The Effect of Environmental Performance and Environmental Costs on Firm Value with Profitability as a Mediating Variable

Rinaldi Kartobi, Fajar Gustiawaty Dewi — Fri, 27 Mar 2026 00:00:00 +0000

Purpose: This study examines the effect of environmental performance and environmental costs on firm value, with profitability as a mediating variable, in energy sector companies listed on the Indonesia Stock Exchange between 2022 and 2024.

Research methodology: Using a quantitative approach, 75 firm-year observations were selected through purposive sampling from annual and sustainability reports. Firm value is proxied by Tobin’s Q, profitability by ROA, and environmental variables by disclosure indices. The data were analyzed using multiple regression, path analysis, and the Sobel test.

Results: Environmental performance negatively affects profitability, whereas environmental costs have no significant effect. Both variables do not directly influence firm value. Profitability positively affects firm value and mediates the effect of environmental performance but not that of environmental costs.

Conclusions: The capital market in the Indonesian energy sector is more financially oriented than environmentally oriented in determining firm value.

Limitations: This study focuses only on the energy sector and has a short observation period.

Contribution: This study enriches the empirical evidence on sustainability and firm value relationships in emerging markets

Studi Akuntansi dan Bisnis Indonesia

The Effect of Environmental Performance and Environmental Costs on Firm Value with Profitability as a Mediating Variable