The nexus between Capital Structure, profitability, and environmental performance: empirical evidence from Indonesia
Keywords:
Capital Structure; Profitability; Environmental Performance; Sustainable Finance
Abstract
This study investigates the nexus between capital structure, profitability, and environmental performance among companies listed on the Indonesia Stock Exchange (IDX) from 2020 to 2024. The objective is to analyze how financial leverage and environmental performance influence profitability, as well as the mediating role of profitability in linking capital structure to environmental performance. Using Partial Least Squares Structural Equation Modeling (PLS-SEM) on 126 companies, the results show that capital structure negatively affects profitability and environmental performance, while environmental performance positively influences profitability. Profitability significantly mediates the relationship between capital structure and environmental performance, supporting both the Trade-Off and Stakeholder Theories. The findings emphasize the need for firms to maintain optimal leverage and integrate sustainability strategies to enhance long-term profitability and corporate value.
References
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Yeni, F., Hadi, H., & Elfiswandi, E. (2025). Growth sales, capital structure and corporate governance on financial performance of energy and basic material sector: Evidence from Indonesia. Journal of Infrastructure, Policy and Development, 9(1), 1–11. https://doi.org/10.24294/jipd3923
Aprillianto, B., Adhani, B. F., & Maulidy, R. S. (2025). Determinan Sensitivitas Lingkungan: Peran ESG dan Sumber Daya Keuangan Perusahaan Agroindustri Indonesia. Jurnal Ilmiah Ecobuss, 13(1), 110–124. https://doi.org/10.51747/ecobuss.v13i1.2361
Dearani, N., Nugroho, M., & Rahmiyati, N. (2025). The Effect of Green Investment, Green Innovation, and Environmental Performance on Firm Value through Profitability as an Intervening Variable (LQ45 Category Mining Sector Companies Listed on the Indonesia Stock Exchange for the Period 2020-2024). Journal of Social Interactions and Humanities, 4(2), 661–678. https://doi.org/10.55927/jsih.v4i2.319
Dwianto, A., Puspitasari, D., A’yun, A. Q., Sulistyawati, A. I., & Pugara, A. (2024). Sustainability Environmental Performance Future Investment for Company Value. Journal of Ecohumanism, 3(2), 233–250. https://doi.org/10.33182/joe.v3i2.3193
Fauzi, T. H. (2022). The Effect of Environmental Performance on Firm Value with Mediating Role of Financial Performance in Manufacturing Companies in Indonesia. Academic Journal of Interdisciplinary Studies, 11(3), 256–265. https://doi.org/10.36941/ajis-2022-0081
Fenani, P. A., & Faisol, A. (2025). The Effect of Environmental Performance on Firm Value with Profitability as a Mediating Variable: An Empirical Study of SRI-KEHATI Indexed Companies Listed on the Indonesia Stock Exchange (2021–2023). Journal of Innovative and Creativity (Joecy), 5(2), 3762–3775. https://doi.org/10.31004/joecy.v5i2.611
Hakim, A. A. A., & Wahyuningtyas, E. T. (2024). Impact of Implementing Green Accounting and Capital Structure on Profitability. EAJ (Economic and Accounting Journal). https://doi.org/10.32493/eaj.v7i1.y2024.p32-43
Handayani, P., & Cahyani, N. D. (2025). THE ROLE OF ESG, ASSET STRUCTURE AND CAPITAL STRUCTURE IN SUSTAINING COMPANY PERFORMANCE. Fokus Ekonomi : Jurnal Ilmiah Ekonomi, 20(1). https://doi.org/10.34152/fe.20.1.23-30
Mahaningrum, I. S. E., & Haryono, N. A. (2025). Profitability and Its Determinants in the Energy Sector: A Study of CSR, Environmental Performance, Leverage, Liquidity, and Intellectual Capital. Indonesian Journal of Banking and Financial Technology, 3(3), 343–360. https://doi.org/10.55927/fintech.v3i3.108
Martini, N. M., Widnyana, I., & Kepramareni, P. (2025). The Effect of Capital Structure, Liquidity and Profitability on Company Value with Sustainability Report as a Moderation Variable in Mining Companies on the Indonesia Stock Exchange. Journal of Economics, Finance And Management Studies, 8(7), 4750–4755. https://doi.org/10.47191/jefms/v8-i7-63
Phitaloka, N. G., Nugroho, M., & Rahmiyati, N. (2025). The Influence of Working Capital Management, Sustainable Investment, and Environmental Performance on Profitability and Firm Value in the Textile Industry. Journal of Social Interactions and Humanities, 4(2), 539–554. https://doi.org/10.55927/jsih.v4i2.293
Prasetyo, E., Nofryanti, & Holiawati. (2025). COMPARATIVE STUDY OF FINANCIAL AND ENVIRONMENTAL PERFORMANCE: INDONESIAN AND SINGAPOREAN E-COMMERCE COMPANIES. International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC), 3(3), 830–839. https://doi.org/10.61990/ijamesc.v3i3.504
Rima, R., Lusiana, L., & Sari, D. P. (2025). Capital Structure and Financial Performance on Company Value with Profitability as an Intervening Variable. GOVERNORS, 4(1), 1–14. https://doi.org/10.47709/governors.v4i1.5582
Rizal, J., Valdiansyah, R., & Ferdian, S. M. (2025). ASSESSING SUSTAINABILITY ASPECT, INTELLECTUAL CAPITAL, AND OWNERSHIP STRUCTURE IN ENHANCING FIRM PERFORMANCE: THE MODERATING ROLE OF PROFITABILITY. International Journal of Contemporary Accounting, 7(1), 1–22. https://doi.org/10.25105/v7i1.22864
Verawati, V., & Tjakrawala, K. (2025). The Influence of Capital Structure, ESG (Environmental, Social, And Governance), And Firm Size on Financial Performance of Food & Beverage Subsector Companies Listed on the Indonesia Stock Exchange in 2019-2023. International Journal of Current Science Research and Review, 8(4), 1556–1564. https://doi.org/10.47191/ijcsrr/v8-i4-03
Wijayanti, D. A. A., & Arifin, T. (2025). Firm Value Dynamics: The Role of Capital Intensity and Environmental Costs with Profitability to Control. Journal of Economics, Finance And Management Studies, 8(1). https://doi.org/10.47191/jefms/v8-i1-46
Yeni, F., Hadi, H., & Elfiswandi, E. (2025). Growth sales, capital structure and corporate governance on financial performance of energy and basic material sector: Evidence from Indonesia. Journal of Infrastructure, Policy and Development, 9(1), 1–11. https://doi.org/10.24294/jipd3923
Published
2026-02-02
How to Cite
Dasman, S., Tri Sasongko, A., Widiastuti, Saputra, G. A., & Jubaedah, I. (2026). The nexus between Capital Structure, profitability, and environmental performance: empirical evidence from Indonesia . Jurnal Akuntansi Bisnis Pelita Bangsa, 10(02), 187-199. https://doi.org/10.37366/akubis.v10i2.3077
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Articles
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