The Effect of Carbon Emission Disclosure and Green Innovation on Financial Performance and Its Impact on Firm Value

Abstract

Global climate change has prompted companies to intensify strengthen the adoption of sustainability practices. Despite this, financial performance which the energy sector remains volatile, and prior studies have reported produced mixed results. From a theoretical perspective, carbon emission disclosure and green innovation are expected to facilitate the achievement of strong financial performance and sustainable business growth. However, empirical findings indicate that their effects are not consistently significant. Based on this issue, the current study seeks to identify the effect of carbon emission disclosure ang green innovation on financial performance, as well as to examine how financial performance affects firm value. This study is about the energy sector firms registered on the Indonesia Stock Exchange (IDX) in the 2020-2024 era. The methodology applied in this research is quantitative in nature, utilizing secondary data sourced from annual reports as well as sustainability reports. Purposive sampling method was utilized, which led to the selection of 14 firms having 70 observations in total. The data were analyzed using regression techniques supported by IBM SPSS software. The findings reveal that carbon emission disclosure and green innovation do not substantial affect financial performance. Meanwhile, financial performance contributes significantly to firm value. These outcomes imply that the quality of carbon emission disclosure and the effectiveness of green innovation practices still require improvement in order to generate measurable economic outcomes. Furthermore, the outcomes of this study contribute valuable insights for businesses in terms of improving transparency of carbon emission reporting, maximizing green innovation processes, and enhancing financial performance as a means of increasing company value.