Determinants and consequences of environmental investment: an empirical study of Indonesian firms

Anis Chariri · Mohammad Nasir · Indira Januarti · Daljono Daljono

34 citations0/0 files storedJournal of Asia Business Studies

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Corporate Social Responsibility Reporting Corporate Finance and Governance Environmental Sustainability in Business

Abstract

Purpose This study aims to examine the effect of institutional ownership, audit committee and types of industry on environmental investment. Furthermore, this research investigates the consequences of environmental investments on firm financial performance. Design/methodology/approach The sample consisted of 145 companies listed on the Indonesia Stock Exchanges and receiving PROPER awards issued by the Ministry of Environment, Republic of Indonesia in the year 2009-2015. The data were then analyzed using ordinal logistic regression and multiple regression. Findings The findings showed that environmental investment was significantly affected by types of industry. However, institutional ownership and audit committee did not influence environmental investment. Finally, the finding indicated that environmental investments positively affected firm financial performance. Research limitations/implications This research only covered companies listed on the Indonesia Stock Exchanges and receiving PROPER awards. Thus, the findings cannot be generalized for all companies in Indonesia and other markets. Originality/value This study is the first effort intended to investigate the determinants and consequences of environmental investment which have been ignored by previous studies, especially in the Asian emerging markets. This study at least provides us with two main contributions. First, the findings on determinants of environmental investment can be used by governments in Asian countries, especially Indonesia as a reference in making policies concerning the obligations of companies to the environmental problems. Second, the finding on the relationship of environmental investment and financial performance can be used by companies as strategies to generate profits without destroying the environment.

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References

1975Organizational Legitimacy: Social Values and Organizational Behavior 1995Corporate social and environmental reporting 1985Data in Search of a Theory: A Critical Examination of the Relationships Among Social Performance, Social Disclosure, and Economic Performance of U.S. Firms 1990The Double-Edge of Organizational Legitimation 1996Some determinants of social and environmental disclosures in New Zealand companies 1996DOES IT PAY TO BE GREEN? AN EMPIRICAL EXAMINATION OF THE RELATIONSHIP BETWEEN EMISSION REDUCTION AND FIRM PERFORMANCE 1998Managing Public Impressions: Environmental Disclosures in Annual Reports 2002Environmental disclosures in the annual report

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