Why Innovation Matters More Than Disclosure for Firm Value in Indonesian ESG Leaders?

Abstract

Purpose: The study examines whether carbon emission disclosure, green innovation, and eco-efficiency affect firm value differently, and whether environmental performance mediates these relationships, among Indonesian ESG-listed firms.

Methods/Study design/Approach: The quantitative study analyzes a balanced panel of 32 firms listed on the ESG Sector Leaders IDX KEHATI index with 96 firm-year observations in 2021–2023 using PLS-SEM with bootstrapped confidence intervals. Carbon emissions disclosure and green innovation are measured using content analysis; eco-efficiency is measured using ISO 14001 certification; environmental performance is measured using PROPER ratings; and firm value is measured using Tobin’s Q.

Result/Findings: Green innovation significantly increases firm value, while carbon emission disclosure significantly decreases it; eco-efficiency has no significant effect. Environmental performance does not significantly affect firm value directly, nor does it mediate any of the three relationships tested.

Novelty/Originality/Value: The study is among the first to jointly test compliance-based (disclosure and certification) and capability-based (innovation) sustainability practices within a single PLS-SEM framework for ESG-listed Indonesian firms, distinguishing between the credibility of the signals each sends to investors. It contributes evidence that environmental performance does not function as a market-valuation channel.