The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia

Abstract

Corporate governance (CG) and corporate social responsibility (CSR) are important subjects for corporate sustainability that affect firm value (FV). At the same time research results in several countries provide diverse empirical evidence. This study analyzes the impact of corporate governance (CG) and corporate social responsibility (CSR) on firm value (FV) through the cost of capital (CoC) in public companies of Indonesia. The research sample includes 27 companies that publish sustainability reports and corporate governance reports, with an observation period from 2010 till 2016. This study presents the analysis of three firm value proxies (Tobin’s q (TQ), Price Earnings Ratio (PER), and Price to Book Value (PBV)). Results of hypotheses testing using Partial Least Squares (PLS) show that CG and CSR have both direct and indirect effects on FV. These findings are consistent for all three firm value assessments. According to direct testing, CG has a negative effect on FV, while CSR has a positive effect. The CoC acts as a mediating variable in this relationship. The CG and CSR have a negative effect on CoC, while CoC has a negative effect on FV. The findings show that CG and CSR can improve the company performance and corporate image internally and externally, thereby increasing the investors` confidence, and companies have the opportunity to obtain inexpensive funding sources that can reduce CoC. A decrease in CoC can increase profitability and have an impact on FV increasing.

Impact Of Governance Factors on Firm Performance: A Case from Vietnam Consumer Goods Firms

“…In addition, good firm governance means that it also needs to ensure all the interests of stakeholders and the firm's internal relations. This contributes to maintaining sustainable operations and gaining the trust of investors (Kartika et al, 2019). Ferro et al, (2018) and also affirmed that the purpose of governance is to ensure the interests of all stakeholders, thereby maximizing profitability and business efficiency.…”

Peran Tata Kelola Dan Tanggung Jawab Sosial Dalam Meningkatkan Nilai Perusahaan Dengan Ukuran Perusahaan Sebagai Mediasi

“…Karena tingginya nilai perusahaan akan membuat investor yakin akan prospek dan kinerja perusahaan kedepannya (Gantino & Alam, 2020). Nilai perusahaan dapat dipengaruhi oleh banyak faktor seperti tata kelola dan tanggung jawab sosial (Titisari et al, 2019), dan ukuran perusahaan (Diantimala et al, 2021).…”

“…Beberapa studi sebelumnya memberikan bukti empiris bahwa tata kelola perusahaan meningkatkan nilai perusahaan (Ararat et al, 2017;Khanaghah et al, 2019;Le & Nguyen, 2022;Lozano et al, 2016;Singh et al, 2017;Titisari et al, 2019), tanggung jawab sosial perusahaan meningkatkan nilai perusahaan (Butt et al, 2020;Fuadah & Kalsum, 2021;Khanaghah et al, 2019;Titisari et al, 2019), Ukuran perusahaan meningkatkan nilai perusahaan (Diantimala et al, 2021;Hirdinis, 2019;Nguyen et al, 2021). Namun demikian, ukuran perusahaan pada penelitian ini digunakan sebagai variabel mediasi.…”

“…Dari hasil uji t di atas H2 ditolak karena diperoleh hasil yang menyebutkan tanggung jawab sosial tidak mampu mempengaruhi nilai perusahaan. Yang artinya studi ini tidak sejalan dengan kajian terdahulu yang mengatakan tanggung jawab sosial mempengaruhi nilai perusahaan secara positif (Titisari et al, 2019). Dengan kata lain hipotesis penelitian ini ditolak, sehingga pengungkapan corporate social responsibility melalui web resmi entitas tidak mempengaruhi nilai perusahaan.…”

Examining the impact of corporate governance and corporate financial reporting on firm value: A study of selected banks in Nigeria

“…The confidence in quality products and services earns the companies the stakeholders' confidence and legitimacy, which tend to drive corporate growth and firm value on a sustainable length. Kartika, Moeljadi, Ratnawati, and Indrawati (2019) stated that the complexity and problem of firm value are fundamental to the existence of corporate organizations. The going concern of the companies largely depends on economic value, which can deepen corporate effectiveness and competitiveness in the industry where companies operate.…”