From ESG Compliance to Sustainability Credibility: The Role of Green Accounting Quality and Carbon Emission Disclosure in Shaping Market Response and Its Implications for the Accounting Profession

Abstract

This study investigates the influence of Green Accounting Quality and Carbon Emission Disclosure on capital market response, with sustainability credibility serving as the mediating variable, among beyond compliance companies in Indonesia. A quantitative research design with panel data regression analysis was employed using a sample of 20 companies classified as beyond compliance firms under the PROPER rating system during the 2020–2024 observation period. The study applied the Random Effect Model (REM) with the assistance of EViews 10 software.

The results indicate that Carbon Emission Disclosure positively and significantly affects sustainability credibility, whereas Green Accounting Quality demonstrates a positive and significant relationship with market response. In contrast, Carbon Emission Disclosure has a negative effect on market response, while sustainability credibility does not significantly influence market response. These findings suggest that the Indonesian capital market is gradually moving toward ESG-oriented investment considerations, although sustainability credibility has not yet been fully recognized as economically relevant information by investors.

This study contributes to the ESG literature by emphasizing sustainability credibility as an important explanatory mechanism for understanding how environmental disclosure practices are interpreted by capital market participants. The findings also highlight the evolving role of the accounting profession in strengthening sustainability credibility through ESG reporting, green accounting, carbon accounting, and sustainability assurance.