Financing Decisions and Green Accounting: The Moderating Role of Profitability

Abstract

Environmental management has emerged as a pressing global concern,
prompting governments worldwide to mandate the adoption of
environmentally sustainable practices, commonly referred to as green
accounting. This study examines the effects of debt financing and equity
financing decisions on green accounting practices while also
investigating the moderating role of profitability in these relationships.
The research utilizes secondary data collected from manufacturing firms
in the basic industry and chemical sectors listed on the Indonesia Stock
Exchange (IDX) during the period 2021–2023. A panel data regression
analysis with moderation effects was employed, with preliminary
testing conducted to determine the most appropriate econometric
model: Fixed Effect Model (FEM), Common Effect Model (CEM), or
Random Effect Model (REM). The findings reveal that debt financing
negatively impacts green accounting practices, while equity financing
has a significant positive effect. However, profitability was not found to
moderate the relationship between financing decisions and green
accounting. These results underscore the distinct influences of financing
strategies on corporate environmental practices and suggest that
profitability alone may not enhance the integration of green accounting
within financing decisions.