The Impact of Implementing Green Accounting on Corporate Value (A Case Study on Manufacturing Companies Listed on the IDX)

Abstract

This study examines the impact of green accounting practices on the corporate value of manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2020 to 2023. Using a purposive sampling method, 50 companies were selected based on specific criteria, including the availability of audited financial reports and sustainability disclosures. Corporate value was measured using the Price to Book Value (PBV) ratio, while green accounting practices were assessed through environmental cost disclosures. Company size and profitability were included as control variables to account for their influence on corporate value.

The findings reveal a significant positive relationship between green accounting practices and corporate value, highlighting the financial benefits of adopting sustainability-focused accounting. These results support legitimacy and stakeholder theories, demonstrating that transparent environmental disclosures enhance societal legitimacy and strengthen stakeholder trust, which in turn boosts market valuations. Larger and more profitable firms were better positioned to implement green accounting, benefiting from increased market confidence and operational efficiency. This study extends prior research by focusing on an emerging market context, emphasizing the growing importance of green accounting in Indonesia’s manufacturing sector. The results suggest that market forces and stakeholder pressures drive the adoption of green accounting practices, even in environments with less stringent regulatory frameworks. The study provides practical implications for policymakers to promote stricter environmental reporting standards and for corporate managers to leverage green accounting as a strategic tool for enhancing corporate value and long-term sustainability. Despite its contributions, the study is limited by its reliance on secondary data and focus on a single industry. Future research could explore cross-industry comparisons and qualitative insights to deepen the understanding of green accounting’s broader impact. This research underscores the strategic importance of integrating environmental considerations into corporate reporting for achieving financial and sustainability objectives.