THE IMPACT OF CLIMATE CHANGE DISCLOSURE PERFORMANCE ON FINANCIAL DISTRESS AMONG ENERGY SECTOR COMPANIES

Abstract

This study examines the effect of Climate Change Disclosure Performance (CCDP) and audit quality on financial distress and investigates the moderating role of audit quality in the relationship between CCDP and financial distress among energy sector companies listed on the Indonesia Stock Exchange during the 2018-2024 period. A quantitative approach was employed using panel data selected through purposive sampling. Financial distress was measured using the AC_Dis proxy, CCDP was assessed based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and audit quality was proxied by the use of Big Four and non-Big Four accounting firms. Hypotheses were tested using Moderated Regression Analysis (MRA). The results show that CCDP is negatively and significantly associated with financial distress, suggesting that greater transparency regarding climate-related information can help reduce a firm's risk of financial distress. In contrast, audit quality is not significantly associated with financial distress. The findings also reveal that audit quality weakens the negative relationship between CCDP and financial distress, indicating a substitution effect between external monitoring and voluntary disclosure in mitigating information asymmetry. Overall, the results highlight the strategic role of climate change disclosure in strengthening the financial resilience of energy sector firms.

Keywords: Climate Change Disclosure Performance, audit quality, financial distress, energy sector, TCFD.