A company must have a goal, and that is to make a profit. Profit is the difference between revenue and total costs (Barney, 2018). Profitability ratio analysis can be used to determine a company's profits. Company profits can be calculated using profitability ratios. Ratios of profitability are used to determine a company's capacity to receive revenue or profits (Petchsakulwong & Jansakul, 2018). A profitability ratio is a kind of analytical ratio that is used to measure financial performance. A company's financial performance is used as an indicator of its accomplishments during a specified time period.

The company will improve its financial performance in order to attract investors. When investors make investment decisions, they consider not only a company's financial performance but also non-financial information (Davern et al., 2019). Non-financial performance and relevant information are called voluntary disclosures (Scaltrito, 2016). Developing countries still have low voluntary disclosure rates ((Mahmudah et al., 2023); (Zaini et al., 2018)). In fact, voluntary disclosure is important for companies because it can provide information for investors when making investment decisions (Sihombing et al., 2017).

The company will report more detailed information to attract investors (Trisnawati et al., 2022). Investors will be interested in the company's disclosures if they are of good quality (Chen et al., 2011). The information reported by the company can include disclosures of social and environmental responsibility. This responsibility is a form of corporate contribution to the well-being of society ((Barauskaite & Streimikiene, 2020); (Li et al., 2019)). In terms of environmental responsibility, companies contribute to the mitigation of climate change caused by global warming. Global warming has the potential to lead to an increase in greenhouse gases (GHGs), such as carbon dioxide (CO₂) (Al-Ghussain 2019). According to the Indonesian Minister of Transportation, 342 million tons of carbon emissions were produced in the ASEAN region, with Indonesia producing around 27 percent of those emissions (Amalia, 2022). According to the International Energy Agency, the world's largest production of carbon dioxide reached a record by 2022, as energy production grew by 0.9% to 36.8 gigatons (VOA Indonesia 2022).

Increased carbon dioxide production will lead to increasingly worrying environmental problems as it will impact environmental and health problems ((Lee et al., 2015); (Tang et al., 2020)). Carbon dioxide can be caused by a company's operating activities, mining and energy companies are the main sources of carbon emissions ((Aguirre-Villegas & Benson, 2017); (Othman & Jafari, 2016); (Desai et al., 2022)). Governments and some groups will put more pressure on environmentally exposed companies (Alfani & Diyanty, 2020). So it will need the cooperation of many parties to solve the issue. The company wants to contribute to the solution by disclosing carbon emissions. (Robaina & Madaleno, 2020) contend that higher levels of carbon disclosure would improve financial performance.

The company is also trying to protect its reputation, one of which is by reporting carbon emission disclosures. Companies that disclose carbon emissions will have an impact on the company's reputation. A company's reputation will improve if it discloses its carbon emissions (Gallego-Álvarez et al., 2015). Companies need to involve various parties in disclosing carbon emissions. One of the parties involved is the shareholder. In a company, there's a share ownership structure, one of which is institutional ownership. Institutional ownership refers to the proportion of a company's shares that are owned by various institutions, including banks, insurance companies, social security funds, mutual funds, and government ((El-Diftar et al., 2017); (Lin & Fu, 2017)). According to (Shen et al., 2020), the existence of institutional investors will result in an increase in the amount of carbon information that is disclosed. As a result, institutional investors' monitoring is important, because institutional investors are frequently perceived to be under pressure, they are more active in making sure the company is on the right course (Ogabo et al., 2021). If institutional ownership is related to financial performance, the company's financial performance will improve ((Abedin et al., 2022); (Drobetz et al., 2021); (Hsu & Wang, 2014); (Lin & Fu, 2017)).

Alsaifi, Elnahass, and Salama (2020) state that carbon disclosure can improve the financial performance of companies. However, companies with a high carbon intensity tend to have low financial performance (Nguyen, 2018). There are gaps in the research based on the literature review that was conducted. The disclosure of carbon emissions in past research has shown that carbon disclosures have a positive effect on financial performance ((Capece et al., 2017); (Datt et al., 2019); (Gabrielle & Toly, 2019); (Gallego-Álvarez et al., 2015); (Ganda, 2018); (Hardiyansah & Agustini, 2021); (Lee & Cho, 2021); (Siddique et al., 2021)). Other studies showed different results ((Desai et al., 2022); (Ganda & Milondzo, 2018); (Han et al., 2020); (Houqe et al., 2022); (Kurnia et al., 2021);(Luo, 2017); (Muhammad & Aryani, 2021); (Saka & Oshika, 2014); (Sun et al., 2022)).

The inconsistency of previous studies motivated researchers to examine whether carbon emission disclosure could improve financial performance, with institutional ownership as a moderating variable. The research also uses control variables such as corporate size, leverage, liquidity, and cash ((Safiullah et al., 2022); (Córdova et al., 2018); (Detthamrong et al., 2017); (Ibhagui & Olokoyo, 2018); Norli, Ostergaard, and Schindele 2015; (Yu et al., 2018)). The novelty of this study is its focus on mining, energy, and transportation companies in Malaysia and Indonesia, as most of the previous research used manufacturing companies, and this research uses moderating variables. The purpose of this study is to examine the effect of carbon emission disclosure on financial performance, with institutional ownership as a moderating variable.

This research data is collected from the Stock Exchange and the research objects of Indonesian and Malaysian mining and transportation companies. The sampling used in this study is purposive sampling with the following criteria:

Mining and transportation companies listed on the Indonesian and Malaysian stock exchanges are examined in this study. The sample of this study consists of 61 companies listed on the Indonesian and Malaysian stock exchanges for the period from 2018 to 2022. The test in this study used E-Views 12, and this test used moderated regression analysis because this study uses moderating variables. Before testing moderated regression analysis to determine the model or panel data technique, this study was tested through the Chow test and the Hausman test. The results of these tests can be seen in Table 3.

Based on the chow test, when the p-value is > 0.05, the selected model is the common effect model, and when the p-value is < 0.05, the selected model is the fixed effect model. The result of the chow test in this study is that the p-value is 0.0000, which means the p-value is < 0.05 so this study uses a fixed effect model. This study carried out the Chow test first, then the Hausman test.

Based on the Hausman Test, when the p-value is > 0.05, the selected model is a random effect model, and when the p-value is < 0.05, the selected model is a fixed effect model. The result of the Hausman test in this study is that the p-value is 0.0000, which means the p-value is < 0.05 so this study uses a fixed effect model. From both tests, between the Chow and the Hausman tests, the results showed a p-value < 0.05 so this study used a fixed effect model. After determining the model used in the research, this research will show a descriptive statistical analysis in Tabel 4.

Based onTabel 4, descriptive statistics on this study with the period from 2018 to 2022, carbon emission disclosure (CED) has an average value of 2.0524, a median value of 1.0000 and a minimum value of 0.0000, which means that the level of carbon emissions disclosures in mining and transportation companies is still low and the levels of carbon emissions are still below average. When viewed from the minimum value, some companies have not yet disclosed carbon emissions. An average ROA of 0.0324 means the impact of carbon emission disclosure resulted in an increase in ROA of 3.24% and a minimum ROA value of -0.3795 indicates that the company also experienced a decline in profits. Moreover, when viewed from the perspective of institutional ownership (IO), the average value of 0.1335 means institutional holdings in mining and transportation companies in 2018–2022 of 13.35%. Descriptive statistics in this study have been described in Tabel 4. The research also carried out the Chow test and the Hausman test to determine the model. The fixed effect model is a model that will be used in this study. The model will be used in regression tests. The regression test results can be seen in Table 5.

In a regression test, when the p-value is < 0.05, H₁ is accepted, and when the p-value is > 0.05, H₂ is rejected. The carbon emission disclosure (CED) for p-value is 0.0049, meaning p-value < 0.05 and coefficient value -0.0090 so that the CED variable has a significant negative impact on ROA. In this study, using the moderating variable IO, the analysis uses the model of moderated regression analysis. The model can be seen in Table 5 CED*IO shows a p-value of 0.0224, which means a p-value < 0.05 and a coefficient value of 0.0329 so the IO variable strengthens the influence between CED and ROA.

Based on Table 5, this study also shows the F test and the determination coefficient (Adjusted R-squared). Table 5 shows a determination coefficient of 0.5430, then the contribution of the variable carbon emission disclosure to financial performance is 54.30%, while the remaining percentage is accounted for by other factors. As for the F test in Table 5 shows p-value 0.0000 (0.0000 < 0.05), it means that independent variables and control variables simultaneously affect dependent variables.

The results of this study for H₁ were rejected by using the regression test, indicating that CED had a significantly negative effect on ROA. The results are the same as previous research ((Muhammad & Aryani, 2021); (Desai et al., 2022); (Han et al., 2020); (Houqe et al., 2022)). Disclosing carbon emissions can negatively impact a company's financial performance, potentially resulting in a decline in profits. According to (Muhammad & Aryani, 2021), disclosing carbon emissions requires high costs. The effects of investments aimed at protecting the environment are thought to provide only a small financial benefit to the company (Alvarez, 2012). Moreover, in 2020–2021, when the Covid-19 pandemic occurred, several companies experienced a decline in profits. As a result of the decline in profits, the company diminishes its investment in environmental programs. When the company's financial performance begins to recover, it will reinvest. In addition, for companies in developing countries, environmentally friendly technology is still relatively expensive, so it is necessary to provide incentives and cost efficiency (Ganda & Milondzo, 2018). Disclosure of carbon emissions is expensive, this will be an advantage for companies because not all companies disclose carbon emissions. The regression test results for H₂ (received) show that the institutional ownership variable moderated the effect of carbon emission disclosure on return on assets. The findings are consistent with the research ((Benlemlih et al., 2023); (Kordsachia et al., 2022); (El-Diftar et al., 2017). Institutional owners, such as banks, will work to encourage the companies they invest in to disclose their carbon emissions (El-Diftar et al., 2017).

Institutional ownership is motivated to disclose carbon emissions in order to protect their image and reputation. They assume that this disclosure will improve the value of their investment portfolio (Krueger et al., 2020). Some of the institutional investors take an active part in monitoring and improving the performance of the company. The gap between managers and agents will also be smaller because the company has institutional investors. But, institutional investors from insurance agencies are considered sensitive to pressure, which will trigger a conflict of interest because they have potential business relationships with the company ((Bae et al., 2018); (Lin & Fu, 2017); (Hong & Linh, 2023)).

This research examines the influence of carbon emissions on the financial performance of transportation and mining companies. Carbon emissions from mining operations that are expected to be environmentally sensitive must be disclosed. There will be a correlation between financial performance and carbon emission disclosure, as the disclosure of carbon emissions by a company will result in a decline in financial performance. This is due to the considerable expenses that have accrued. The findings of this study indicate that carbon emission disclosure has a significant negative impact on return on assets. Moreover, institutional ownership could moderate the effect of carbon emissions disclosures on returns on assets.

This research contributes to the fact that very environmentally sensitive companies care about carbon emission disclosure, although in financial terms the companies experience a decrease in profits as a result of the costs incurred for disclosing carbon emissions. On the other hand, it will be an advantage that not all companies disclose. This study also suggests that institutional ownership could push companies to disclose their carbon emissions.

The limitations of this research on carbon emission disclosure cannot prove whether the company actually disclosed it or not. This research only uses sustainable reports and annual reports, so hopes for future research could use other media to look at the carbon emissions disclose by the company.