Effects of Profitability towards Enterprise Value with Corporate Social Responsibility Performance and Brand Value as Mediating Variables
Keywords:enterprise value, brand value, CSR performance, profitability
Currently, many companies are taking many actions to put their most vigorous efforts into enterprise value creation, which enables the company to achieve its highest market capitalization. They plan and do many strategies, such as value-added creation by creating intangible values through CSR activities, creating CSR performance, and brand value creation through brand valuation. This research seeks to determine whether companies' profitability, ROA, and ROE affect the enterprise value. Therefore, two mediating variables, CSR performance and Brand Value, have been set to analyze whether one impacts another. To do research, the researcher utilizes secondary data, which is the data that has been collected by someone other than the researcher. The finding shows that companies' profitability has no impact on the enterprise value and CSR performance.; On the other hand, the results show a strong relationship between brand value and enterprise value, and brand value is a mediating variable between companies' profitability and enterprise value.
Alarussi, A. S., & Alhaderi, S. M. (2018). Factors Affecting Profitability in Malaysia. Journal of Economic Studies, 45(3), 442–458. https://doi.org/10.1108/JES-05-2017-0124
Allouche, J., & Laroche, P. (2005). A Meta-Analytical Investigation of the Relationship Between Corporate Social and Financial Performance. Revue de Gestion Des Ressources Humaines, 57, 18.
Amran, A., & Ooi, S. K. (2014). Sustainability Reporting: Meeting Stakeholder Demands. Strategic Direction, 30(7), 38–41. https://doi.org/10.1108/SD-03-2014-0035
Basgoze, P., Yildiz, Y., & Metin Camgoz, S. (2016). Effect of Brand Value Announcements on Stock Returns: Empirical Evidence from Turkey. Journal of Business Economics and Management, 17(6), 1252–1269. https://doi.org/10.3846/16111699.2016.1153517
Budac, C., & Baltador, L. (2013). The Value of Brand Equity. Procedia Economics and Finance, 6(Olins 2009), 444–448. https://doi.org/10.1016/s2212-5671(13)00161-5
Calabrese, A., Costa, R., Menichini, T., Rosati, F., & Sanfelice, G. (2013). Turning Corporate Social Responsibility-Driven Opportunities in Competitive Advantages: A two-dimensional model. Knowledge and Process Management, 20(1), 50–58. https://doi.org/10.1002/kpm.1401
Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate Social Responsibility and Access to Finance. Strategic Management Journal, 35(1), 1–23. https://doi.org/10.1002/smj.2131
Chovanová, H. H., Korshunov, A. I., & Babčanová, D. (2015). Impact of Brand on Consumer Behavior. Procedia Economics and Finance, 34(15), 615–621. https://doi.org/10.1016/s2212-5671(15)01676-7
Chowdhury, R., Chun, W., Choi, S., & Friend, K. (2020). Brand and Firm Values in Distinct National Cultures. Asia Pacific Journal of Marketing and Logistics, 32(8), 1737–1758. https://doi.org/10.1108/APJML-03-2019-0121
Crisóstomo, V. L., De Souza Freire, F., & De Vasconcellos, F. C. (2011). Corporate Social Responsibility, Firm Value and Financial Performance in Brazil. Social Responsibility Journal, 7(2), 295–309.
Cubilla-Montilla, M., Nieto-Librero, A. B., Galindo-Villardón, M. P., Vicente Galindo, M. P., & Garcia-Sanchez, I. M. (2019). Are Cultural Values Sufficient To Improve Stakeholder Engagement Human And Labour Rights Issues? Corporate Social Responsibility and Environmental Management, 26(4), 938–955. https://doi.org/10.1002/csr.1733
Ekatah, I., Samy, M., Bampton, R., & Halabi, A. (2011). The Relationship between Corporate Social Responsibility and Profitability: The Case of Royal Dutch Shell Plc. Corporate Reputation Review, 14(4), 249–261. https://doi.org/10.1057/crr.2011.22
Esen, E. (2013). The Influence of Corporate Social Responsibility (CSR) Activities on Building Corporate Reputation. In Advances in Sustainability and Environmental Justice (Vol. 11). Emerald Group Publishing Limited. https://doi.org/10.1108/S2051-5030(2013)0000011010
Farooq, O., Aguenaou, S., & Amor, M. A. (2015). Corporate Social Responsibility Policy and Brand Value. Journal of Applied Business Research, 31(6), 2013–2024. https://doi.org/10.19030/jabr.v31i6.9463
Fernández-Guadaño, J., & Sarria-Pedroza, J. H. (2018). Impact of Corporate Social Responsibility on Value Creation from A Stakeholder Perspective. Sustainability (Switzerland), 10(6). https://doi.org/10.3390/su10062062
Hair, Joe F., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial Least Squares Structural Equation Modeling (PLS-SEM): An emerging Tool in Business Research. European Business Review, 26(2), 106–121. https://doi.org/10.1108/EBR-10-2013-0128
Hair, Joseph F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to Use and How to Report the Results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203
Han, D., & Chen, X. (2018). Free Cash Flow, Corporate Social Responsibility and Enterprise Value: An Empirical Analysis Based on Listed High-tech Enterprises. 176(Icmess), 1606–1610. https://doi.org/10.2991/icmess-18.2018.353
He, J., & Calder, B. J. (2020). The Experimental Evaluation of Brand Strength and Brand Value. Journal of Business Research, 115(August 2019), 194–202. https://doi.org/10.1016/j.jbusres.2020.04.035
Heinberg, M., Ozkaya, H. E., & Taube, M. (2018). Do corporate Image and Reputation Drive Brand Equity in India and China? - Similarities and differences. Journal of Business Research, 86, 259–268.
Helm, S., Garnefeld, I., & Tolsdorf, J. (2009). Perceived Corporate Reputation and Consumer Satisfaction - An Experimental Exploration of Causal Relationships. Australasian Marketing Journal, 17(2), 69–74. https://doi.org/10.1016/j.ausmj.2009.05.003
Kádeková, Z., Savov, R., Košičiarová, I., & Valaskova, K. (2020). CSR Activities and Their Impact on Brand Value in Food Enterprises in Slovakia Based on Foreign Participation. Sustainability (Switzerland), 12(12). https://doi.org/10.3390/SU12124856
Khan, G. F., Sarstedt, M., Shiau, W. L., Hair, J. F., Ringle, C. M., & Fritze, M. P. (2019). Methodological Research on Partial Least Squares Structural Equation Modeling (PLS-SEM): An Analysis Based on Social Network Approaches. Internet Research, 29(3), 407–429. https://doi.org/10.1108/IntR-12-2017-0509
Kilian, T., & Hennigs, N. (2014). Corporate Social Responsibility and Environmental Reporting in Controversial Industries. European Business Review, 26(1), 79–101. https://doi.org/10.1108/EBR-04-2013-0080
Kirk, C. P., Ray, I., & Wilson, B. (2013). The Impact of Brand Value on Firm Valuation: The Moderating Influence of Firm Type. Journal of Brand Management, 20(6), 488–500. https://doi.org/10.1057/bm.2012.55
Kock, N., & Hadaya, P. (2018). Minimum Sample Size Estimation in PLS-SEM: The Inverse Square Root and Gamma-Exponential Methods. Information Systems Journal, 28(1), 227–261. https://doi.org/10.1111/isj.12131
Kuo, T. C., Kremer, G. E. O., Phuong, N. T., & Hsu, C. W. (2016). Motivations and Barriers for Corporate Social Responsibility Reporting: Evidence from the Airline Industry. Journal of Air Transport Management, 57, 184–195. https://doi.org/10.1016/j.jairtraman.2016.08.003
Kyere, M., & Ausloos, M. (2021). Corporate Governance and Firms Financial Performance in the United Kingdom. International Journal of Finance and Economics, 26(2), 1871–1885. https://doi.org/10.1002/ijfe.1883
Lai, C. S., Chiu, C. J., Yang, C. F., & Pai, D. C. (2010). The Effects of Corporate Social Responsibility on Brand Performance: The Mediating Effect of Industrial Brand Equity and Corporate Reputation. Journal of Business Ethics, 95(3), 457–469. https://doi.org/10.1007/s10551-010-0433-1
Larkin, Y. (2013). Brand Perception, Cash Flow Stability, and Financial Policy. Journal of Financial Economics, 110(1), 232–253. https://doi.org/10.1016/j.jfineco.2013.05.002
Lee, D. D., Faff, R. W., & Langfield-Smith, K. (2009). Revisiting the Vexing Question: Does Superior Corporate Social Performance Lead to Improved Financial Performance? Australian Journal of Management, 34(1), 21–49. https://doi.org/10.1177/031289620903400103
Lindorff, M., Prior Jonson, E., & McGuire, L. (2012). Strategic Corporate Social Responsibility in Controversial Industry Sectors: The Social Value of Harm Minimisation. Journal of Business Ethics, 110(4), 457–467. https://doi.org/10.1007/s10551-012-1493-1
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis. Journal of Finance, 72(4), 1785–1824.
Lys, T., Naughton, J. P., & Wang, C. (2015). Signaling through Corporate Accountability Reporting. Journal of Accounting and Economics, 60(1), 56–72. https://doi.org/10.1016/j.jacceco.2015.03.001
Martin, P. R., & Moser, D. V. (2016). Managers’ Green Investment Disclosures and Investors’ Reaction. Journal of Accounting and Economics, 61(1), 239–254. https://doi.org/10.1016/j.jacceco.2015.08.004
Mizik, N. (2014). Assessing the Total Financial Performance Impact of Brand Equity with Limited Time-Series Data. Journal of Marketing Research, 51(6), 691–706. https://doi.org/10.1509/jmr.13.0431
Mock, T. J., Rao, S. S., & Srivastava, R. P. (2013). The Development of Worldwide Sustainability Reporting Assurance. Australian Accounting Review, 23(4), 280–294. https://doi.org/10.1111/auar.12013
Mohd, N. Y., Nasser, M. N., & Mohamad, O. (2007). Does Image of Country-Of-Origin Matter to Brand Equity? Journal of Product and Brand Management, 16(1), 38–48. https://doi.org/10.1108/10610420710731142
Mojsovska-Salamovska, S., & Todorovska, M. (2016). Brand Valuation and Marketing Assets Assessment: Theoretical Background vs. Contemporary Managerial Issues. Strategic Management, 21(4), 37–44.
Naseem, T., Shahzad, F., Asim, G. A., Rehman, I. U., & Nawaz, F. (2020). Corporate Social Responsibility Engagement and Firm Performance in Asia Pacific: The Role of Enterprise Risk Management. Corporate Social Responsibility and Environmental Management, 27(2), 501–513.
Nitzl, C. (2014). Partial Least Squares Structural Equation Modelling (PLS-SEM) in Management Accounting Research: Critical Analysis, Advances, and Future Directions. SSRN Electronic Journal, September 2016. https://doi.org/10.2139/ssrn.2469802
Nitzl, C., & Chin, W. W. (2017). The Case of Partial Least Squares (PLS) Path Modeling in Managerial Accounting Research. Journal of Management Control, 28(2), 137–156. https://doi.org/10.1007/s00187-017-0249-6
Nyuur, R. B., Ofori, D. F., & Amponsah, M. M. (2019). Corporate Social Responsibility and Competitive Advantage: A Developing Country Perspective. Thunderbird International Business Review, 61(4), 551–564. https://doi.org/10.1002/tie.22065
Ozdora Aksak, E., Ferguson, M. A., & Atakan Duman, S. (2016). Corporate Social Responsibility and CSR Fit as Predictors of Corporate Reputation: A Global Perspective. Public Relations Review, 42(1), 79–81. https://doi.org/10.1016/j.pubrev.2015.11.004
Porter, M. E., & Kramer, M. R. (2019). The Big Idea Creating Shared Value How to Reinvent Capitalism-And Unleash A Wave of Innovation and Growth. Creating Shared Value, February, 2–17.
Preston, L. E., & O’Bannon, D. P. (1997). The Corporate Social-Financial Performance Relationship: A Typology and Analysis. Business and Society, 36(4), 419–429. https://doi.org/10.1177/000765039703600406
Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does Corporate Social Responsibility Contribute to Firm Financial Performance? The Mediating Role of Competitive Advantage, Reputation, and Customer Satisfaction. Journal of Business Research, 68(2), 341–350.
Safina, J. (2021). How To Increase Your Company Value. Forbes. https://www.forbes.com/sites/ forbesfinancecouncil/2021/03/05/how-to-increase-your-companys-value/
Sarstedt, M., Ringle, C. M., & Hair, J. F. (2020). Handbook of Market Research. In Handbook of Market Research (Issue September). https://doi.org/10.1007/978-3-319-05542-8
Setiadi, E., Adiwijaya, M., & Subagio, H. (2018). The Impact of Brand Awareness and Country of Origin on Purchase Intention with Mediation of Self Congruity on Chinese Brand Automotive Products Wuling. Petra International Journal of Business Studies, 1(2), 70–79. https://doi.org/10.9744/ijbs.1.2.70-79
Sinclair, R., & Keller, K. L. (2017). Brand Value, Accounting Standards, and Mergers and Acquisitions: “the Moribund Effect.” Journal of Brand Management, 24(2), 178–192. https://doi.org/10.1057/s41262-016-0025-1
Singh, A., & Verma, P. (2017). How CSR Affects Brand Equity of Indian Firms? Global Business Review, 18(3_suppl), S52–S69. https://doi.org/10.1177/0972150917693149
Singh, A., & Verma, P. (2018). Driving Brand Value Through CSR Initiatives: An Empirical Study in Indian Perspective. Global Business Review, 19(1), 85–98. https://doi.org/10.1177/0972150917713270
Skalický, R. (2016). The Impact of Brand Equity on Company Economic Indicators in Selected Sectors in the Czech Republic. Procedia - Social and Behavioral Sciences, 220(March), 462–471. https://doi.org/10.1016/j.sbspro.2016.05.521
Šontaitė-Petkevičienė, M. (2015). CSR Reasons, Practices and Impact to Corporate Reputation. Procedia - Social and Behavioral Sciences, 213, 503–508. https://doi.org/10.1016/j.sbspro.2015.11.441
Srinivasan, S., Hsu, L., & Fournier, S. (2012). Branding and Firm Value. Handbook of Marketing and Finance, January, 155–203. https://doi.org/10.4337/9781849806046.00016
Stocker, F., de Arruda, M. P., de Mascena, K. M. C., & Boaventura, J. M. G. (2020). Stakeholder Engagement in Sustainability Reporting: A Classification Model. Corporate Social Responsibility and Environmental Management, 27(5), 2071–2080. https://doi.org/10.1002/csr.1947
Swarnapali, R. M. N. C. (2020). Consequences of Corporate Sustainability Reporting: Evidence from an Emerging Market. International Journal of Law and Management, 62(3), 243–265. https://doi.org/10.1108/IJLMA-12-2017-0294
Tuan, L. T. (2012). Corporate Social Responsibility, Leadership, And Brand Equity In Healthcare Service. Social Responsibility Journal, 8(3), 347–362. https://doi.org/10.1108/17471111211247929
Wang. (2014). How Relational Capital Mediates The Effect of Corporate Reputation on Competitive Advantage: Evidence from Taiwan High-Tech Industry. Technological Forecasting and Social Change, 82(1), 167–176. https://doi.org/10.1016/j.techfore.2013.06.009
Wang, & Sengupta, S. (2016). Stakeholder Relationships, Brand Equity, Firm Performance: A Resource-Based Perspective. Journal of Business Research, 69(12), 5561–5568. https://doi.org/10.1016/j.jbusres.2016.05.009
Wedysiage, M., Hatane, S., & Deviesa, D. (2021). Corporate Social Responsibility and Competitive Advantage: The Evaluation of the Mediation role of Employee Commitment and Customer Satisfaction, (Study on Manufacturing Companies in Surabaya). Petra International Journal of Business Studies, 4(1), 1–10. https://doi.org/10.9744/ijbs.4.1.1-10
Yadav, P. L., Han, S. H., & Kim, H. (2017). Sustaining Competitive Advantage Through Corporate Environmental Performance. Business Strategy and the Environment, 26(3), 345–357. https://doi.org/10.1002/bse.1921
Petra IJBS (e-ISSN: 2621-6426) is published by Master of Management Program, Faculty of Business and Economics - Petra Christian University
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.