Disclosure of CO2 emissions, community complaints, occupational safety and its relation to financial distress

Abstract

The Indonesian government is committed to resolving emission issues through the development of green industries. The government encourages industries to transform into sustainable industries that are environmentally friendly. The Indonesian government asks the public and the market to put pressure on the industry to improve its environmental performance. The public can monitor and pressure companies through the disclosure of environmental performance information such as disclosure of CO2 emissions. In addition to environmental performance, disclosure of corporate social performance is no less important. Social performance relates to the company’s responsibility towards employees (work accidents) and the surrounding community (community complaints). The risk of companies that have poor environmental performance and social performance can result in the company experiencing financial distress. This study aims to examine the effect of disclosure of CO2 emissions, community complaints, and work safety on Financial Distress. Financial Distress is measured using the Altman Z Score and operational cash flow adequacy. This study uses age and company size as control variables. The sample of this study is manufacturing companies listed on the Indonesia Stock Exchange from 2018-2021. This study uses the Common Effect Model (CEM) and Random Effect Model (REM). The results of the research show Disclosure of CO2 emissions, community complaints, occupational safety has no significant effect on financial distress. However, firm age and firm size have a significant positive effect on the adequacy of the firm’s operating cash flow.