The Effect of Environmental Performance, Firm Size, and Leverage on the Financial Performance of Mining Sector Companies Listed on the Indonesia Stock Exchange 2018–2024

Abstract

Drawing on legitimacy, stakeholder, agency, and trade-off theories, this study examines whether environmental performance, firm size, and leverage are associated with the financial performance of mining and energy companies listed on the Indonesia Stock Exchange over 2018–2024. The novelty is its focus on within-firm change: 15 of the 17 sample firms shifted PROPER (Company Environmental Performance Rating Program) rating at least once, which the model separates from the commodity cycle common to all firms. This quantitative study uses secondary data from audited financial statements and PROPER decrees of the Ministry of Environment and Forestry; purposive sampling yielded 17 firms and 119 firm-year observations. Environmental performance is proxied by the PROPER score, firm size by the natural logarithm of total assets, leverage by the debt to equity ratio (DER), and financial performance by return on assets (ROA). After Chow and Hausman tests, a firm fixed effect panel regression with year effects was estimated in R with firm-clustered standard errors and wild cluster bootstrap p-values. Each one-unit increase in DER is associated with a 3.223 percentage-point lower ROA (p < 0.001). The PROPER coefficient is positive but weak (p = 0.113; bootstrap p = 0.071), and firm size is not significant (p = 0.208); jointly, the three variables are significant (F = 11.733; p < 0.001). Without year effects, environmental performance and firm size become significant, indicating that the 2021–2022 commodity boom partly drives their apparent association with ROA. Leverage is most stably associated with profitability, whereas the environmental link requires caution