The Impact of Corporate Governance on Firm Value with Corporate Environmental Disclosure as Intervening Variable: Evidence from Indonesia

Abstract

The worldwide quest for sustainability necessitates the active involvement of the
corporate sector. The challenge for businesses has been to strategically integrate
environmental disclosure into their broader corporate governance framework to
enhance company value through effective governance and increased environmental
transparency. This study investigates the influence of corporate governance on
company value, utilizing corporate environmental disclosure as an intermediary
variable. We utilize GRI's checklist to obtain an environmental disclosure index and
assess firm value by Tobin's Q. This study used a variance-based partial least squares
structural equation modeling (PLS-SEM) approach with WarpPLS 5.0 software for
data analysis. The findings indicate that more corporate environmental transparency
enhances business value. Corporate environmental disclosure was found to mediate the
relationship between board size, the frequency of board meetings, and company value.
The dimensions of the board and the frequency of board meetings positively correlate
with corporate environmental disclosures and company value. In conclusion, the
findings are beneficial for regulators, policymakers, and corporate managers to assess
the influence of Corporate Governance and Environmental Disclosure regulations on
enhancing market expectations and augmenting firm value. This has important
implications for the current policy approach prevailing in Indonesia.