The Effect of Environmental Disclosure in Sustainability Reports on Firm Performance and Firm Value, With Firm Age as a Moderating Factor

Abstract

The performance of the IDX80 portfolio declined significantly from 2022 to 2024, particularly in the finance, basic materials, and infrastructure sectors, accompanied by a decrease in price-to-book value. This condition raised questions regarding whether environmental transparency through sustainability reports could enhance corporate performance and firm value. This study aimed to analyze the effect of environmental aspect disclosure in sustainability reports on firm performance and firm value, with firm age as a moderating variable. A quantitative causal approach was employed using secondary data obtained from annual reports, sustainability reports, and stock market data of companies in the finance, basic materials, and infrastructure sectors listed in the IDX80 index during the 2022–2024 period. Purposive sampling resulted in 25 companies and 75 observations. Environmental disclosure was measured using an Environmental Disclosure Index based on 34 indicators from the Global Reporting Initiative (GRI) Standards; firm performance was proxied by Return on Equity (ROE), while firm value was measured using Price-to-Book Value (PBV). Data were analyzed using Moderated Regression Analysis (MRA). The results indicated that environmental aspect disclosure had a positive and significant effect on both firm performance and firm value. Firm age did not moderate the effect of environmental disclosure on firm performance but strengthened the effect of environmental disclosure on firm value. These findings suggested that environmental transparency enhanced corporate performance, reputation, and investor confidence, particularly among companies with longer operational histories. Therefore, regulators and corporate management should encourage more comprehensive and credible environmental disclosures as strategic instruments for improving firm performance and value.