The Triple Bottom Line Effect on Emerging Market Companies: A Test of Corporate Social Responsibility and Firm Value Relationship

Abstract

Over the last twenty years, after corporations have historically focused their reporting systems on the provision of financial information needed by managers and shareholders to assess risks and calculate returns, the global awareness of the need to assess the full spectrum of corporate value has grown dramatically. The triple bottom line or total returns on capital-economic, social, or environmental-are now tracked with increasing regularity. Prior research has revealed that a significant pressure of economic changes, an increase in interest in corporate social responsibility (CSR) in recent years, and an acknowledgement of it as an important research topic has brought a bigger and wider effort to build a comprehensive framework. Little empirical research on the effect of corporate social responsibility together with profitability on firm value is done in Southeast Asian countries. This study extends the literature that has been done mostly in western societies by proposing a further linkage between social responsibility, profitability, and firm value, which is rarely investigated in non-western societies. The study analyzed 35 Indonesian manufacturing firms that are listed in Indonesian Stock Exchange (IDX) and report their CSR as the supplement in the annual report. Statistic methods used for testing the hypothesis are T-test and multivariate regression model. The empirical results reveal that CSR has significantly influenced the firm value of Indonesian manufacturing companies. However, one striking finding in this study is the insignificant influence of two measures of profitability, i.e. ROA and ROE, over firm value of those companies have good CSR. These results explicitly show how firms in emerging countries are going to be more concerned with social sustainability and long-run profitability.

Mediation of CSR and Profitability on the Influences of GCG Mechanisms to the Firm Value

“…ROE influence on PBV, so hypothesis 14 was accepted. These findings supported Mardiati et al (2012) but in contrary to research conducted by Arafat et al (2012) who proved return on equity did not affect the firm value.…”

The Effects of Knowledge, Training, and Competency on the Performance: A Case of Local Public Agricultural Mentors

“…The more in-depth the knowledge of the field agricultural mentors/officers is, the higher their performance is. This finding is in line with the research that found a significant positive relationship between the variable knowledge and the variable employee performance (Arafat et al, 2012;Kohansal et al, 2013;Nuryanti et al, 2018;Payal et al, 2019;Rizan et al, 2020). As conveyed by Palumbo et al (2005), knowledge contributes a more significant variance in performance improvement.…”

“…When it comes down to field agricultural mentors/officers, Sumardjo (2008) opines that field mentors/officers' competency is the characteristic attached to a mentor/officer that determines his/her performance effectiveness in assuming the field agricultural mentorship missions. Employees must have high competencies in order to be able to respond to changes in the environment and thus improve performance (Arafat et al, 2012;Sabuhari et al, 2020). The higher the employee competency is, the higher the organizational performance is, and the lower the employee competency is, the lower the organizational performance is (Suharno & Despinur, 2017;Rizan et al, 2020).…”

The Influence of Corporate Governance, Corporate Social Responsibility, Firm Size on Firm Value: Financial Performance as Mediation Variable

“…Joseph (2016), in his research results show that the disclosure of corporate social responsibility influences the value of the firm. Results were also supported by research Arafat, et al (2012). H5: Corporate social responsibility a significant effect on the value of the firm Buzzle and Gale (1987), the size of the company's positive effect on the company's performance means that with increasing size of the company, the company increasingly able to manage economic resources properly, then cause a value of the firm increases.…”