The effect of environmental disclosure on bankruptcy risk: Evidence from companies listed on the Indonesia Stock Exchange

Abstract

The purpose of this study is to examine the effect of environmental disclosure on bankruptcy risk of listed firms in the Indonesia Stock Exchange in the year 2022-2024. The data comprises firms composed from 2022 to 2024 for the non-financial sector companies listed on the BEI. There are 57 companies and 171 data that fall into the criteria based on the purposive sampling method. Multiple Regression Analysis as data analysis techniques used SPSS software (version 21.0). Environmental disclosure (ED) as an independent variable is measured by the environmental disclosure score provided by Bloomberg in this reasearch. Bankruptcy risk (BR) is dependent variable is measured by Altman Z-score, and Size as control variable. The empirical results shows that environmental disclosure (ED) has a significant negative effect on bankruptcy risk (BR). This study offers originality by examining how environmental disclosure, rather than broader ESG or environmental performance indicators, influences bankruptcy risk among publicly listed firms in Indonesia. While prior research has predominantly focused on ESG scores, financial ratios, or environmental performance metrics, very few studies have specifically investigated environmental disclosure transparency as a determinant of corporate financial distress in an emerging market setting. By using firm-level environmental disclosure scores and integrating them with bankruptcy prediction models, this study provides new empirical evidence on whether transparent environmental reporting can serve as a protective factor against bankruptcy risk in the Indonesian capital market.