The Effect of Carbon Emissions Disclosure on Earnings Management in Indonesian Mining Companies

Abstract

This study aims to investigate the effect of carbon emissions disclosure on earnings management in Indonesian mining companies. This study uses two competing theories, namely stakeholder theory and agency theory, to explain how carbon emissions disclosure affects earnings management. The sample of this study consists of 26 Indonesian mining companies listed on the Indonesian Stock Exchange (IDX) from 2021-2023, with a total of 78 observations. The data analysis technique is Partial Least Squares (PLS). The result of this study shows that carbon emissions disclosure does not affect earnings management. The different results may be explained by legitimacy theory, where mining companies disclose sustainability information merely to maintain legitimacy, not as a tool for financial management. Strong pressure from external parties and a high public visibility may cause companies in the mining industry to disclose carbon emissions merely to comply with regulations or respond to external pressures, without genuinely implementing substantive sustainability commitments; therefore, carbon emissions disclosure is not directly related to earnings management.