Published date: Aug 29 2024

Journal Title: KnE Social Sciences

Issue title: Annual Symposium on Applied Business Economics and Communication (ASABEC) 2023

Pages: 41–54

DOI: 10.18502/kss.v9i25.16951

Sabar Warsinisabar.warsini@akuntansi.pnj.ac.idDepartment of Accounting, Politeknik Negeri Jakarta, Depok

Titi SuhartatiDepartment of Accounting, Politeknik Negeri Jakarta, Depok

Yusef Friya Purwa SetyaDepartment of Accounting, Politeknik Negeri Jakarta, Depok

In the era of sustainability, there has been a shift in indicators for assessing company performance. Stakeholders are not only concerned with financial performance but pay great attention to non-financial performance in the form of sustainability performance and risk management. This study was conducted to find empirical evidence of whether investment decisions mediate the effect of the quality of sustainability reporting and ERM on company prices. We use a sample of 648 firm years of public companies listed on the Indonesia Stock Exchange. In general, the level of conformity of sustainability reports for public companies in Indonesia reaches 61.2% of the Global Reporting Initiative standard. By using multiple regression path analysis the results were obtained: first, sustainability reports and ERM have a direct positive effect on company value. Second, ERM has a direct positive effect on investment decisions but sustainability reports are not significant. Third, investment decisions mediate the impact of ERM on firm value. The implications of this study are important for company management to build quality sustainability reporting and effective ERM to maximize firm value.

Keywords: sustainability report, ERM, investment decision, company value

[1] Young E. Value of sustainability reporting. A study by EY and Boston College Center for Corporate Citizenship. 2013.

[2] Otoritas Jasa Keuangan. POJK Nomor 51/POJK.03/2017 tentang Penerapan Keuangan Berkelanjutan Bagi Lembaga Jasa Keuangan, Emiten, dan Perusahaan Publik. 2017.

[3] Initiative GR. Sustainability reporting guidelines. 2002.

[4] KR S, Prasad K. Does GRI compliance moderate the impact of sustainability disclosure on firm value? Society and Business Review. 2023;18(1):152–74.

[5] Yan H, Li X, Huang Y, Li Y. The impact of the consistency of carbon performance and carbon information disclosure on enterprise value. Finance Research Letters. 2020;37:101680.

[6] Zam-Zam FM, Gamaliel H, Pinatik S. The effect of sustainability reports on company value (empirical study of infrastructure companies listed on the Indonesia Stock Exchange for the 2017-2021 Period). Jurnal Ekonomi dan Bisnis Digital. 2023;2(1):325–40.

[7] Jemunu MDP, Apriyanto G, Parawiyati P. Good Corporate Governance, Pengungkapan Sustainability Report dan Manajemen Laba terhadap Nilai Perusahaan. AFRE Accounting and Financial Review. 2020;3(2):93–102.

[8] Habibi, M., dan Andraeny D. The effect of profitability and sustainability reporting on company value with investment opportunity set as a moderating variable. Diponegoro Journal of Accounting. 2018;8(3):1–12.

[9] Mendra Y, SAITRI PW, MARIYATNI NPS. Good corporate governance, corporate social responsibility, and sustainability report to firm value. International Journal of Environmental, Sustainability, and Social Science. 2021;2(1):17–21.

[10] Bussiness.com. https://bussiness.com. https://bussiness.com.

[11] Fujita S, Iwasawa K, Yoshida E. Enterprise risk management in accounting research: A. Journal of Modern Accounting and Auditing. 2018;14(7):380–9.

[12] Eastman EM, Li C, Sun L, Xu J. Enterprise risk management and financial misconduct. Working Paper. Florida State University, University of Kansas, and …; 2020.

[13] Bailey C, Collins DL, Abbott LJ. The impact of enterprise risk management on the audit process: Evidence from audit fees and audit delay. Auditing: A Journal of Practice & Theory. 2018;37(3):25–46.

[14] Berry-Stölzle TR, Xu J. Enterprise risk management and the cost of capital. Journal of Risk and Insurance. 2018;85(1):159–201.

[15] Gordon LA, Loeb MP, Tseng CY. Enterprise risk management and firm performance: A contingency perspective. Journal of accounting and public policy. 2009;28(4):301– 27.

[16] Faisal F, Abidin Z, Haryanto H. Enterprise risk management (ERM) and firm value: The mediating role of investment decisions. Cogent Economics & Finance. 2021;9(1):2009090.

[17] Farrell M, Gallagher R. Moderating influences on the ERM maturity-performance relationship. Research in International Business and Finance. 2019;47:616–28.

[18] Hoyt RE, Liebenberg AP. The value of enterprise risk management. J. Journal of Risk and Insurance,. 2011;78(4):795–822.

[19] Hörisch J, Schaltegger S, Freeman RE. Integrating stakeholder theory and sustainability accounting: A conceptual synthesis. Journal of Cleaner Production. 2020;275:124097.

[20] Atmajaya T. Analisis Penerapan Sustainability Report Perusahaan–Perusahaan Pertambangan Peserta Indonesia Sustainability Reporting Awards (ISRA) 2013. 2015;

[21] Rudyanto A, Veronica Siregar S. The effect of stakeholder pressure and corporate governance on the sustainability report quality. International Journal of Ethics and Systems. 2018;34(2):233–49.

[22] Adhariani D. Readability of sustainability reports: Evidence from Indonesia. 2022.

[23] Cai R, Lv T, Wang C, Liu N. Can environmental information disclosure enhance firm value?—An analysis based on textual characteristics of annual reports. International Journal of Environmental Research and Public Health. 2023;20(5):4229.

[24] Loh L, Thomas T, Wang Y. Sustainability reporting and firm value: Evidence from Singapore-listed companies. Sustainability. 2017;9(11):2112.

[25] Kuzey C, Uyar A. Determinants of sustainability reporting and its impact on firm value: Evidence from the emerging market of Turkey. Journal of cleaner production. 2017;143:27–39.

[26] COSO. “Executive summary: Enterprise risk management-Integrating with strategy and performance.” 2017.

[27] Baxter R, Bedard JC, Hoitash R, Yezegel A. Enterprise risk management program quality: Determinants, value relevance, and the financial crisis. Contemporary Accounting Research. 2013;30(4):1264–95.

[28] Bohnert A, Gatzert N, Hoyt RE, Lechner P. The drivers and value of enterprise risk management: Evidence from ERM ratings. The European Journal of Finance. 2019;25(3):234–55.

[29] Chen YL, Chuang YW, Huang HG, Shih JY. The value of implementing enterprise risk management: Evidence from Taiwan’s financial industry. The North American Journal of Economics and Finance. 2020;54:100926.

[30] Silva JR, Silva AF da, Chan BL. Enterprise risk management and firm value: Evidence from Brazil. Emerging Markets Finance and Trade. 2019;55(3):687–703.

[31] Jankensgård H. A theory of enterprise risk management. Corporate Governance: The International Journal of Business in Society. 2019;19(3):565–79.