Abstract
This study aims to analyze the empirical evidence about the effect of environmental performance on firm value mediated by firm reputation in emerging countries. The sample of this study is the mining industry sectors listed on the Indonesia Stock Exchange from 2015 to 2018. The data is analyzed using partial least squares based structural equation modeling (PLS-SEM) with WarpPLS 6.0 software. The results show that environmental performance has a positive and significant effect on firm reputation. In contrast to the expectation, environmental performance has a negative and significant effect on firm value. Firm reputation further becomes a significant mediator in the relationship between environmental performance and firm value. These findings recommend for future studies to expand the objects and extend the observation period.
Highlights
Firms are generally established to maximize profit-oriented and corporate value
Firms that focus on environmental performance will improve the firm image in the future so that it will affect the improvement of financial performance (Butler, 2011)
This means that the percentage of the effect of environmental performance on firm reputation is 2.7%, while the remainder is 97.3% explained by other variables outside the research
Summary
Firms are generally established to maximize profit-oriented and corporate value. Maximizing firm value is seen as very important for firms to increase shareholder wealth (Sucuahi and Cambarihan, 2016). Increasing firm value influences shareholder value which is characterized by a high return on investment. The value of the firm can be measured through several aspects. One of them is the market price of the firm’s stock which reflects the overall assessment of investors for each equity owned. Stock market prices act as a barometer of the firm management performance (Ojikutu et al, 2017)
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