PROFITABILITY AS MODERATION: THE EFFECT COST, PERFORMANCE, AND ENVIRONMENTAL DISCLOSURE ON FIRM VALUE

Abstract

ABSTRACT
Growing awareness of environmental issues influences how pharmaceutical companies respond through their environmental costs, performance, and disclosures, ultimately impacting firm value. This research aims to examine the effects of environmental costs, environmental performance, and environmental disclosure on firm value, with profitability acting as a moderating variable. The study focuses on pharmaceutical companies listed on the Indonesia Stock Exchange (IDX) from 2020 to 2023. The methodology employed is moderation regression analysis, utilizing secondary data gathered from annual and sustainability reports. The findings indicate that environmental costs negatively affect firm value, suggesting that high expenditures on environmental initiatives may lead to unfavorable perceptions among investors. Furthermore, environmental performance and disclosure do not have a significant effect on firm value. Interestingly, profitability strengthens the effect of environmental costs on firm value, suggesting that firms with high levels of profitability can manage environmental costs more effectively to increase value. In contrast, Profitability does not influence environmental disclosure, indicating that transparency in disclosure alone is inadequate to enhance firm value without the backing of profitability. The implications of this study underscore the importance for pharmaceutical companies to consider environmental issues in their business strategies. Effective management of environmental costs and increased profitability can be key to increasing shareholder value. This study provides insights for management of pharmaceutical companies in integrating environmental considerations into strategic decision making. By understanding the interactions between environmental costs, performance, disclosure and profitability, pharmaceutical companies can better navigate the complexities of sustainable business practices. This research highlights the need for a holistic approach to environmental management to ensure that environmental initiatives are not only implemented, but also aligned with the financial health and overall strategic goals of the organization.

Keywords: envionmental cost, environmental performance, environmental disclosure, firm value, profitability