The Impact of Profitability on Firm Value: Does Environmental Performance Play a Mediation Role?

Yulita Setiawanta, St. Dwiarso Utomo, Imang Dapit Pamungkas, Jumanto, Luluk Muhimatul Ifada

Abstract

This study aims to determine whether environmental performance, which is proxied by greenhouse gas emissions, can mediate the effect of financial performance on the profitability of firm value. The research data on the three factors are then analyzed. This research is necessary to be conducted within the slowing economic circumstances due to the COVID-19 virus pandemic currently, which has been sweeping the world. The research data with purposive sampling are the companies indexed by the Sri-Kehati Indonesian stock exchange in a row from 2016 to 2019. The data that met the criteria were processed using the Smart-PLS version 3.29 statistical application. The results showed that profitability of financial performance had a significant positive effect on firm value but a negative effect on greenhouse gas emissions as a proxy for environmental performance. Greenhouse gas emissions had a significant negative impact on firm value, but they had proven to significantly mediate the effect of financial performance on the profitability of firm value.

 

Keywords: financial performance, profitability, greenhouse gas emissions, environment, firm value.


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