Carbon Tax Policy, Environmental Accounting Disclosure, and Corporate Financial Performance: Evidence from Listed Energy and Manufacturing Firms

Atria Tiffany Widyaningsih; Sani Sani

doi:10.61255/jeemba.v4i5.1920

Authors

Atria Tiffany Widyaningsih Akademi Perpajakan Panca Bhakti Pontianak, Indonesia
Sani Akademi Perpajakan Panca Bhakti Pontianak, Indonesia

DOI:

https://doi.org/10.61255/jeemba.v4i5.1920

Keywords:

Carbon Tax Policy, Corporate Financial Performance, Energy Sector, Environmental Accounting Disclosure, Manufacturing Sector

Abstract

Purpose – Carbon pricing is transforming environmental externalities into measurable corporate costs, yet its financial consequences may differ substantially across carbon-intensive industries. This study examines the association of carbon-tax policy exposure and environmental accounting disclosure with corporate financial performance, focusing on sectoral differences between listed energy and manufacturing firms in Indonesia.

Design/methodology/approach – Using an unbalanced panel of 132 firms and up to 812 firm-year observations from 2018–2025, the study applies two-way fixed-effects regression with firm-clustered robust standard errors and sectoral interaction terms. The main return-on-assets regressions use 799 complete firm-year observations because sales-growth data are unavailable for 13 observations; robustness-test sample sizes vary with the availability of Tobin’s Q, return on equity, and lagged disclosure data.

Finding/Results – Carbon-tax policy exposure is negatively associated with financial performance, whereas environmental accounting disclosure is positively associated with profitability. Sectoral estimates reveal a pronounced asymmetry: the adverse financial effect of carbon-policy exposure is substantially stronger among energy firms, while the positive marginal effect of environmental accounting disclosure is also larger in the energy sector. These findings remain stable across alternative performance measures, lagged disclosure specifications, and Driscoll–Kraay standard errors.

Originality/Value – The study integrates carbon-policy exposure, environmental accounting disclosure, and sectoral heterogeneity in an Indonesian firm-level setting. It highlights uneven financial associations with the carbon transition and the potential relevance of environmental disclosure for managing transition-related risks.

Abstract views: 75 ,

PDF downloads: 62

Downloads

Download data is not yet available.

References

Alsaifi, K., Elnahass, M., & Salama, A. (2020). Carbon disclosure and financial performance: UK environmental policy. Business Strategy and the Environment, 29(2), 711–726. https://doi.org/10.1002/bse.2426

Ben-Amar, W., Gomes, M., Khursheed, H., & Marsat, S. (2022). Climate change exposure and internal carbon pricing adoption. Business Strategy and the Environment, 31(7), 2854–2870. https://doi.org/10.1002/bse.3051

Bento, N., & Gianfrate, G. (2020). Determinants of internal carbon pricing. Energy Policy, 143, 111499. https://doi.org/10.1016/j.enpol.2020.111499

Bento, N., Gianfrate, G., & Aldy, J. E. (2021). National climate policies and corporate internal carbon pricing. The Energy Journal, 42(5), 89–100. https://doi.org/10.5547/01956574.42.5.nben

Bresciani, S., Rehman, S. U., Giovando, G., & Alam, G. M. (2023). The role of environmental management accounting and environmental knowledge management practices influence on environmental performance: Mediated-moderated model. Journal of Knowledge Management, 27(4), 896–918. https://doi.org/10.1108/JKM-12-2021-0953

Burritt, R. L., Herzig, C., Schaltegger, S., & Viere, T. (2019). Diffusion of environmental management accounting for cleaner production: Evidence from some case studies. Journal of Cleaner Production, 224, 479–491. https://doi.org/10.1016/j.jclepro.2019.03.227

Deb, B. C., Rahman, M. M., & Rahman, M. S. (2023). The impact of environmental management accounting on environmental and financial performance: Empirical evidence from Bangladesh. Journal of Accounting & Organizational Change, 19(3), 420–446. https://doi.org/10.1108/JAOC-11-2021-0157

Desai, R., Raval, A., & Thanki, S. (2025). Does internal carbon pricing moderate the firm value effects of carbon emission? A study of an emerging economy. Journal of Applied Accounting Research, 26(5), 1213–1236. https://doi.org/10.1108/JAAR-07-2024-0248

Ganda, F., & Milondzo, K. S. (2018). The impact of carbon emissions on corporate financial performance: Evidence from the South African firms. Sustainability, 10(7), 2398. https://doi.org/10.3390/su10072398

Gerged, A. M. (2021). Factors affecting corporate environmental disclosure in emerging markets: The role of corporate governance structures. Business Strategy and the Environment, 30(1), 609–629. https://doi.org/10.1002/bse.2642

Gerged, A. M., Zahoor, N., & Cowton, C. J. (2024). Understanding the relationship between environmental management accounting and firm performance: The role of environmental innovation and stakeholder integration—Evidence from a developing country. Management Accounting Research, 62, 100865. https://doi.org/10.1016/j.mar.2023.100865

Gorbach, O. G., Kost, C., & Pickett, C. (2022). Review of internal carbon pricing and the development of a decision process for the identification of promising internal pricing methods for an organisation. Renewable and Sustainable Energy Reviews, 154, 111745. https://doi.org/10.1016/j.rser.2021.111745

Gunarathne, A. D. N., Lee, K.-H., & Hitigala Kaluarachchilage, P. K. (2021). Institutional pressures, environmental management strategy, and organizational performance: The role of environmental management accounting. Business Strategy and the Environment, 30(2), 825–839. https://doi.org/10.1002/bse.2656

Hang, M., Geyer-Klingeberg, J., & Rathgeber, A. W. (2019). It is merely a matter of time: A meta-analysis of the causality between environmental performance and financial performance. Business Strategy and the Environment, 28(2), 257–273. https://doi.org/10.1002/bse.2215

Hassan, O. A. G., & Romilly, P. (2018). Relations between corporate economic performance, environmental disclosure and greenhouse gas emissions: New insights. Business Strategy and the Environment, 27(7), 893–909. https://doi.org/10.1002/bse.2040

Jiang, Y., Luo, L., Xu, J., & Shao, X. (2021). The value relevance of corporate voluntary carbon disclosure: Evidence from the United States and BRIC countries. Journal of Contemporary Accounting & Economics, 17(3), 100279. https://doi.org/10.1016/j.jcae.2021.100279

Latan, H., Jabbour, C. J. C., Jabbour, A. B. L. S., Wamba, S. F., & Shahbaz, M. (2018). Effects of environmental strategy, environmental uncertainty and top management’s commitment on corporate environmental performance: The role of environmental management accounting. Journal of Cleaner Production, 180, 297–306. https://doi.org/10.1016/j.jclepro.2018.01.106

Liu, X., Tang, X., Xiong, Y., Chen, Y., & Wu, Y. (2023). The effect of carbon emission policy on financial performance of target companies in China. Journal of Cleaner Production, 412, 137437. https://doi.org/10.1016/j.jclepro.2023.137437

Ma, J., & Kuo, J. (2021). Environmental self-regulation for sustainable development: Can internal carbon pricing enhance financial performance? Business Strategy and the Environment, 30(8), 3517–3527. https://doi.org/10.1002/bse.2817

Miah, M. D., Hasan, R., & Usman, M. (2021). Carbon emissions and firm performance: Evidence from financial and non-financial firms from selected emerging economies. Sustainability, 13(23), 13281. https://doi.org/10.3390/su132313281

Qian, W., Hörisch, J., & Schaltegger, S. (2018). Environmental management accounting and its effects on carbon management and disclosure quality. Journal of Cleaner Production, 174, 1608–1619. https://doi.org/10.1016/j.jclepro.2017.11.092

Qian, W., & Schaltegger, S. (2017). Revisiting carbon disclosure and performance: Legitimacy and management views. The British Accounting Review, 49(4), 365–379. https://doi.org/10.1016/j.bar.2017.05.005

Qin, L., Wang, Z., & Pan, A. (2023). How the implementation of internal carbon pricing impacts on carbon reduction: Facilitating or hindering. Environmental Science and Pollution Research. https://doi.org/10.1007/s11356-023-30997-5

Rokhmawati, A., Sarasi, V., & Berampu, L. T. (2024). Scenario analysis of the Indonesia carbon tax impact on carbon emissions using system dynamics modeling and STIRPAT model. Geography and Sustainability, 5(4), 577–587. https://doi.org/10.1016/j.geosus.2024.07.003

Scarpellini, S., Marín-Vinuesa, L. M., Aranda-Usón, A., & Portillo-Tarragona, P. (2020). Dynamic capabilities and environmental accounting for the circular economy in businesses. Sustainability Accounting, Management and Policy Journal, 11(7), 1129–1158. https://doi.org/10.1108/SAMPJ-04-2019-0150

Siddique, M. A., Akhtaruzzaman, M., Rashid, A., & Hammami, H. (2021). Carbon disclosure, carbon performance and financial performance: International evidence. International Review of Financial Analysis, 75, 101734. https://doi.org/10.1016/j.irfa.2021.101734

Tang, S., & Demeritt, D. (2018). Climate change and mandatory carbon reporting: Impacts on business process and performance. Business Strategy and the Environment, 27(4), 437–455. https://doi.org/10.1002/bse.1985

Trinks, A., Mulder, M., & Scholtens, B. (2022). External carbon costs and internal carbon pricing. Renewable and Sustainable Energy Reviews, 168, 112780. https://doi.org/10.1016/j.rser.2022.112780

Trumpp, C., & Guenther, T. (2017). Too little or too much? Exploring U-shaped relationships between corporate environmental performance and corporate financial performance. Business Strategy and the Environment, 26(1), 49–68. https://doi.org/10.1002/bse.1900

Tzouvanas, P., Kizys, R., Chatziantoniou, I., & Sagitova, R. (2020). Environmental and financial performance in the European manufacturing sector: An analysis of extreme tail dependency. The British Accounting Review, 52(6), 100863. https://doi.org/10.1016/j.bar.2019.100863

Veeravel, V., Hiremath, R. B., & Panda, P. (2025). Does internal carbon pricing improve firm performance? Evidence from Indian listed companies. Finance Research Letters, 86, 108780. https://doi.org/10.1016/j.frl.2025.108780

Velte, P., Stawinoga, M., & Lueg, R. (2020). Carbon performance and disclosure: A systematic review of governance-related determinants and financial consequences. Journal of Cleaner Production, 254, 120063. https://doi.org/10.1016/j.jclepro.2020.120063

Zhao, A., Wang, J., Sun, Z., & Guan, H. (2022). Environmental taxes, technology innovation quality and firm performance in China—A test of effects based on the Porter hypothesis. Economic Analysis and Policy, 74, 309–325. https://doi.org/10.1016/j.eap.2022.02.009

Zhao, A., Zhang, H., Liu, Y., & Guan, H. (2024). Environmental taxes, technological innovation and firm performance: Evidence from China’s manufacturing firms. Heliyon, 10(10), e31386. https://doi.org/10.1016/j.heliyon.2024.e31386

Zhu, B., Xu, C., Wang, P., & Zhang, L. (2022). How does internal carbon pricing affect corporate environmental performance? Journal of Business Research, 145, 65–77. https://doi.org/10.1016/j.jbusres.2022.02.071