Impact of institutional ownership on environmental disclosure in Indonesian companies

Abstract

Purpose This study aims to investigate the effect of the classification of origin country of institutional shareholder (domestic, developed and developing country) and its status on stock exchange (listed and unlisted) on environmental disclosure level in Indonesian companies. Design/methodology/approach The data set comprises 474 non-financial firms listed in Indonesian Stock Exchange (IDX) for the period of 2017 to 2019. The study uses an environmental disclosure checklist to measure the extent of environmental disclosure in companies’ reports. Panel regression analysis technique is adopted to investigate the association between total percentage of shares held by institutional shareholders based on the classification of origin country and the status in stock exchange, and the extent of environmental disclosure. Findings The study reveals that the extent of environmental disclosure is positively and significantly associated with institutional investors from domestic, developed countries, listed and unlisted institutional investors. Further analysis shows interesting results that institutions from developing countries have a negative and significant relationship with environmental disclosure in non-sensitive industries. Research limitations/implications The authors recognize the issue of authors’ subjectivity in the measurement process of environmental disclosure. The sample for this study encompasses Indonesian listed firms. Thus, the results may not be generalized to Indonesian unlisted firms and other countries or regions. Practical implications This study suggests managers to engage more with institutional shareholders because they have greater concern for environmental disclosure practices. The current study also suggests managers to make strong environmental policies as they are important to ensure that institutional shareholders’ investments are safe. Social implications Given the positive impact institutional shareholders have on the level of environmental disclosure, it indirectly indicates that institutional shareholders have a strong motivation to make the world a better place. Originality/value This study offers in-depth insights into the effect of institutional ownership on environmental disclosure based on the classification of origin country and listing status of institutional investors.

A Slight Look Environmental Disclosure Score Trends during Covid-19 Outbreak: What’s Driver the Environmental Disclosure in Indonesian Mining and Manufacturing Companies

“…Third, corporate governance is also starting to be researched regarding its relationship with environmental disclosure. Several researchers collectively analyze corporate governance as a single entity (Purbawangsa et al, 2020;Solikhah and Maulina, 2021;Trireksani and Djajadikerta, 2016), while several researchers proxy corporate governance as a board of directors (Indrabudiman, 2016;Trireksani and Djajadikerta, 2016;Wahyuningrum et al, 2019), board gender (Wahyuningrum et al, 2019), audit committee (Maulia and Yanto, 2020), board of commissioners (Junita and Yulianto, 2018;Maulia and Yanto, 2020;, independent board (Pramono et al, 2023), institutional, managerial, domestic and overseas ownership (Asrori et al, 2019;Hadiningtiyas and Mahmud, 2017;Jubaedah and Setiawan, 2023;Junita and Yulianto, 2018;Safitri and Wahyuningrum, 2021;Wicaksono et al, 2023).…”

Does the origin region of institutional shareholders influence water disclosure in Indonesian companies?

“…However, there is no study investigating the effect of the origin region of shareholder on water disclosure. This examination is important because different region location of investor has different value, culture, and political dimension that affect shareholder's behavior and decision (Nagata & Nguyen, 2017; Wicaksono et al, 2023). As this study uses Indonesian firms as samples where their shares are dominantly owned by institutional shareholders, we test the effect of the origin region of institutional shareholder on water disclosure.…”

“…Domestic investors are firm's shareholder located in the same country as company. Hence, this shareholder may not experience significant asymmetry problems compared to foreign shareholders (Wicaksono et al, 2023). It is because domestic shareholder can easily collect corporate information, whereas foreign shareholder has difficulties to gather information due to geographical separation (Haniffa & Cooke, 2005; Sari et al, 2021).…”

“…These countries are classified as developed countries which are more concerned with global accountability and sustainable business practices. Previous studies indicate that foreign investor from developed countries actively press managers to show stewardship activities and disclosures including water disclosure (Sari et al, 2021; Wicaksono et al, 2023). In addition, these countries has water regulation that encourage their people and industries to concern on water sustainability.…”

Corporate ethical values disclosure: evidence from Malaysian and Indonesian top companies

“…Coercive isomorphism is arguably a key concept in institutional theory which provides a critical perspective for analyzing disclosures of corporate ethical values in listed companies, including top-tier firms in Malaysia and Indonesia. As noted in Wicaksono et al (2023), listed companies are encouraged to disclose information about particular activities (e.g. CSR performance) to show their compliance with regulations regulating those activities (e.g.…”