Firm Performance: The Role of Determinant Variables Water Awareness, Intellectual Capital, and Corporate Social Responsibility

Abstract

Purpose: This study aims to investigate of firm's performance through water awareness, intellectual capital, and corporate social responsibility. Theoretical framework: The main goal of the signaling theory by Spence (2002) is to reduce the information asymmetry between two parties. Research by Ericson and Call (2008), Shabaati et al. (2010), Helena, Pedro, and Jardon (2010), and others have demonstrated that intellectual capital has a favorable impact on performance. Clacher, Hagendorff, Jo, and Harjoto (2012), as well as Ameer and Othman (2012), discovered a beneficial relationship between CSR and a company's financial performance. Design/methodology/approach: The present study was conducted on 21 manufacturing companies in Indonesia with a total of 106 samples. The data of the present study were financial reports and sustainability reports which were obtained from the Indonesian stock exchange website and each company's website during the period 2015-2019 by using purposive sampling techniques and multiple linear regression methods. Findings: The findings revealed that water awareness and corporate social responsibility affect company performance, but not the firm’s intellectual capital. However, a firm's sustainability is empirically proven to affect company performance. Research, Practical & Social implications: This study is useful for managers to examine the effectiveness of water awareness and sustainability practices including intellectual capital towards the company's performance. Originality/value: The value of the study is useful for managers to examine the affect company performance, but not the firm’s intellectual capital. However, a firm's sustainability is empirically proven to affect company performance. This measurement of firm’s sustainability model will be very useful for decision makers and policy makers.