The impact of biological asset disclosures and economic sustainability on firm value: Evidence from agricultural companies in Indonesia

Abstract

This research aims to investigate whether biological asset reporting and the economic sustainability of the firm affect its value. In accordance with the Indonesian Statement of Financial Accounting Standard 69 (PSAK 69), corporations are required to disclose their methods of recognizing and valuing the fair market value of assets pertaining to living things such as plants or animals. Hence, whether biological asset disclosure impacts investors’ decisions to value the firm is the focus of the study. The study also examines if PSAK 69 increased agricultural corporations’ biological asset disclosure. The comparison test shows that PSAK 69 increased the disclosure. The Altman Z-rating probability of bankruptcy is a proxy for economic sustainability. Utilizing 56 listed agricultural firms from 2017 to 2020 as a sample, the regression analysis reveals that biological asset disclosure does not influence firm value. Instead, economic sustainability and other financial indicators such as profitability and the level of debt affect the value of the firm. The results imply that the agricultural corporation’s reputation in the eyes of shareholders is dependent upon its economic sustainability instead of the dissemination of information on its biological assets. The research provides insight into the non-value relevance of biological asset reporting in the context of Indonesia.