Sarumpaet, Susi and Nelwan, Melinda Lydia and Dewi, Dian Nirwana (2017) The value relevance of environmental performance: evidence from Indonesia. Social Responsibility Journal, 13 (4). pp. 817-827. ISSN 1747-1117

SRJ-01-2017-0003 Sarumpaet et al.pdf

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Purpose This paper aims to extend previous developed market-based research on the value relevance of environmental performance by testing the relationship between share prices of Indonesian-listed corporations and their environmental performance ratings. Design/methodology/approach The sample consists of 60 listed firms which are rated by the Indonesia Ministry of Environment between 2002 and 2012, resulting in a sample of 246 observations. The Ohlson (1995) model was utilized and modified by including environmental ratings. Findings The research finds that superior environmental performance is associated with higher share price, whereas inferior environmental performance is value irrelevant to the market. Research limitations/implications Considering the significance of PROPER, this research did not observe other types of corporate environmental performance, such as those released by the press and reported in the company annual reports and websites. These limitations are not controlled for in the tests, and this might confound inferences. Originality/value The paper addresses a gap in the literature by providing insight on how a developing capital market values both superior and inferior environmental performance. It also provides implication on the effectiveness of environmental monitoring policy in providing incentives for firms to improve their environmental performance

Item Type: Article
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Depositing User: Susi Sarumpaet
Date Deposited: 24 Oct 2017 07:55
Last Modified: 24 Oct 2017 07:55

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