The Influence of Corporate Philanthropy and Risk Management on Corporate Value
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Dec 29, 2024
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Abstract
Corporate sustainability has become a critical concern for stakeholders, emphasizing that management's focus should extend beyond short-term profit maximization to encompass the broader welfare of all stakeholders. Through the adoption of strategic philanthropic initiatives and the implementation of robust risk management practices, companies can address stakeholder expectations while strengthening their competitive position in dynamic market environments. This study aims to analyze the influence of corporate philanthropy and risk management on firm value. Utilizing a sample of 112 manufacturing companies listed on the Indonesia Stock Exchange for the 2022 period, this research employs regression analysis, preceded by classical assumption tests to ensure the validity and reliability of the data. The findings reveal that both corporate philanthropy and risk management have a significant positive effect on firm value, underscoring the importance of socially responsible practices and effective risk mitigation in fostering sustainable corporate growth and long-term stakeholder trust.
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References
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Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857.
Fama, E. (2012). Agency problems and the theory of the firm. In The Economic Nature of the Firm: A Reader, Third Edition. https://doi.org/10.1017/CBO9780511817410.022
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Gautier, A., & Pache, A.-C. (2013). Research on Corporate Philanthropy: A Review and Assessment. Journal of Business Ethics, 126(3), 343–369. https://doi.org/10.1007/s10551-013-1969-7
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KPMG. (2020). KPMG Survey of Corporate Responsibility Reporting 2020. JNCCN Journal of the National Comprehensive Cancer Network, 17(4).
Madsen, P., & Rodgers, Z. J. (2014). Looking Good by Doing Good: The Antecedents and Consequences of Stakeholder Attention to Corporate Disaster Relief. Strate-gic Management Journal, 36(5), 776–794. https://doi.org/10.1002/smj.2246
Miller, J. I. (2008). The Ongoing Legitimacy Project: Corporate Philanthropy as Protec-tive Strategy. European Management Review, 5(3), 151–164. https://doi.org/10.1057/emr.2008.18
Mock, T. J., Strohm, C., & Swartz, K. M. (2021). Sustainability reporting and firm per-formance: Evidence from the global market. Journal of Business Ethics, 170(1), 43–64.
Moriarty, J. (2012). The Connection Between Stakeholder Theory and Stakeholder Democracy. Business & Society, 53(6), 820–852. https://doi.org/10.1177/0007650312439296
Muller, A., & Kräussl, R. (2011). The Value of Corporate Philanthropy During Times of Crisis: The Sensegiving Effect of Employee Involvement. Journal of Business Ethics, 103(2), 203–220. https://doi.org/10.1007/s10551-011-0861-6
Myers, J. N. (1999). Implementing residual income valuation with linear information dy-namics. Accounting Review, 74(1), 1–28. https://doi.org/10.2308/accr.1999.74.1.1
Pagach, D., & Warr, R. (2011). The Characteristics of Firms That Hire Chief Risk Of-ficers. Journal of Risk and Insurance, 78(1). https://doi.org/10.1111/j.1539-6975.2010.01378.x
Ricks, J. M. (2005). An Assessment of Strategic Corporate Philanthropy on Percep-tions of Brand Equity Variables. Journal of Consumer Marketing, 22(3), 121–134. https://doi.org/10.1108/07363760510595940
Schnurbein, G. v., Seele, P., & Lock, I. (2016). Exclusive Corporate Philanthropy: Re-thinking the Nexus of CSR and Corporate Philanthropy. Social Responsibility Journal, 12(2), 280–294. https://doi.org/10.1108/srj-10-2014-0149
Song, Y., Gianiodis, P. T., & Li, Y. (2016). Institutional Ownership and Corporate Philan-thropic Giving in an Emerging Economy. Management and Organization Review, 12(2), 357–385. https://doi.org/10.1017/mor.2015.33
Su, W., & Sauerwald, S. (2015). Does Corporate Philanthropy Increase Firm Value? The Moderating Role of Corporate Governance. Business & Society, 57(4), 599–635. https://doi.org/10.1177/0007650315613961
Verrecchia, R. E., & Weber, J. (2006). Reducing information asymmetry in agency rela-tionships: Monitoring and the structure of the board. Journal of Financial Econom-ics, 80(3), 395–415.
Wang, K., Chen, M. H., Lin, C. P., & Hu, D. F. (2019). Corporate philanthropy effect on hospitality consumer benefit. Journal of Hospitality and Tourism Management, 39. https://doi.org/10.1016/j.jhtm.2018.12.003
Azuma, K., Dahan, N., & Doh, J. P. (2023). Shareholder Reaction to Corporate Philan-thropy After a Natural Disaster: An Empirical Exploration of the “Signaling Finan-cial Prospects” Explanation. Asia Pacific Journal of Management. https://doi.org/10.1007/s10490-023-09876-7
Baxter, R., Bedard, J. C., Hoitash, R., & Yezegel, A. (2013). Enterprise risk manage-ment program quality: Determinants, value relevance, and the financial crisis. Contemporary Accounting Research, 30(4). https://doi.org/10.1111/j.1911-3846.2012.01194.x
Beasley, M. S., Clune, R., & Hermanson, D. R. (2005). Enterprise risk management: An empirical analysis of factors associated with the extent of implementation. Jour-nal of Accounting and Public Policy.
Bromiley, P., McShane, M., Nair, A., & Rustambekov, E. (2015). Enterprise Risk Man-agement: Review, Critique, and Research Directions. Long Range Planning, 48(4), 265–276. https://doi.org/10.1016/j.lrp.2014.07.005
Cha, W., Rew, D., & Jung, J. Y. (2022). Corporate Philanthropy and Firm Performance: The Role of Corporate Strategies. Society and Business Review, 18(1), 104–123. https://doi.org/10.1108/sbr-12-2021-0249
Chung, S., Pyo, H., & Guiral, A. (2019). Who Is the Beneficiary of Slack on Corporate Financial Performance and Corporate Philanthropy? Evidence From South Ko-rea. Sustainability, 11(1), 252. https://doi.org/10.3390/su11010252
Cuypers, I., Koh, P.-S., & Wang, H. (2016). Sincerity in Corporate Philanthropy, Stake-holder Perceptions and Firm Value. Organization Science, 27(1), 173–188. https://doi.org/10.1287/orsc.2015.1030
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial dis-closure and the cost of equity capital: The initiation of corporate social responsi-bility reporting. The Accounting Review, 86(1), 59–100.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857.
Fama, E. (2012). Agency problems and the theory of the firm. In The Economic Nature of the Firm: A Reader, Third Edition. https://doi.org/10.1017/CBO9780511817410.022
Fedorova, E., Demin, I., & Silina, E. (2023). Impact of Expenditures and Corporate Phi-lanthropy Disclosure on Company Value. Corporate Communications an Interna-tional Journal, 28(3), 425–450. https://doi.org/10.1108/ccij-10-2022-0122
Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & Colle, S. D. (2010). Stakeholder Theory. https://doi.org/10.1017/cbo9780511815768
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregat-ed evidence from more than 2000 empirical studies. Journal of Sustainable Fi-nance & Investment, 5(4), 210–233.
Gautier, A., & Pache, A.-C. (2013). Research on Corporate Philanthropy: A Review and Assessment. Journal of Business Ethics, 126(3), 343–369. https://doi.org/10.1007/s10551-013-1969-7
Gómez-Trujillo, A. M., & González-Pérez, M. A. (2020). Sustainable development goals and sustainable development: A conceptual framework. Sustainability, 12(18), 7345.
Greenwood, M., & Buren, H. J. V. (2010). Trust and Stakeholder Theory: Trustworthi-ness in the Organisation–Stakeholder Relationship. Journal of Business Ethics, 95(3), 425–438. https://doi.org/10.1007/s10551-010-0414-4
Hoyt, R. E., & Liebenberg, A. P. (2011). The Value of Enterprise Risk Management. Journal of Risk and Insurance, 78(4), 795–822. https://doi.org/10.1111/j.1539-6975.2011.01413.x
Jones, T. M., Harrison, J. S., & Felps, W. (2018). How Applying Instrumental Stake-holder Theory Can Provide Sustainable Competitive Advantage. Academy of Management Review, 43(3), 371–391. https://doi.org/10.5465/amr.2016.0111
Jones, T. M., Wicks, A. C., & Freeman, R. E. (2017). Stakeholder Theory: The State of the Art. 1–16. https://doi.org/10.1002/9781405164771.ch0
Khan, M., Serafeim, G., & Yoon, A. (2021). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697–1724.
KPMG. (2020). KPMG Survey of Corporate Responsibility Reporting 2020. JNCCN Journal of the National Comprehensive Cancer Network, 17(4).
Madsen, P., & Rodgers, Z. J. (2014). Looking Good by Doing Good: The Antecedents and Consequences of Stakeholder Attention to Corporate Disaster Relief. Strate-gic Management Journal, 36(5), 776–794. https://doi.org/10.1002/smj.2246
Miller, J. I. (2008). The Ongoing Legitimacy Project: Corporate Philanthropy as Protec-tive Strategy. European Management Review, 5(3), 151–164. https://doi.org/10.1057/emr.2008.18
Mock, T. J., Strohm, C., & Swartz, K. M. (2021). Sustainability reporting and firm per-formance: Evidence from the global market. Journal of Business Ethics, 170(1), 43–64.
Moriarty, J. (2012). The Connection Between Stakeholder Theory and Stakeholder Democracy. Business & Society, 53(6), 820–852. https://doi.org/10.1177/0007650312439296
Muller, A., & Kräussl, R. (2011). The Value of Corporate Philanthropy During Times of Crisis: The Sensegiving Effect of Employee Involvement. Journal of Business Ethics, 103(2), 203–220. https://doi.org/10.1007/s10551-011-0861-6
Myers, J. N. (1999). Implementing residual income valuation with linear information dy-namics. Accounting Review, 74(1), 1–28. https://doi.org/10.2308/accr.1999.74.1.1
Pagach, D., & Warr, R. (2011). The Characteristics of Firms That Hire Chief Risk Of-ficers. Journal of Risk and Insurance, 78(1). https://doi.org/10.1111/j.1539-6975.2010.01378.x
Ricks, J. M. (2005). An Assessment of Strategic Corporate Philanthropy on Percep-tions of Brand Equity Variables. Journal of Consumer Marketing, 22(3), 121–134. https://doi.org/10.1108/07363760510595940
Schnurbein, G. v., Seele, P., & Lock, I. (2016). Exclusive Corporate Philanthropy: Re-thinking the Nexus of CSR and Corporate Philanthropy. Social Responsibility Journal, 12(2), 280–294. https://doi.org/10.1108/srj-10-2014-0149
Song, Y., Gianiodis, P. T., & Li, Y. (2016). Institutional Ownership and Corporate Philan-thropic Giving in an Emerging Economy. Management and Organization Review, 12(2), 357–385. https://doi.org/10.1017/mor.2015.33
Su, W., & Sauerwald, S. (2015). Does Corporate Philanthropy Increase Firm Value? The Moderating Role of Corporate Governance. Business & Society, 57(4), 599–635. https://doi.org/10.1177/0007650315613961
Verrecchia, R. E., & Weber, J. (2006). Reducing information asymmetry in agency rela-tionships: Monitoring and the structure of the board. Journal of Financial Econom-ics, 80(3), 395–415.
Wang, K., Chen, M. H., Lin, C. P., & Hu, D. F. (2019). Corporate philanthropy effect on hospitality consumer benefit. Journal of Hospitality and Tourism Management, 39. https://doi.org/10.1016/j.jhtm.2018.12.003