (company’s value), residual test is used. This test
will be free from multicollinearity problem as it often happens on the
moderated regression analysis (MRA) model. This test will test the H3a,
H3b, H4a, and H4b hypothesis. A moderating
variable is said to have a moderating effect when the coefficient of regression
is negative, and the significance value is less than 0.05. Below are the tables
showing the residual test of managerial ownership as moderating variables on
environmental cost and environmental performance towards company’s value:
Table 7. Residual Test on Managerial Ownership as Moderating Variable on
Environmental Cost towards Company’s Value
|
Variable |
B |
Sig. |
|
Q |
-0.71 |
0.001 |
Dependent Variable: Abs_Res_EC_MO
Source: Processed Data from SPSS
(2022)
Table 8. Residual Test on Managerial Ownership as Moderating Variable on
Environmental Performance towards Company’s Value
|
Variable |
B |
Sig. |
|
Q |
-0.016 |
0.429 |
Dependent Variable: Abs_Res_PROPER_MO
Source: Processed Data from SPSS
(2022)
As shown by table 8
above, the coefficient of regression is negative and the significance value is
0.001, which is less than 0.05. It means that managerial ownership has
moderating effect on environmental cost towards company’s value. Thus, H3a
is accepted. Meanwhile, as shown by the table 9 above, the coefficient of
regression is negative. However, the significance value is 0.429, which is more
than 0.05. It means that managerial ownership has no moderating effect on
environmental performance towards company’s value. Thus, H3b is
rejected.
Below are the tables
showing the residual test of institutional ownership as moderating variables on
environmental cost and environmental performance towards company’s value:
Table 9. Residual Test on Institutional Ownership as Moderating Variable
on Environmental Cost towards Company’s Value
|
Variable |
B |
Sig. |
|
Q |
-0.002 |
0.044 |
Dependent Variable: Abs_Res_EC_IO
Source: Processed Data from SPSS
(2022)
Table 10. Residual Test on Institutional Ownership as Moderating Variable
on Environmental Performance towards Company’s Value
|
Variable |
B |
Sig. |
|
Q |
-0.000053 |
0.947 |
Dependent Variable: Abs_Res_PROPER_IO
Source: Processed Data from SPSS
(2022)
As shown by table 10
above, the coefficient of regression is negative and the significance value is
0.044, which is less than 0.05. It means that institutional ownership has
moderating effect on environmental cost towards company’s value. Thus, H4a
is accepted. Meanwhile, as shown by the table 11 above, the coefficient of
regression is negative. However, the significance value is 0.947, which is more
than 0.05. It means that institutional ownership has no moderating effect on
environmental performance towards company’s value. Thus, H4b is
rejected.
Discussion
Environmental cost has significant influence on company’s value
The result of t-test of
environmental cost towards company’s value is in accordance with (Carandang
& Ferrer, 2020), in which the environmental cost has
negative and no significant influence towards company's value. The CSR cost in
the environmental cost calculation is reported in the sustainability report of
each company listed in IDX. However, most companies did not disclose the amount
of CSR cost related to the environment protection, as it is still a voluntary
disclosure. Thus, the stakeholders will not find and notice on the
environmental cost although there is sustainability report published each year.
This results in no positive signal sent to the stakeholders, especially
shareholders, which will increase the stock price if information about
environmental cost is disclosed. In effect, the company's value is not
increased.
Environmental performance has significant influence on company’s value
The
result of t-test of environmental performance towards company’s value is
consistent with the research findings by (Yadav
et al., 2016), in which environmental performance
has positive and significant influence towards company's value. The PROPER
ranking earned by a company shows how well the company in conducting business
operations with the concern of environmental protection practices. A high rank
on PROPER assessment (which is gold color) earned by a company, will be a good
way to show that the company is very concern on integrating the environmental
concern on its business operation. This will give positive signal to the
stakeholders, especially shareholders that the company can be sustain in its
operation for a long time. This will increase the stock price of the company,
thus will increase the company's value.
Managerial ownership has moderating effect on environmental cost towards
company’s value.
Managerial ownership is
the ownership of shares by the directors, commissioners, and managers of a
company. If the management has the ownership of shares of the company, - which
will lower the agency cost - then they will always make decisions that will
increase the company's value, including decisions about the environmental cost.
The management will develop strategies that will always integrate the
environmental practices in the operational of the company. Some strategies are
using eco-friendly technologies and office supplies, environmental-concern
waste management, and development of green society in the operation area of the
company, in which the external and internal stakeholders may take part as well.
When the strategies are implemented, the company may earn legitimacy from the
society around the company operates. The management’s decision on environmental
concerns can be seen through the environmental cost incurred in the company (Abdullah
& Yuliana, 2018). Thus, stakeholders will notice what
has been done by the management in protecting the environment, in which it will
send positive signal to the shareholders. In the end, the company’s value will
be increased. Therefore, managerial ownership can strengthen the influence of
environmental cost disclosure towards the company’s value.
Managerial ownership has moderating effect on environmental performance
towards company’s value.
Environmental performance
as measured by PROPER rank showed what the company has achieved on the
standards required by the Ministry of Environmentas
the only stakeholders that can influence the standards. Thus, the management
whether they have shares or not in the company, cannot influence on what the standards
set by the ministry. The company only just can perform based on the standards,
then will be assessed by the ministry to be given certain rank based on the
assessment. The legitimacy of the company will be earned and lost from society
once the rank that has been announced. Thismeans thatthe positive signal will not be sentuntil
the rank is released by the Ministry of Environment.Thus,
managerial ownership cannot strengthen the influence of environmental performance
disclosure towards the company’s value.
Institutional ownership has moderating effect on environmental cost
towards company’s value.
Institutional ownership
is the ownership of shares by certain institutions that will monitor the
company’s performance and operations. In order to increase their wealth, the
institutional investors will monitor the management to perform the operations
that will integrate the environmental concerns in the business operations, in
which it is one of the ways to reduce agency problem. They will require regular
update on how the management commitment in performing the strategies related to
environmental protection. One of the indicators to show the management’s
commitment is through the environmental cost incurred and it will be reported
in the financial statements that will be read by the institutional investors.
This will give positive signal to not only the institutional investors, but
also other stakeholders as well. As addition, the company can earn legitimacy
from the society as it will help to protect the environment where the company
operates. The company’s value will be increased as the reputation of the
company is increased. Therefore, institutional ownership can strengthen the
influence of environmental cost disclosure towards the company’s value.
Institutional ownership has moderating effect on environmental
performance towards company’s value.
Similar
to managerial ownership, institutional ownership has no moderating effect on
environmental performance towards company’s value. This is because the institutional
investors do not have the influence on the PROPER rank given by the Ministry of
Environment, as the only external stakeholders that has influence on the
ranking decision. What the institutional investors can do is only to monitor
that the management will perform based on the standards set by the ministry in
the PROPER assessment. Other than that, what rank that will be given by the
ministry, the institutional investors have no influence on it. They cannot help
the company to maintain its legitimacy on society as the legitimacy will be
based on the ranking announced by the ministry. By having institutional
ownership will not have effect on environmental performance towards company’s
value. Therefore, institutional ownership cannot strengthen the influence of
environmental performance disclosure towards the company’s value.
Conclusion
The environmental cost has negative and
no significant influence towards company’s value. This is due to few companies
which disclose the environmental cost as one of the CSR cost components in the
sustainability report, which in turn will no transmit positive signal to the
stakeholders, especially shareholders. Thus, the stock price will not be
affected, and it will not increase the company’s value.
The environmental performance has
positive and significant influence towards company’s value. With high rank of
PROPER assessment, it will transmit positive signal to the stakeholders,
especially shareholders, which will increase the stock price, which in turn,
will increase company’s value.
The managerial ownership has moderating
effect on environmental cost towards company’s value. The management who owns
shares of a company will develop strategiesto integrate the environmental
practices in the operational of the company which can be seen through the
environmental cost occurred in the company. Thus, stakeholders will notice what
has been done by the management in protecting environment, in which it will
send positive signal to the shareholders. In the end, the company’s value will
be increased.
The managerial ownership has no
moderating effect on environmental performance towards company’s value. The
management who has shares of the company cannot influence on the PROPER rank
earned by the company, thus, the company’s value will not be increased until
the rank is released by the Ministry of Environment.
The institutional ownership has
moderating effect on environmental cost towards company’s value. The
institutional investors will always monitor the environmental concerns integrated
into the business operation of a company. The results will be seen in the
environmental cost reported by the management. Thus, the institutional
ownership can moderate the environmental cost towards company’s value, as the
reputation of the company is increased.
The institutional ownership has no
moderating effect on environmental performance towards company’s value. Similar
to managerial ownership, the institutional investors cannot influence the
result of PROPER assessment. What the institutional investors do is just to
monitor the management to perform the standards set by the Ministry of
Environment. Thus, institutional ownership cannot moderate the environmental
performance towards company’s value.
The main theoretical implication of this
research is that managerial ownership and institutional ownership can
strengthen the influence environmental cost disclosure in sustainability report
towards company’s value. This means that both ownerships have the effect of monitoring
the management to stay on the commitment of protecting the environment where
the company operates.
The practical implication of the
research is board of directors must consider optimum ownership structure to
monitor and ensure that environmental cost disclosure inside sustainability report
is mandatory in the future. The environmental cost disclosed must be according
to the sustainability standards that will soon be developed. Not only that, the
board of directors must also make sure the operation of the companies isall
according to the PROPER assessment standards, so that the company may earn the
highest rank and maintain it in the long term.As the external stakeholders, the
governmentmust establisha policy that oblige the publicly traded companies to
disclose the environmental cost completely.
The researcher suggests for the next
researcher who will do similar research to use other proxy for environmental
cost, rather than just using the total CSR cost. Not only that, the
environmental performance also needs another proxy that can complement the
PROPER assessment rank to measure the influence more accurately.
The researcher also suggests for
companies to start on disclosing environmental cost in the sustainability
report to show their responsibility on environment quantitatively, as this is
also one of the concerns of the stakeholders about the sustainability of the
company. This, in turn, will increase the company’s value in the future. The
managerial ownership and institutional ownership must be considered as both
ownership structure can moderate the environmental cost towards company’s
value, although environmental performance cannot be moderated. It means that
both institutional investors and management must be focused on the commitment
to always take care of the environment where the company operates. It is not
only for the sustainability of the environment, but also for the company
itself.
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