Environmental Disclosure on Cost of Capital: Environmental Risk as a Moderator Variable

Abstract

The goal of this research is to test the effect of environmental disclosure on cost of capital. Also, to examines the environmental risk on its relationship on cost of capital. This study is derived on the stakeholder theory, legitimacy theory, and signaling theory. To implement the stakeholder theory, the companies can inform their environmental issues by disclosing their environmental management (Meng et al. 2014). They also disclose their environmental issue to fulfill both national and international regulation on environment to implement the legitimacy theory. Disclosure of environmental issue also indicates investor reliance. The larger disclosure will increase the more investor reliance (El Ghoul et al. 2011). Disclosure also indicate the signal of management to the investor. The design of this study is an explanatory research with quantitative approach. The populations in this study are the companies that listed on Indonesia Stock Exchange. The sampling technique based on purposive sampling. The data used is secondary data; consist of annual report of the company and financial report. The authenticity of this research is the first accounting study in Indonesia that examines environmental risks. The result shows that environmental risk can moderate the relationship between environmental disclosure and cost of capital.

Corporate Social Responsibility Disclosure, Intellectual Capital Disclosure, Risk Disclosure, Cost of Capital: Moderating Role of Earnings Management

“…Many previous studies related to the cost of capital have been carried out include governance (AlHares, 2020; Arslan, 2019;Khan et al, 2020;Pham et al, 2012), litigation risk (Qin et al, 2020), corporate social responsibility disclosure (Atan et al, 2018;Ellili, 2020;Gjergji et al, 2021;Johnson, 2020;Rahmasari, 2013), economic policy uncertainty (Xu, 2020), risk disclosure (Almania, 2019;Liu, 2020), leverage (Battisti et al, 2020;Rajverma et al, 2019), environmental disclosure (Anh, 2020;Haninun et al, 2019), integrated reporting (Vena et al, 2019), ownership structure (Rajverma et al, 2019), dividend policy (Rajverma et al, 2019), disclosure quality (Ezat, 2019), intellectual capital disclosure (Gomes et al, 2019), employee shareholding (Aubert et al, 2017), information risk (Safdar & Yan, 2016), earnings management (Patro & Kanagaraj, 2016), board of directors concentration (Upadhyay, 2014), excess control (Bozec et al, 2014), and earnings quality (Apergis et al, 2012).…”

Do Environmental Compliances Reduce Agricultural Profitability? An Inference from Indonesia

“…On behalf of financial benefits, companies may be encountered by a paradigm that cost and incentive to consider the environment activities both internal and external sides are not a key to affect the profitability. Even more there are no empirical consensuses that environmental compliances don't take great spaces to lead into the increase of company profitability and prior studies still provides unclear findings to withdraw inferences in terms of the profitability and environment performance [7][8][9][10][11][12]. That's why, this research comes up to fill the gap in the literature by documenting valuable insight into the nexus between environmental compliances and profitability and to respond the assumption that companies benefit under environmental compliances empirically affecting the profitability.…”