The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia
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)...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2019-10-01
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| Series: | Investment Management & Financial Innovations |
| Subjects: | |
| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/12630/IMFI_2019_04_Titisari.pdf |
| _version_ | 1826907342210334720 |
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| author | Kartika Hendra Titisari M. Moeljadi Kusuma Ratnawati Nur Khusniyah Indrawati |
| author_facet | Kartika Hendra Titisari M. Moeljadi Kusuma Ratnawati Nur Khusniyah Indrawati |
| author_sort | Kartika Hendra Titisari |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-12-11T11:33:09Z |
| format | Article |
| id | doaj.art-6b8ec585edaa4a66bd2c67dc696f3aa5 |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2025-02-17T09:04:49Z |
| publishDate | 2019-10-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-6b8ec585edaa4a66bd2c67dc696f3aa52025-01-02T16:39:32ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582019-10-01164283610.21511/imfi.16(4).2019.0312630The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from IndonesiaKartika Hendra Titisari0M. Moeljadi1Kusuma Ratnawati2Nur Khusniyah Indrawati3Doctorate student, Faculty of Economics and Business, University of Brawijaya, MalangProfessor, Lecturer, Faculty of Economics and Business, University of Brawijaya, MalangPh.D, Lecturer, Faculty of Economics and Business, University of Brawijaya, MalangPh.D., Lecturer, Faculty of Economics and Business, University of Brawijaya, MalangCorporate 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.https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/12630/IMFI_2019_04_Titisari.pdfcost of capitalperformanceprofitability |
| spellingShingle | Kartika Hendra Titisari M. Moeljadi Kusuma Ratnawati Nur Khusniyah Indrawati The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia Investment Management & Financial Innovations cost of capital performance profitability |
| title | The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia |
| title_full | The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia |
| title_fullStr | The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia |
| title_full_unstemmed | The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia |
| title_short | The roles of cost of capital, corporate governance, and corporate social responsibility in improving firm value: evidence from Indonesia |
| title_sort | roles of cost of capital corporate governance and corporate social responsibility in improving firm value evidence from indonesia |
| topic | cost of capital performance profitability |
| url | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/12630/IMFI_2019_04_Titisari.pdf |
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