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http://dx.doi.org/10.13106/jafeb.2021.vol8.no3.1073

Environmental Performance and Earnings Persistence: Empirical Evidence from Indonesia  

PUTRA, Ferdy (Department of Accounting, Faculty of Business and Economics, University of Riau)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.3, 2021 , pp. 1073-1081 More about this Journal
Abstract
When firms have higher environmental performance, they can provide sustainable business that allows firms to build the value of credibility and ethics, higher reputation, higher productivity, and lower costs. The advantages of environmental responsibilities help firms to maintain their earnings level over a long-term period. This research aims to examine the effect of environmental performance on earnings persistence. Research samples include 413 manufacturing firms-years listed in the Indonesian Stock Exchange and the PROPER evaluation in 2013-2019. Environmental performance is measured by PROPER evaluation rating. The result shows that environmental performance has a positive effect on earnings persistence. The advantage of environmental responsibilities allows firms to enjoy performance sustainability and persistence in a long-term period, not only periodically. Also, the positive effect of environmental performance on earnings persistence occurs more in the environmentally sensitive industry than non-sensitive ones. Since an environmentally-sensitive industry brings more environmental damage, higher environmental performance is more valuable to provide sustainability. This research has limitations to use all the Indonesian Stock Exchange-listed firms since not all firms participate in the PROPER evaluation. This research implies firms' management should maintain earnings persistence and sustainability by implementing higher-quality environmental responsibility, especially for firms in an environmentally-sensitive industry.
Keywords
Environmental Performance; Earnings Persistence; Sustainability; Indonesia;
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