Islamic Corporate Social Responsibility, Corporate Governance in the Relationship between Profitability and Company Value

Authors

  • Andi Sulfati STIEM Bongaya Makassar
  • Muslimin Kara Universitas Islam Negeri Alauddin Makassar
  • Amiruddin Kadir Universitas Islam Negeri Alauddin Makassar
  • Rika Dwi Ayu Parmitasari Universitas Islam Negeri Alauddin Makassar

DOI:

https://doi.org/10.57178/atestasi.v5i2.34

Keywords:

Corporate Governance, Firm Value, Islamic Corporate Social Responsibility, Profitability

Abstract

Through the mediation of Islamic corporate social responsibility and corporate governance, this study examines the direct and indirect effects of business profitability on firm value. Using a strategy of purposive sampling, the population of this study consists of enterprises listed on the Jakarta Islamic Index-70 of the Indonesia Stock Exchange for the period 2018-2020. The AMOS 22 and Structural Equation Modeling (SEM) examined the data. The findings revealed that profitability has a beneficial impact on the value of the company. Profitability has no positive influence on corporate governance. Corporate governance has a detrimental impact on the value of a company. Profitability has no considerable beneficial effect on the value of a company. Islamic corporate social responsibility (ICSR) has a substantial positive impact on the value of a company. Profitability influences significant value as mediated by ICSR. Corporate governance cannot reconcile the profitability and company value relationship. Companies should increase their ICSR activities because it has been demonstrated that ICSR activities can become a mechanism for companies to maintain good relations and trust with all stakeholders and can be used as a new marketing tool for companies if conducted continuously, enhancing the firm's image and value. The Next Researchers can investigate the impact of additional elements affecting firm value, such as intellectual capital, media exposure, and several others.

Downloads

Download data is not yet available.

References

Aboud, A., & Diab, A. (2018). The impact of social, environmental and corporate governance disclosures on firm value: Evidence from Egypt. Journal of Accounting in Emerging Economies. https://doi.org/10.1108/JAEE-08-2017-0079

Abu-Bader, S., & Jones, T. V. (2021). Statistical mediation analysis using the sobel test and hayes SPSS process macro. International Journal of Quantitative and Qualitative Research Methods. 9(1), 42–61. https://ssrn.com/abstract=3799204

Al-Haija, E. A., Kolsi, M. C., & Kolsi, M. C. C. (2021). Corporate social responsibility in Islamic banks: to which extent does Abu Dhabi Islamic bank comply with the global reporting initiative standards?. Journal of Islamic Accounting and Business Research, 12(8), 1200–1223. https://doi.org/10.1108/JIABR-11-2020-0346

Al-Slehat, Z. A. F., Zaher, C., Fattah, A., & Box, P. O. (2020). Impact of financial leverage, size and assets structure on firm value: Evidence from industrial sector, Jordan. International Business Research, 13(1), 109-120. https://doi.org/10.5539/ibr.v13n1p109

Alsos, G. A., & Ljunggren, E. (2017). The role of gender in entrepreneur–investor relationships: A signaling theory approach. Entrepreneurship Theory and Practice, 41(4), 567-590. https://doi.org/10.1111%2Fetp.12226

Arsad, S., Said, R., Yusoff, H., & Ahmad, R. (2021). Corporate Governance and Islamic Corporate Social Responsibility Disclosures: Shari’ah Compliant Companies in Malaysia. Estudios de economía aplicada, 39(10), 35. https://doi.org/10.25115/eea.v39i10.5347

Aziz, M. F., & Haron, R. (2021). Corporate Social Responsibility Disclosure and Financial Performance of Shariah PLCS in Malaysia. Social Sciences, 11(6), 333-353. http://dx.doi.org/10.6007/IJARBSS/v11-i6/10155

Bae, S. M., Masud, M. A. K., & Kim, J. D. (2018). A cross-country investigation of corporate governance and corporate sustainability disclosure: A signaling theory perspective. Sustainability, 10(8), 2611. https://doi.org/10.3390/su10082611

Barney, J. B., & Harrison, J. S. (2020). Stakeholder theory at the crossroads. Business & Society, 59(2), 203-212. https://doi.org/10.1177/0007650318796792

Chung, C. Y., Jung, S., & Young, J. (2018). Do CSR activities increase firm value? Evidence from the Korean market. Sustainability, 10(9), 3164. 1–22. https://doi.org/10.3390/su10093164

Dakić, S., & Mijić, K. (2020). Regression analysis of the impact of internal factors on return on assets: a case of meat processing enterprises in Serbia. Strategic Management-International Journal of Strategic Management and Decision Support Systems in Strategic Management, 25(1), 29–34. https://doi.org/10.5937/straman2001029d

Das, C. (2019). Significant Issues of financial literacy and application in stock market: A descriptive study on Bangladesh capital market. International Journal of Business Society, 3(1), 38-44. https://doi.org/10.30566/ijo-bs-2019-11-4

Harun, M. S., Hussainey, K., Kharuddin, K. A. M., & Al Farooque, O. (2020). CSR disclosure, corporate governance and firm value: a study on GCC Islamic banks. International Journal of Accounting & Information Management, 28(4), 607-638. https://doi.org/10.1108/IJAIM-08-2019-0103

Huynh, T. L. D., Wu, J., & Duong, A. T. (2020). Information Asymmetry and firm value: Is Vietnam different?. The Journal of Economic Asymmetries, 21(1). https://doi.org/10.1016/j.jeca.2019.e00147

Indonesian Ministry of National Planning (2019). Indonesia Islamic Economic Masterplan 2019-2024’, Indonesian Ministry of National Development Planning, pp. 1–400.

Irawan, D. C. et al. (2021). The Effect of Capital Structure, Liquidity, and Firm Size on Firm Value. Quality Access to Success, 23(187), 52–57. https://doi.org/10.47750/QAS/23.187.06

Javaid, S. and Al-Malkawi, H. A. N. (2018). Corporate social responsibility and financial performance in Saudi Arabia: Evidence from Zakat contribution. Managerial Finance, 44(6), 648–664. https://doi.org/10.1108/MF-12-2016-0366

Jihadi, M. et al. (2021). Islamic social reporting on value of the firm: Evidence from Indonesia Sharia Stock Index. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1920116

Koleva, P. (2021). Towards the Development of an Empirical Model for Islamic Corporate Social Responsibility: Evidence from the Middle East. Journal of Business Ethics, 171(4), 789–813. https://doi.org/10.1007/s10551-020-04465-w

Latif, K., Bhatti, A. A., & Raheman, A. (2017). Earnings quality: A missing link between corporate governance and firm value. Business & Economic Review, 9(2), 255-280. https://doi.org/10.22547/BER/9.2.11

Lu, J., Liang, M., Zhang, C., Rong, D., Guan, H., Mazeikaite, K., & Streimikis, J. (2021). Assessment of corporate social responsibility by addressing sustainable development goals. Corporate Social Responsibility and Environmental Management, 28(2), 686-703. https://doi.org/10.1002/csr.2081

Matuszak, Ł., Różańska, E., & Macuda, M. (2019). The impact of corporate governance characteristics on banks’ corporate social responsibility disclosure: Evidence from Poland. Journal of Accounting in Emerging Economies, 9(1), 75–102. https://doi.org/10.1108/JAEE-04-2017-0040

Nasir, M. (2020). Etika dan komunikasi dalam bisnis: tinjauan Al-Qur’an, filsafat dan teoritis. CV. Social Politic Genius (SIGn).

Nazir, M. S., & Afza, T. (2018). Does managerial behavior of managing earnings mitigate the relationship between corporate governance and firm value? Evidence from an emerging market. Future Business Journal, 4(1), 139-156. https://doi.org/10.1016/j.fbj.2018.03.001

Oehmichen, J., Firk, S., Wolff, M., & Maybuechen, F. (2021). Standing out from the crowd: Dedicated institutional investors and strategy uniqueness. Strategic Management Journal, 42(6), 1083-1108. https://doi.org/10.1002/smj.3269

Panisi, F., Buckley, R. P., & Arner, D. (2019). Blockchain and Public Companies: A Revolution in Share Ownership Transparency, Proxy Voting and Corporate Governance?. Stan. J. Blockchain L. & Pol'y, 2, 189–220. https://ssrn.com/abstract=3389045

Peng, L. S., & Isa, M. (2020). Environmental, social and governance (ESG) practices and performance in Shariah firms: agency or stakeholder theory?. Asian Academy of Management Journal of Accounting & Finance, 16(1), 1–34. https://doi.org/10.21315/aamjaf2020.16.1.1

Platonova, E., Asutay, M., Dixon, R., & Mohammad, S. (2018). The impact of corporate social responsibility disclosure on financial performance: Evidence from the GCC Islamic banking sector. Journal of Business Ethics, 151(2), 451-471. https://doi.org/10.1007/s10551-016-3229-0

Puteri, F. A., Lindrianasari, L., Kesumaningrum, N. D., & Farichah, F. (2018). The Effect of Corporate Social Performance and Financial Performance on Corporate Social Responsibility (CSR) Disclosure As an Intervening Variable Toward Firm Value. The Indonesian Journal of Accounting Research, 21(3), 395-422. https://doi.org/10.33312/ijar.405

Putranto, P. and Kurniawan, E. (2018). Effect of managerial ownership and profitability in firm value. European Journal of Business and Management, 10(25), 96–104. https://core.ac.uk/download/pdf/234628586.pdf

Ratri, R. F., & Dewi, M. (2017). The effect of financial performance and environmental performance on firm value with Islamic social reporting (ISR) disclosure as intervening variable in companies listed at Jakarta Islamic Index (JII). In SHS Web of Conferences (Vol. 34, pp. 1-6). https://doi.org/10.1051/shsconf/20173412003

Rehman, Z. U., Zahid, M., Rahman, H. U., Asif, M., Alharthi, M., Irfan, M., & Glowacz, A. (2020). Do corporate social responsibility disclosures improve financial performance? A perspective of the Islamic banking industry in Pakistan. Sustainability, Digital Transformation and Fintech, 12(8). https://doi.org/10.3390/SU12083302

Renaldi, J. Y., Pinem, D. B., & Permadhy, Y. T. (2020). Analysis of factors affecting the value of manufacturing industry companies in the Indonesian Stock Exchange (IDX). European Journal of Business and Management Research, 5(1). 1–8. https://doi.org/10.24018/ejbmr.2020.5.1.230

Batra, R., & Bahri, A. (2018). Financial PerFormance and corPorate Social reSPonSibility (cSr): emPirical evidence From bankS in india. International Journal of Business Ethics in Developing Economies, 7(2), 37, 37–42. https://doi.org/10.26643/think-india.v21i2.7761

Sahni, J. (2020). Managerial training effectiveness: An assessment through Kirkpatrick framework. TEM Journal, 9(3), 1227-1233. https://doi.org/10.18421/TEM93-51

Sroufe, R., & Gopalakrishna-Remani, V. (2019). Management, social sustainability, reputation, and financial performance relationships: An empirical examination of US firms. Organization & Environment, 32(3), 331-362. https://doi.org/10.1177/1086026618756611

Sucuahi, W., & Cambarihan, J. M. (2016). Influence of profitability to the firm value of diversified companies in the Philippines. Accounting and Finance Research, 5(2), 149-153. http://dx.doi.org/10.5430/afr.v5n2p149

The Financial Services Authority, O. (2017). Peraturan Otoritas Jasa Keuangan tentang Laporan Kepemilikan atau Setiap Perubahan Kepemilikan Saham Perusahaan Terbuka’, Otoritas Jasa Keuangan. Available at: http://www.ojk.go.id/id/kanal/iknb/regulasi/lembaga-keuangan-mikro/peraturan-ojk/Documents/SAL-POJK PERIZINAN FINAL F.pdf

Yimenu, K. A., & Surur, S. A. (2019). Earning management: From agency and signalling theory perspective in Ethiopia. Journal of Economics, Management and Trade, 24(6), 1-12. https://doi.org/10.9734/jemt/2019/v24i630181

Yoon, B., Lee, J. H., & Byun, R. (2018). Does ESG performance enhance firm value? Evidence from Korea. Sustainability, 10(10), 3635. https://doi.org/10.3390/su10103635

Yusoff, H., Azhari, N. K. M. and Darus, F. (2018). Effects of Financial Performance and Governance on Corporate Social Responsibility Disclosure: Evidence from Islamic Financial Institutions in Malaysia. Global Journal Al-Thaqafah, (Special Issue), 57–72. https://doi.org/10.7187/GJATSI2018-04

Zuhroh, I. (2019). The effects of liquidity, firm size, and profitability on the firm value with mediating leverage. KnE Social Sciences, 3(13), 203–230. https://doi.org/10.18502/kss.v3i13.4206

Downloads

Published

2022-09-30

How to Cite

Sulfati, A., Kara, M., Kadir, A., & Parmitasari, R. D. A. (2022). Islamic Corporate Social Responsibility, Corporate Governance in the Relationship between Profitability and Company Value. Atestasi : Jurnal Ilmiah Akuntansi, 5(2), 511–524. https://doi.org/10.57178/atestasi.v5i2.34

Issue

Section

Articles