The Influence of Management Control System and Environmental Management Control System on Environmental Performance and Its Implications on Company's Financial Performance: Empirical Study on Coal Mining Industry in Indonesia

Abstract

The inability of coal mining companies to anticipate environmental changes associated with the decline in coal demand as a result of the global economic slowdown is an environmental change that coal mining companies are unable to anticipate, allegedly as a result of ineffective management control (Management Control System/MCS). The ineffective implementation of reclamation in the mining area, despite being mandated by the Indonesian government, has caused environmental damage in the coal mining area. Based on this, the purpose of this study is to determine the impact of the Management Control System (MCS) and the Environmental Management Control System (EMCS) on environmental performance and the financial performance of the company. This study is a quantitative descriptive and verification study. In this study, the unit of analysis and the unit of observation are all coal mining companies that are members of the Indonesian Coal Mining Association (APBI) as of December 31, 2019, which are categorized into groups of companies that have been listed on the Indonesian stock exchange and groups of companies that have not been listed on the Indonesian stock exchange. According to this study, there are 35 Indonesian coal mining enterprises. The results of the study indicate that the Management Control System (MCS) and Environmental Management Control System (EMCS) are urgently required to enhance the company's environmental performance, which will have an effect on its financial performance. The novelty produced by the research is used to prepare proposals for the application of research findings in an effort to improve the performance of coal mining companies in Indonesia through environmental performance improvement and the development of a Management Control System (MCS) and an Environmental Management Control System (EMCS).