Determinants of Firm Value: The Role of Earnings Quality, Green Accounting, and Tax Avoidance

Abstract

ABSTRACT

The valuation effect of earnings quality, green accounting, and tax avoidance is assessed using data from basic materials companies on the IDX for 2020–2024. Investor perception of a firm's performance and future potential is often captured through its firm value. A quantitative analysis was conducted on secondary data sources, including firm annual reports, financial statements, and environmental performance ratings issued by Indonesia’s Ministry of Environment and Forestry. After applying purposive sampling procedures, a balanced panel of 14 firms covering 70 observations was constructed and tested via panel regression models. The Chow, Hausman, and Lagrange Multiplier tests determined the appropriate panel model, while classical assumptions of normality, multicollinearity, heteroscedasticity, and autocorrelation were verified. The results indicate that earnings quality has no significant impact on firm value, implying that investors prioritize profitability and growth prospects. Green accounting, proxied by the PROPER rating, demonstrates a significant negative influence on firm value, which suggests that environmental commitments are perceived as costs that reduce short-term financial outcomes. Meanwhile, tax avoidance shows no significant effect on firm value, signifying that investors focus more on long-term stability and sustainability than on tax-saving practices.

Keywords: Firm Value, Earnings Quality, Green Accounting, Tax Avoidance, PROPER Rating