Journal of Economics.
Entrepreneurship.
Management Business and Accounting, 2026, 4.
,53-66.
https://doi.
org/10.
61255/jeemba.
Capital Expenditure Environmental Disclosure: ProfitabilityAos Role in Driving Financial Performance Yohanna Thresia Nainggolan*.
Andhika Januardyh .
Truly Wulandari.
Ferica Christinawati Putri.
Rizky Agusriyanti Irna Department of Economics.
Faculty of Economics and Business.
Universitas Borneo Tarakan.
Tarakan, 77123.
Indonesia
ABSTRACT
ARTICLE INFO
Purpose Ae This study investigates financial performance determinants, focusing on capital expenditure .
and environmental management accounting practices in cost allocation and disclosure, with profitability acting as a mediating variable.
Design/methodology/approach Ae A quantitative approach was applied using secondary data from 30 property and real estate companies listed on the Indonesia Stock Exchange (IDX) during 2021Ae Data analysis employed the Structural Equation ModelingAe Partial Least Squares (SEM-PLS) method to assess both direct and mediating relationships.
Finding/Results Ae The results reveal that capex and environmental disclosure do not significantly affect financial performance.
Moreover, profitability fails to mediate the relationship between capex, environmental disclosure, and financial performance.
These findings highlight that investments in capital and environmental initiatives may require a longer-term horizon before influencing profitability and financial performance.
Originality/Value Ae This research introduces a novel perspective by integrating capex and environmental disclosure into one analytical framework and testing profitability as a mediator in the Indonesian property sector context, which remains underexplored.
Keywords:
Resource Based View.
Financial.
Capex.
Environmental Accounting.
Sustainable Article Information:
Received: 04/04/2026 Revise: 17/04/2026 Accepted: 27/04/2026 ISSN:
2985-3168 (Onlin.
2985-3222 (Prin.
________ *Corresponding Author at: yohannathresia@borneo.
Department of Economics.
Faculty of Economics and Business.
Universitas Borneo Tarakan.
Jalan Amal Lama No.
Tarakan, 77123.
Indonesia E-mail address: yohannathresia@borneo.
id (Yohanna Thresia Nainggola.
The work is licensed under a Creative Commons Attribution-ShareAlike 4.
0 International (CC BY-SA 4.
Journal of Economics.
Entrepreneurship.
Management Business and Accounting Introduction The decision to allocate capital expenditure reflects a strategic deployment of corporate resources intended to achieve business objectives, enhance firm value, and ultimately maximize shareholder wealth.
Capital Expenditure (Cape.
is a substantial component with expectations of generating future returns that improve financial performance and strengthen corporate value (Jack & Ngozi, 2.
Achieving sustainable corporate value requires continuous investments to maintain competitiveness in the future.
Through the disclosure of environmental performance management, stakeholders increasingly demand accountability regarding the companyAos responsibility for environmental impacts (Andrefe & Kurniawati.
Sustainability has become a fundamental principle of modern business, characterized by responsibility, innovation, resilience, and the creation of positive impacts on society and the environment (Nafis, 2.
In line with this.
Monge.
Jordy, and Infante .
emphasize that Capex in non-manufacturing companies correlates strongly with short-term market movements, serving as a forward-looking indicator and signaling growth and innovation to market participants.
Conversely, in the manufacturing sector, large-scale capital investments face inherent challenges in translating into immediate market value.
Capex can, however, safeguard companies from decline and support sustainable growth stages (Juniarti & Toly.
To strengthen these practices, sustainability disclosures have become increasingly integrated into corporate reporting, offering deeper insights into risk prioritization, opportunities, and long-term perspectives.
The Indonesian Institute of Accountants .
has issued the Sustainability Disclosure Standards Map as a strategic guideline for preparing quality sustainability reports that align with national competitiveness.
The theoretical foundation of this discussion lies in the Resource-Based View (RBV), which asserts that a firmAos resources, including capital investment, represent strategic options to achieve sustainable competitive advantage (Wernerfelt, 1.
Environmental management practices serve as distinctive and valuable resources that complement financial growth objectives.
High-performing companies are not only active in environmental, social, and governance initiatives but also integrate these efforts into their corporate strategies alongside growth and profitability targets (Doherty et al.
, 2.
Financial performance, in this sense, functions as a key parameter of success, measured through operational efficiency, liquidity, solvency, and profitability (Pardede et al.
, 2.
From a methodological perspective, modern approaches such as SmartPLS are increasingly utilized in predictive and exploratory models to capture the complexity of relationships among Capex, environmental accounting, and profitability.
These models allow researchers to incorporate multiple variables, generate robust interpretations, and iteratively refine frameworks (Sarker et al.
, 2.
Thus, the combination of Capex and Environmental Management Accounting (EMA) in relation to profitability provides a comprehensive and timely avenue for empirical investigation.
Previous research, however, has produced mixed results.
Several studies confirm the positive role of EMA in enhancing financial and environmental outcomes by integrating sustainability into strategic decisions (Deb et al.
, 2023.
Mondal et al.
, 2024.
Rahman et al.
, 2.
Others demonstrate that environmental disclosure and green innovation improve economic performance through efficiency and long-term value creation (Cahyaningsih & Ihroma, 2024.
Oktadifa & Widajantie, 2.
Yet, contrasting evidence indicates that environmental costs and Journal of Economics.
Entrepreneurship.
Management Business and Accounting green accounting practices do not significantly affect profitability, although CSR disclosure yields operational benefits (Okterianda et al.
, 2025.
Widiyanti et al.
, 2.
Similarly, findings on Capex remain inconclusive.
While evidence from the energy sector suggests that Capex significantly improves financial indicators, returns on profitability are less immediate (Silaban et al.
, 2.
Broader analyses in real estate and property industries reveal that Capex and firm growth positively influence firm value and profitability, although profitability often fails to mediate these relationships (Adelin et al.
, 2.
Meanwhile, longterm studies highlight Capex as a Augame changerAy in sustaining competitiveness, though with limited short-term impact (Kwistiasnus & Juniarti, 2.
Moreover, profitability itself remains a central determinant of financial performance, particularly when measured by return on assets (ROA) (A.
Haryono et al.
, 2.
Taken together, these findings suggest that while Capex and EMA are critical strategic tools, their effectiveness in enhancing financial performance is context-dependent and profitability does not always serve as an effective mediator.
Literature Review & Hypothesis Development This study is based on the Resource-Based View (RBV), which explains that firm resources and capabilities are key to achieving competitive advantage (Wernerfelt, 1.
Capital expenditure (Cape.
reflects strategic resource allocation aimed at increasing firm value and supporting long-term performance (Jack & Ngozi, 2024.
Juniarti & Toly, 2.
However, in capital-intensive sectors, the benefits of Capex are often not immediately realized due to long investment cycles (Kwistiasnus & Juniarti, 2.
Environmental Management Accounting (EMA) integrates environmental cost management and sustainability practices into corporate decision-making.
EMA is expected to enhance transparency and efficiency, although its impact on profitability is often limited in the short term due to early-stage implementation (Burritt et al.
, 2.
Financial performance reflects the firmAos ability to achieve its financial objectives, while profitability indicates the firmAos capability to generate earnings and is often used as a mediating variable (Pardede et al.
, 2.
However, empirical findings suggest that profitability does not always effectively mediate the relationship between strategic investment and financial performance.
Based on these arguments, the hypotheses are formulated as follows:
H1: The effect of capital expenditure (Cape.
on profitability Capital Expenditure (Cape.
represents a strategic investment in long-term assets that supports company growth and operational capacity.
Capex reflects future-oriented decisionmaking in resource allocation and is expected to enhance firm value and profitability.
However, due to its long-term nature.
Capex often does not directly generate short-term profitability, especially in capital-intensive industries (Kwistiasnus & Juniarti, 2022.
Siagian et , 2.
H2: The effect of environmental management accounting (EMA) on profitability Environmental Management Accounting (EMA) is used to identify, measure, and manage environmental costs in supporting sustainable business practices.
EMA is expected to improve operational efficiency and profitability through better resource management and environmental responsibility.
However, empirical findings show inconsistent results depending on the level of implementation and industry context (Oktadifa & Widajantie, 2024.
Okterianda et al.
, 2025.
Widjaya & Nursiam, 2.
Journal of Economics.
Entrepreneurship.
Management Business and Accounting H3: The effect of profitability on financial performance Profitability reflects the companyAos ability to generate earnings and is a key indicator of financial performance.
Higher profitability indicates better efficiency in utilizing company resources, which can enhance firm value and investor confidence.
Previous studies show that profitability has a significant influence on financial performance (Alriadi & Setyabudi, 2024.
Haryono et al.
, 2025.
Nurhayati et al.
, 2.
H4: The mediating role of profitability between Capex and financial performance Capital Expenditure is expected to improve financial performance through increased profitability as a result of effective asset utilization.
However, the success of Capex depends on how well the investment is managed and translated into profit.
Therefore, profitability plays a mediating role in linking Capex to financial performance (Silaban et al.
, 2.
H5: The mediating role of profitability between EMA and financial performance EMA is expected to influence financial performance through profitability by improving efficiency and enhancing corporate reputation.
Environmental disclosure and sustainability practices can attract investors and increase firm value.
Empirical studies indicate that profitability can mediate the relationship between environmental practices and financial performance (Deb et al.
, 2.
Methodology This study employed a quantitative causal-comparative design to examine the relationship among capital expenditure (Cape.
, environmental management accounting (EMA), profitability, and financial performance, using secondary data derived from financial statements, annual reports, and sustainability reports of property and real estate companies listed on the Indonesia Stock Exchange (IDX) during the 2021Ae2023 period.
Judgment sampling, or purposive sampling, was applied to determine the research samples, with the criteria including: .
companies from the property and real estate sector listed on the IDX during the observation period.
companies that complied with sustainability disclosure standards through the publication of either integrated or stand-alone annual or sustainability and .
companies that disclosed environmental management costs in accordance with the Financial Services Authority Circular Letter (SEOJK) No.
16/SEOJK.
04/2021 concerning the format and content of annual reports for issuers or public companies.
The description of the company selection criteria is attached in Table 1.
Table 1.
Sample Selection No.
Criteria Real Estate and Property Sector Companies Listed on the IDX Companies without disclosure of sustainability values reflected in compliance publish annual reports or sustainability reports, either integrated or separate, for the 2021-2023 period.
Environmental management costs are not disclosed based on the format of the issuer's annual report, as per the Financial Services Authority Circular Letter (SEOJK) Number 16/SEOJK.
04/2021.
Number of selected sample companies Observation Period .
Total Sample (Selected x Year.
Source: (Processed data, 2.
Total Journal of Economics.
Entrepreneurship.
Management Business and Accounting To analyze the data.
Structural Equation Modeling with Partial Least Squares (SEM-PLS) was employed using SmartPLS software, which enables the testing of complex relationships, mediation effects of profitability, and the combined influence of Capex and EMA on financial The analysis consisted of two main stages: evaluation of the measurement model .
uter mode.
and evaluation of the structural model .
nner mode.
The outer model assessed the reliability and validity of the constructs by testing convergent and discriminant validity.
Convergent validity was evaluated through the Average Variance Extracted (AVE), with acceptable Ou0.
50 for AVE (Hair et al.
, 2.
Discriminant validity was examined using cross-loadings, ensuring that each construct was distinct and not excessively correlated with others.
Reliability was measured through CronbachAos Alpha and Composite Reliability, with CR expected to exceed CA to indicate internal consistency.
Model fit was tested using the Standardized Root Mean Square Residual (SRMR), with values <0.
indicating acceptable model fit.
The inner model evaluated the structural relationships among latent variables.
Predictive accuracy was assessed using RA values, where Ou0.
75 indicates strong.
Ou0.
50 moderate, and Ou0.
weak explanatory power (Chin, 1.
Effect sizes .
A) were calculated to measure the contribution of each exogenous variable, with thresholds of 0.
, 0.
, and 35 .
(Cohen, 1.
Path coefficients were estimated to determine the strength and direction of causal relationships, and significance was tested through bootstrapping, with Tstatistics Ou1.
96 or p-values O0.
05 considered significant at the 5% level.
The variables in this study consist of independent, dependent, and mediating constructs.
The independent variables are Capital Expenditure (Cape.
and Environmental Management Accounting (EMA).
Capex refers to company expenditures for acquiring or maintaining longterm tangible assets and was measured as the ratio of capital expenditure to total assets (Capex/TA), reflecting the firmAos capital allocation strategy.
EMA is defined as the integration of monetary and non-monetary measures related to environmental management within internal accounting practices, particularly disclosures of environmental management costs and sustainability-related reporting.
The dependent variable is financial performance, which represents the extent to which a company achieves its financial objectives.
This was assessed through accounting-based indicators such as profitability, solvency, and operational efficiency, serving as a proxy for shareholder value creation and alignment with corporate governance practices.
Finally, profitability, measured primarily by Return on Assets (ROA), was incorporated as a mediating variable to capture the firmAos ability to generate earnings and to examine its role in bridging the effects of Capex and EMA on financial performance.
The detailed definitions, measurement indicators, and references for each variable are presented in Table 2.
Table 2.
Variable Definitions and Measurement Indicators Variable Independent Indicators Capital Expenditure:
CapX1 = Total Capital Expenditure (PP&E (Current Yea.
Ae PP&E (Previous Yea.
rom the Balance Shee.
Depreciatio.
/ Total Assets Scale Reference Ratio (Moussa Elmarzouky, 2023.
Ullah et al.
, 2021.
Vipond, 2.
Journal of Economics.
Entrepreneurship.
Management Business and Accounting CapX2 = Total Fixed Assets/Assets Ratio (Desvita & Rahma.
Widiyati.
Environmental Management Accounting:
EMa1 = Ln (Environmental Cost.
Ratio (Nababan Hasyir, 2.
EMa2 = Ratio (Kong Ratio (Widiatami et al.
yuycAycycoycayceyc ycuyce yceycycoyceycnycoycoyceycc yaycAya ycnycuyccycnycaycaycycuycyc ycNycuycycayco yaycuyccycnycaycaycycuycyc Dependent Financial Performance:
KinJ1 (TobinsAoQ) = ycAycaycycoyceyc ycOycaycoycyce ycNycuycycayco yayceycayc ycNycuycycayco yaycycyceyc KinJ2 (MVA) = Ratio (Ikatan Akuntan Indonesia, 2.
Ratio (Corporate Finance Institute, 2.
Ratio (Juniartin & Aji.
Nurhayati et , 2025.
Sudana, (Migliaccio Palma.
Sudana, 2.
(Silaban et al.
, 2024.
Sudana, 2.
ycAycycoycayceyc ycuyce ycCycycycycycaycuyccycnycuyci ycIEaycaycyceyc ycu ycIEaycaycyce ycEycycnycayce .
cNycuycycayco yayceycayc yaycycycnycyc ) Oe ycIEaycuycycOeycyceycyco yayceycayc KinJ3 (Market to Book Valu.
= ycAycaycycoyceyc yaycaycyycnycycaycoycnycycaycycnycuycu yaAycuycuyco ycOycaycoycyce ycCyce yaycycycnycyc Intervening PRof1 (ROA) = PRof2 (ROE) = ycAyceyc yaycuycaycuycoyce ycNycuycycayco yaycycyceycyc ycAyceyc yaycuycaycuycoyce Ratio ycNycuycycayco yaycycycnycyc PRof3 (ROI) = ycAyceyc yaycuycaycuycoyce yaycaycyycnycycayco yaycuycyyceycuyccycnycycycyce Ratio ycNycuycycayco yaycycyceycyc Notes: CapX = Capital Expenditure.
EMa = Environment Management Accounting.
KinJ = Financial Performance, dan PRof = Profitability Source: (Processed data, 2.
Result and Discussion Capex and EMA as TodayAos Strategic Approaches Findings highlight that Capital Expenditure (Cape.
and Environmental Management Accounting (EMA) hold substantial promise as strategic instruments for achieving sustainable corporate growth.
Although the direct influence of Capex on financial performance is relatively weak, its small-to-moderate effect on profitability suggests that capital investment can gradually enhance firmsAo productive capacity and operational efficiency.
Over time, effective Capex management may contribute to improving long-term firm value and strengthening competitiveness in the property and real estate sector.
Similarly, the modest but positive effect of EMA on financial performance indicates that companies are beginning to integrate sustainability and environmental responsibility into their financial decision-making This trend demonstrates increasing awareness among Indonesian firms toward Journal of Economics.
Entrepreneurship.
Management Business and Accounting aligning investment and reporting practices with global sustainability standards, as guided by the Financial Services Authority (SEOJK) and the Sustainability Disclosure Standards Map issued by the Indonesian Institute of Accountants.
However, the study also reveals several problems and challenges that hinder the full realization of these potentials.
The low RA and fA values indicate that both Capex and EMA contribute only marginally to explaining variations in profitability and financial performance.
This suggests that sustainability-oriented investments have yet to translate into substantial financial returns, likely due to delayed capital recovery periods, limited integration of environmental metrics in strategic decision-making, and weak institutional enforcement of disclosure standards.
Moreover, profitability fails to function effectively as a mediating variable, implying that the financial benefits of environmental initiatives are not yet internalized in corporate operating models.
Sectoral characteristicsAisuch as long project cycles, high capital intensity, and market volatilityAifurther reduce the short-term visibility of returns from sustainability-oriented expenditures.
Overall, while the implementation of Capex and EMA demonstrates emerging potential for strengthening financial sustainability.
Indonesian property and real estate firms still face significant obstacles in converting environmental and investment commitments into tangible financial outcomes.
Strengthening managerial capabilities, refining sustainability measurement frameworks, and extending investment horizons are necessary to optimize both financial and environmental performance outcomes.
Analysis of SEM-PLS Data The data analysis followed the established research procedures, consisting of two main stages:
the evaluation of the outer model .
easurement mode.
and the inner model .
tructural Each stage was analyzed using SmartPLS version 4 to test the validity, reliability, and significance of the causal relationships among the variables.
Figure 1.
Latent Variable Testing Model Design Source: (Processed Data SmartPLS 4, 2.
Convergent validity assesses the degree to which a set of indicators correlates with their corresponding construct.
The primary assessment criterion is the outer loading factor of each According to (Chin, 1.
, loading values between 0.
60 and 0.
70 are acceptable, while (S.
Haryono, 2.
suggests that loadings of Ou 0.
50 may still be retained, and those O 0.
should be eliminated.
As presented in Tabel 3, all indicators associated with Capital Expenditure (Cape.
Environmental Management Accounting (EMA).
Profitability, and Journal of Economics.
Entrepreneurship.
Management Business and Accounting Financial Performance exhibit loading values above 0.
600, confirming that the indicators are strongly correlated with their constructs and establish good convergent validity.
Table 3.
Convergent Validity (AVE) Variabel
Average Variance Extracted (AVE) Desc
Capex
0,808
Valid
EMA
0,686
Valid Profitabilitas 0,996 Valid Kinerja Keuangan 0,785 Valid Source: (Processed Data SmartPLS 4, 2.
Discriminant validity ensures that each construct is distinct and not highly correlated with other constructs.
This was evaluated using the Fornell-Larcker criterion, which compares the square root of the Average Variance Extracted (OoAVE) for each construct with its correlations with other constructs.
As shown in discriminant validity was confirmed for all variables.
For every construct, the OoAVE exceeds its correlations with other variables, indicating sufficient distinctiveness: Capex (OoAVE = 0.
: correlations with other variables (Ae0.
094, 0.
002, 0.
EMA (OoAVE = 0.
: correlations with other variables (Ae0.
Ae0.
Ae0.
Financial Performance (OoAVE = 0.
: correlations with other variables .
Ae0.
314, 0.
Profitability (OoAVE = 0.
: correlations with other variables .
Ae0.
120, 0.
These results confirm that all constructs meet the discriminant validity requirements, ensuring the model effectively distinguishes among the latent variables.
Table 4.
Hypothesis Test Result Variable Relationship Coefficient T-Statistic P-Value Capex Ie Financial Performance -0,055 0,928 0,353 Capex Ie Profitability 0,306 1,838 0,066 EMA Ie Financial Performance -0,308 2,303 0,021 EMA Ie Profitability -0,091 0,577 0,564 Profitability Ie Financian Performance 0,088 0,455 0,649 Capex Ie Profitability Ie Financial Performance 0,027 0,429 0,668 EMA Ie Profitability Ie Financial Performance -0,008 0,166 0,868 R (Financial Performanc.
= 0,106 R2 (Profitabilit.
= 0,107 Notes: A path is considered significant when T-statistic Ou 1.
96 at a 5% level .
wo-taile.
and Pvalue O 0.
Source: (Processed Data SmartPLS 4, 2.
Then, hypothesis testing applies bootstrapping procedures to evaluate the direct and indirect relationships between Capital Expenditure (Cape.
Environmental Management Accounting (EMA).
Profitability, and Financial Performance.
Based on the results of the Structural Equation Model, it was found.
Profitability = CA 0.
306(Cape.
- 0.
091(EMA) ACA and Financial Performance = CA 0.
055(Cape.
- 0.
308(EMA) 0.
088(Profitabilit.
027(Capex y Profitabilit.
- 0.
008(EMA y Profitabilit.
ACC After testing and interpreting the data, analyzes the causal relationships between Capital Expenditure (Cape.
and Environmental Management Accounting (EMA) toward Financial Performance, with Profitability acting as the mediating variable.
Integrating the empirical Journal of Economics.
Entrepreneurship.
Management Business and Accounting findings with the Resource-Based View (RBV) as the grand theory and Agency Theory as the supporting framework.
The Effect of Capital Expenditure (Cape.
on Profitability The results indicate that Capital Expenditure (Cape.
has no significant effect on Profitability ( = 0.
T = 1.
P = 0.
Although the T-statistic approaches the threshold of 1.
96, it does not meet the 5% significance criterion, leading to the rejection of the first hypothesis (H.
This finding is consistent with (Siagian et al.
, 2.
and (Adelin et al.
, 2.
, who also found an insignificant relationship between Capex and profitability, but contrasts with (Inrawan et , 2.
, who reported a positive effect.
From the RBV perspective.
Capex represents a strategic investment in valuable and rare resources, such as land and large-scale property development.
However, these resources must be transformed into productive capabilities before generating competitive advantage.
During the 2021Ae2023 observation period, many firmsAisuch as SMRA and MKPIAiallocated Capex toward long-term investments like land banking and property expansion.
These assets had yet to produce immediate financial returns, explaining the lack of short-term profitability effects.
Meanwhile, under Agency Theory, excessive capital spending may reflect empire-building behavior, where managers pursue prestige and firm expansion rather than maximizing shareholder value.
Such misalignment between managerial actions and shareholder objectives leads to inefficiencies in capital allocation, thereby weakening the relationship between Capex and profitability.
The Effect of Environmental Management Accounting (EMA) on Profitability The analysis reveals that Environmental Management Accounting (EMA) does not significantly affect Profitability ( = -0.
T = 0.
P = 0.
, resulting in the rejection of H2.
This outcome aligns with (Okterianda et al.
, 2.
but contradicts (Widjaya & Nursiam, 2.
and (Oktadifa & Widajantie, 2.
, who reported a positive relationship.
According to the RBV, environmental management practices are a form of emerging capability that requires substantial initial investment before delivering measurable financial returns.
During the 2021Ae2023 period, most property companies were still at the early implementation stage of EMAAifocusing on environmental certifications, sustainability reporting, and waste management systems.
These costs, being immediate expenses, have not yet transformed into sources of competitive advantage.
Examples include BAPA and BCIP, which recorded environmental expenditures mainly for waste and site maintenance without strategic follow-up, and BEST, which allocated environmental capital but failed to realize corresponding profitability gains.
From an Agency Theory lens, some firms may engage in greenwashingAidisclosing environmental actions primarily for legitimacy purposes rather than operational effectivenessAithereby increasing costs without improving financial results.
Hence, while EMA adoption aligns with global sustainability objectives, the short-term financial implications remain limited as the capability has not matured into a value-creating strategic asset.
The Effect of Profitability on Financial Performance The third hypothesis (H.
testing the relationship between Profitability and Financial Performance was also rejected ( = 0.
T = 0.
P = 0.
This finding diverges from studies by (A.
Haryono et al.
, 2.
, (Nurhayati et al.
, 2.
, and (Alriadi & Setyabudi, 2.
, which found significant positive associations.
This inconsistency stems primarily from the difference in performance measurement.
Previous studies predominantly relied on Journal of Economics.
Entrepreneurship.
Management Business and Accounting accounting-based metrics such as Return on Assets (ROA), while this study uses a marketbased measure (TobinAos Q) that reflects investor perception of firm value.
From the RBV viewpoint, firm value in the property sector is heavily influenced by the potential of strategic resourcesAisuch as extensive land banks and development prospectsAi rather than immediate profit outcomes.
Simultaneously.
Agency Theory explains that information asymmetry may cause managerial focus on accounting profits, while investors emphasize future growth and resource strength.
Consequently, profitability does not necessarily translate into improved market-based financial performance.
The Mediating Role of Profitability between Capex and Financial Performance The mediating effect of Profitability on the relationship between Capex and Financial Performance was found to be insignificant (P = 0.
668 > 0.
, leading to the rejection of H4.
Since both direct effectsAiCapex Ie Profitability and Profitability Ie Financial PerformanceAi are statistically insignificant.
Profitability cannot serve as an effective mediating variable.
This suggests that while firms invest heavily in long-term strategic assets, these investments have not yet translated into short-term profit generation or enhanced financial outcomes.
For example, firms such as ASRI.
BAPA.
BCIP.
CTRA, and BSDE increased fixed assets and land holdings during the study period but did not achieve commensurate profitability.
From an RBV perspective, these expenditures contribute to resource accumulation but have not yet evolved into value-generating capabilities.
Under Agency Theory, managerial priorities may lean toward long-term asset expansion rather than immediate profitability, diluting the mediating effect of Profitability on firm value.
The Mediating Role of Profitability between EMA and Financial Performance The final hypothesis (H.
, which posits that Profitability mediates the relationship between EMA and Financial Performance, was rejected (P = 0.
868 > 0.
This finding contrasts with (Deb et al.
, 2.
and (Mukti & Priyawan, 2.
, who reported positive indirect effects through Both mediation pathways failed in this study.
The first path.
EMA Ie Profitability, was insignificant (P = 0.
, indicating that environmental initiatives and sustainability expenditures did not enhance profitability.
The second path.
Profitability Ie Financial Performance, was also insignificant (P = 0.
, implying that even when profits were earned, they did not improve market-based performance.
Examples such as GMTD.
BIPP, and DUTI show that environmental spending was confined to compliance and operational maintenance rather than strategic transformation.
In line with RBV, the AugreenAy capabilities of these firms remain underdeveloped and have not become sources of competitive advantage.
From an Agency Theory standpoint, investors may not yet perceive environmental commitments as financially materialAiespecially in the absence of mandatory sustainability reporting regulationsAileading to weak market responses Conclusion and Suggestion This study examines the causal relationship between Capital Expenditure (Cape.
Environmental Management Accounting (EMA).
Profitability, and Financial Performance in property and real estate companies in Indonesia from 2021 to 2023.
The results show that neither Capital Expenditure nor EMA has a significant direct or indirect effect on Financial Performance, and Profitability does not mediate the relationship.
While Capital Expenditure contributes to resource accumulation and strategic expansion, its long-term nature delays financial returns.
Similarly.
EMA practicesAiwhile aligned with sustainability principlesAiare still in the investment and compliance phase, not yet generating measurable profitability Journal of Economics.
Entrepreneurship.
Management Business and Accounting Profitability itself was found not to significantly drive Financial Performance, indicating that investors in this sector are more focused on long-term asset and growth potential rather than short-term accounting profits.
Compared to previous research, this study offers a contrasting perspective.
Although some studies report a positive relationship between Capital Expenditure.
EMA.
Profitability, and firm performance, this study highlights that the relationship may not hold true in capitalintensive sectors undergoing post-pandemic recovery.
The novelty of this research lies in the integration of Resource-Based View (RBV) and Agency Theory to explain why strategic investments and environmental initiatives have not matured into performance-enhancing Empirically, this research highlights the temporal gap between resource allocation and financial realizationAisuggesting that value creation from sustainability and capital efficiency is still an evolving process.
Thus, this study contributes to the understanding that in emerging markets such as Indonesia, sustainable financial performance depends not only on resource investment, but also on the company's ability to transform those resources into competitive capabilities that balance profitability and stakeholder alignment.
Limitations and Future Research This study is limited by its relatively short observation period .
1Ae2.
, which may not fully capture the long-term effects of capital expenditure and environmental management accounting on financial performance.
In addition, the sample is restricted to property and real estate companies, which may limit the generalizability of the findings to other sectors.
Furthermore, the study employs a limited number of variables, which may not comprehensively explain variations in financial performance.
Therefore, future research is recommended to extend the observation period in order to better capture long-term impacts.
It is also suggested to include a broader range of sectors to enhance Moreover, incorporating additional variables such as corporate governance, firm size, and market-related factors may provide a more comprehensive understanding of financial performance.
Future studies may also consider applying alternative analytical methods to improve the robustness and reliability of the findings.
Reference