Environmental disclosure moderates corporate performance and market perceptions

Abstract

This study advances a signal-reweighting perspective by examining whether environmental disclosure changes how investors interpret corporate performance signals in an emerging capital market. The research gap arises because prior studies commonly treat environmental disclosure as a direct determinant of firm value, while paying limited attention to its role as an information context that modifies the valuation relevance of market capitalization, earnings per share, and leverage.  Using an unbalanced panel of 263 firm-year observations from Indonesian listed companies during 2020-2024, this study applies fixed-effects panel regression and Moderated Regression Analysis. The main model explains 72.81% of the variation in average annual stock prices, with market capitalization and earnings per share showing positive significant effects, while leverage is insignificant. The moderation results clarify an inconsistent pattern: environmental disclosure strengthens the market capitalization-stock price relationship, weakens the EPS-stock price relationship, and does not alter the leverage-stock price relationship. These findings extend signaling theory by showing that environmental disclosure does not merely add an ESG signal, but selectively reweights financial signals in market valuation.