Determinants Carbon Emission Disclosure and the Moderating Role of Firm Size

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Cimahi— Environmental Performance and Debt Burden Shape Carbon Emission Transparency in Indonesian Companies.
These findings were revealed in a study by Aldi Ardiansyah Ramadhan and HN Hartikayanti from the Faculty of Economics and Business, Universitas Jenderal Achmad Yani, through a scholarly article published in January 2026 in the International Journal of Business and Applied Economics.

Universitas Jenderal Achmad Yani (UNJANI) is located in Cimahi City, West Java Province, an education and military hub within the Greater Bandung metropolitan area. The university is recognized for its active engagement in research on economics, business, and sustainability, including studies on environmental accounting and corporate transparency. Based in Cimahi, West Java, Universitas Jenderal Achmad Yani continues to strengthen its role in producing research that addresses Indonesia’s sustainable development challenges. One of its recent contributions comes from academic work in environmental accounting, examining how industrial companies disclose carbon emissions amid climate change pressures, government regulations, and rising public demands for transparency.

Carbon disclosure in a warming world

Climate change has moved from a distant concern to an immediate policy and economic issue. Indonesia is among the world’s largest carbon emitters, driven by industrial activity, energy use, and land conversion. In response, the government has adopted regulations on greenhouse gas reduction and carbon economic value, encouraging companies to measure and report their emissions.

Yet carbon emission disclosure in Indonesia remains largely voluntary. Some firms publish detailed sustainability reports, while others provide minimal information. This uneven landscape raises a key question: what actually motivates companies to be transparent about their carbon footprint?

The study by Ramadhan and Hartikayanti addresses this gap by looking at internal corporate factors rather than external pressure alone. By focusing on the basic materials sector—industries such as cement, chemicals, and metals that are inherently emission-intensive—the research highlights disclosure behavior where environmental impact is most visible and most contested.

How the research was conducted

The authors analyzed 60 firm-year observations drawn from 10 basic materials companies that consistently published sustainability reports and participated in Indonesia’s PROPER environmental rating program from 2019 to 2024.

The analysis combined company financial data with environmental ratings and disclosure indices. In simple terms:

• Environmental performance was measured using the government’s PROPER ratings, ranging from poor to excellent.
• Leverage reflected how much a company relied on debt compared to equity.
• Financial slack captured the availability of excess cash relative to sales.
• Firm size was based on total assets.
• Carbon emission disclosure was assessed by counting how many standard disclosure items a company reported in its sustainability documents.

To understand not only direct effects but also interactions, the researchers used moderated regression analysis, a method that shows whether company size strengthens or weakens the influence of other factors.

Key findings at a glance

The results paint a clear but nuanced picture of corporate behavior:

• Better environmental performers disclose more.
  Companies with higher PROPER ratings consistently provided more detailed carbon emission information.
• High debt discourages transparency.
  Firms with higher leverage disclosed less about their carbon emissions, suggesting that financial pressure limits voluntary reporting.
• Extra cash does not guarantee disclosure.
  Financial slack showed no significant impact on carbon emission disclosure.
• Company size changes the effect of environmental performance.
  Larger firms weakened the positive link between environmental performance and disclosure, while smaller firms with good performance were more eager to disclose.

Together, these factors explained 48.3 percent of the variation in carbon emission disclosure among the sampled companies, indicating that internal corporate conditions play a major role alongside regulations and public scrutiny.

Why environmental performance matters most

One of the strongest messages from the study is that environmental performance is a key driver of transparency. Companies that manage pollution well and earn higher PROPER ratings appear more confident in sharing carbon-related information.

As HN Hartikayanti of Universitas Jenderal Achmad Yani explains, firms with strong environmental records often use disclosure as a legitimacy tool, signaling responsibility and alignment with societal expectations. Ethical paraphrase from the authors suggests that carbon disclosure becomes a way to reinforce trust when companies believe their environmental actions will stand up to public evaluation.

This finding aligns with broader trends in sustainability reporting, where disclosure is not only about compliance but also about reputation management.

Debt as a barrier to disclosure

In contrast, leverage emerged as a clear constraint. Companies carrying higher debt loads tended to reduce voluntary disclosures, including carbon emission reporting. The logic is straightforward: when firms must prioritize debt repayment and financial stability, environmental reporting is seen as an additional cost rather than a strategic investment.

This insight is particularly relevant for emerging markets like Indonesia, where access to capital and debt financing often shapes corporate priorities. It also suggests that financial structure can indirectly slow progress toward greater environmental transparency.

The surprising role of firm size

Conventional wisdom often assumes that large companies are more transparent because they face greater scrutiny. The study confirms this only partially.

While large firms are indeed more visible, the research shows that firm size actually weakens the positive effect of environmental performance on disclosure. Large companies with good environmental performance may feel their reputation is already secure, reducing the perceived need for extensive carbon reporting. Smaller companies, by contrast, appear to use disclosure more actively to build legitimacy and attract stakeholder attention.

This finding challenges the assumption that size alone guarantees transparency and highlights the strategic nature of disclosure decisions.

Implications for policy, business, and investors

The findings have several real-world implications:

• For policymakers:
  Voluntary disclosure frameworks may not be sufficient. Firms with high leverage or established reputations may still underreport emissions, suggesting the need for clearer standards or incentives.
• For companies:
  Strong environmental performance creates an opportunity to build trust through transparency, especially for smaller firms seeking recognition and legitimacy.
• For investors and analysts:
  Carbon disclosure should be interpreted alongside financial structure. Low disclosure may reflect financial pressure rather than poor environmental performance alone.
• For sustainability advocates:
  Encouraging disclosure requires aligning environmental goals with financial realities, particularly in capital-intensive sectors.

Author profile

• Aldi Ardiansyah Ramadhan, S.E. - Universitas Jenderal Achmad Yani
• HN Hartikayanti, S.E., M.Si.- Universitas Jenderal Achmad Yani

Source

Aldi Ardiansyah Ramadhan, HN Hartikayanti. Determinants of Carbon Emission Disclosure and the Moderating Role of Firm Size. Business and Applied Economics, Vol. 5 No. 1, Januari 2026, hlm. 359–378.2026                              

DOI:https://doi.org/10.55927/ijbae.v5i1.568 

Official URL: https://nblformosapublisher.org/index.php/ijbae