SUSTAINABILITY PERFORMANCE: IT’S IMPACT ON RISK AND VALUE OF THE FIRM

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Abstract

This study aims to analyze the relationship between the sustainability performances (corporate social performance, good corporate governance, and financial performance) and the risk as well as the value of the company. Employing the data from publicly listed mining firms in Indonesia and structural equation modeling to examine the hypotheses, we find that the corporate social performance improvement can be served to increase the corporate financial performance. Implementation of good corporate governance may contribute to improve financial performance and reduce the risk of the company. In short term, investors will appreciate the social and environmental responsibility undertaken by the company only if its implementation can contribute to the improvement of the company’s financial performance. In long term, social and environmental performance improvements made by the company will be able to increase the value of the company directly. Investors consider companies that apply the principles of good corporate governance not just as regulatory compliance, so that it can provide benefits for improving corporate performance and value of the company, in the short term and long term.

Keywords: Corporate Social Performance, Financial Performance, Firm Risk, Firm Value, Good Corporate Governance, Sustainability Performance

How to cite this paper: Haryono, U., Iskandar, R., Paminto, A., & Ulfah, Y. (2016). Sustainability performance: It’s impact on risk and value of the firm. Corporate Ownership & Control, 14(1-1), 278-286. https://doi.org/10.22495/cocv14i1c1p11