Linking Ownership Concentration to Firm Value: Mediation Role of Environmental Performance

  • Mohamad Nur UTOMO Faculty of Economics Borneo Tarakan University, Indonesia
  • Sugeng WAHYUDI Faculty of Economics and Business Diponegoro University, Indonesia
  • Harjum MUHARAM Faculty of Economics and Business Diponegoro University, Indonesia
  • Monica Rahardian Ary HELMINA Faculty of Economics and Business Lambung Mangkurat University, Indonesia

Abstract

Research was aimed to examine the indirect effect of ownership concentration on firm value through environmental performance. Firms with businesses at mining, manufacture, and agriculture sectors, and that listing at Indonesia Stock Exchange and participating with Environmental Performance Assessment Program (PROPER), were the sample of research. Research has given some results. Ownership concentration has positive impact non-linearly on environmental performance. Ownership concentration can increase firm value through strategy of improving environmental performance. These results supported stakeholder theory and legitimacy theory. Corporate action that adopts environmentally friendly issue was selected as strategy to create firm value.

References

[1] Aerts, W., and Cormier, D. 2009. Media legitimacy and corporate environmental communication. Accounting, Organizations and Society, 34(1): 1-27.
[2] Ahmed, K., Sehrish, S., Saleem, F., and Yasi, M. 2012. Impact Of Concentrated Ownership On Firm Performance (Evidence From Karachi Stock Exchange). Interdisciplinary Journal of Contemporary Research In Business 4(5): 201-210.
[3] Al-Saidi, M., and Al-Shammari, B. A. 2015. Ownership concentration, ownership composition and the performance of the Kuwaiti listed non-financial firms. International Journal of Commerce and Management, 25(1): 108-132.
[4] Al-Tuwaijri, S. A., Christensen, T. E. and Hughes, K. E. 2004. The relationship among Environmental Disclosure, Environmental Performance, and Economic Performance: A Simultaneous Equation Approach. Accounting Organization and Society, 29(5/6): 447-471.
[5] Aldrich, H. E., and Fiol, C. M. 1994. Fools rush in? The institutional context of industry creation. Academy of Management Review, 19(4): 645-670.
[6] Anderson, K. L., Deli, D. N., and Gillan, S. L. 2003. Boards of Directors, Audit Committees, and the Information Content of Earnings Paper presented at the Weinberg Center for Corporate Governance Working Paper Retrieved from http://www.lerner.udel.edu/ccg/
[7] Angeliaa, D., and Suryaningsih, R. 2015. The Effect of Environmental Performance And Corporate Social Responsibility Disclosure Towards Financial Performance (Case Study to Manufacture, Infrastructure, And Service Companies That Listed At Indonesia Stock Exchange) Social and Behavioral Sciences, 211: 348-355
[8] Berle, and Means. 1932. The Modern Corporation and Private Property. New York: The Mac- millan Company.
[9] Bran, F., Radulescu, C. V., and Ioan, I. 2011. Measures of Environmental Performance Review of International Comparative Management, 12(5): 893-900.
[10] Caixe, D. F., and Krauter, E. 2013. The Influence of the Ownership and Control Structure on Corporate Market Value in Brazil. R. Cont. Finance, 24(62): 142-153.
[11] Caracuel, J. A., and Mandojana, N. O. d. 2013. Green Innovation and Financial Performance: An Institutional Approach. Organization & Environment http:/oae.sagepub.com.
[12] Chang, K. 2013. The Effects of Ownership and Capital Structure on Environmental Information Disclosure Empirical Evidence from Chinese Listed Electric Firms. WSEAS Journal, 12(12): 637 - 649.
[13] Chang, K., and Zhang, L. 2015. The Effects of Corporate Ownership Structure on Environmental Information Disclosure—Empirical Evidence from Unbalanced Penal Data in Heavy-pollution Industries in China WSEAS Transactions on Syatems and Control, 10: 405 - 414.
[14] Cong, Y., and Freedman, M. 2011. Corporate governance and environmental performance and disclosures. Advances in Accounting, incorporating Advances in International Accounting, 27: 223-232.
[15] Crisostomo, V. L., and Freire, F. d. S. 2015. The Influence of Ownership Concentration on Firm Resource Allocations to Employee Relations, External Social Actions, and Environmental Actions Review of Business Management, 17(55): 987-1006.
[16] Dallas, G. 2004. Governance and Risk. Analytical Hand books for Investors, Managers, Directors and Stakeholders Standard and Poor. New York Governance Services, MC. Graw Hill. .
[17] Deegan, C. 2002. Introduction: The legitimising effect of social and environmental disclosures – a theoretical foundation. Accounting, Auditing & Accountability Journal, 15 (3): 282 - 311.
[18] Desoky, A. M., and Mousa, G. A. 2013. An empirical investigation of the influence of ownership concentration and identity on firm performance of Egyptian listed companies. Journal of Accounting in Emerging Economies, 3(2): 164 - 188.
[19] DiMaggio, P. J., and Powell, W. W. 1983. The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48 (2): 147-160.
[20] Djajadiningrat, S. T., Hendriani, Y., and Famiola, M. 2014. Green Economy. Bandung: Rekayasa Sains.
[21] Dogl, C., and Holtbrugge, D. 2014. Corporate environmental responsibility, employer reputation and employee commitment: an empirical study in developed and emerging economies. The International Journal of Human Resource Management, 25(12): 1739-1762.
[22] Earle, Kucsera, and Telegdy. 2004. Ownership Concentration and Corporate performance on the Budapest Stock Exchange. Journal of Corporate governance, 11: 1-24.
[23] Earnhart, D., and Lizal, L. 2006. Effects of ownership and financial performance on corporate environmental performance. Journal of Comparative Economics, 34: 111-129
[24] Elkington, J. 1997. Cannibal with Forks: The Triple Bottom Line of 21st Century Business. Oxford, UK: Capstone.
[25] Epstein, E. M. 1972. The Historical Enigma of Corporate Legitimacy California Law Review, 60(6): 1701-1717.
[26] Farooque, O. A., Zijl, T. v., Dunstan, K., and Karim, A. W. 2010. Co-deterministic relationship between ownership concentration and corporate performance. Accounting Research Journal, 23(2): 172 - 189.
[27] Freeman, R. 1984. Strategic Management: A Stakeholder’s Approach: Pitman, Boston, MA. .
[28] Freeman, R. E., and Evan, W. M. 1990. Corporate governance: A stakeholder interpretation. Journal of Behavioral Economics, 19(4): 337-359.
[29] Gaur, S. S., Bathula, H., and Singh, D. 2015. Ownership concentration, board characteristics and firm performance. Management Decision, 53(5): 911 - 931.
[30] Hart, S. 1995. A natural resource-based view of the firm. Academy of Management Review, 20(4): 874-907.
[31] Henriques, I., and Sadorsky, P. 1996. The Determinants of an Environmentally Responsive Firm: An Empirical Approach. Journal fF Environmental Economics and Management, 30: 381-395.
[32] Iqbal, M., T, S., Assih, P., and Rosidi. 2013. Effect of Environmental Accounting Implementation and Environmental Performance and Environmental Information Disclosure as Mediation on Company Value. International Journal of Business and Management Invention, 2(10): 55-67.
[33] Jaafar, A., and El-Shawa, M. 2009. Ownership concentration, board characteristics and performance: evidence from Jordan. Accounting in Emerging Economies, 9: 73-95.
[34] Jensen, M. C. 2001. Value Maximization, Stakeholder theory, and the Corporate Objective Function. European Financial Management, 7(3): 297-317.
[35] Jensen, M. C., and Meckling, W. H. 1976. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure Journal of Financial Economics, 3(4): 305-360.
[36] Jiang, H., Habib, A., and Smallman, C. 2009. The effect of ownership concentration on CEO compensation-firm performance relationship in New Zealand. Pacific Accounting Review, 21(2): 104 - 131
[37] Lahouel, B. B., Peretti, J. M., and Autissier, D. 2014. Stakeholder power and corporate social performance. Corporate Governance, 14(3): 363-381.
[38] Latan, H., and Ghozali, I. 2016. Partial Least Squares Konsep, Metode dan Aplikasi Menggunakan WarpPLS 50. Semarang: Badan Penerbit Universitas Diponegoro.
[39] Lin, C. J. 2011. An Examination of Board and Firm Performance: Evidence From Taiwan. The International Journal of Business and Finance Research, 5(4).
[40] Marcus, A., and Geffen, D. 1998. The Dialectics of Competency Acquisition: Pollution Prevention in Electric Generation. Strategic Management Journal, 19(12): 1145-1168.
[41] Moneva, J. M., and Ortas, E. 2010. Corporate environmental and financial performance: a multivariate approach Industrial Management & Data Systems, 110(2): 193-210
[42] Muhammad, N., Scrimgeour, F., Reddy, K., and Abidin, S. 2015. The Relationship between Environmental Performance and Financial Performance in Periods of Growth and Contraction: Evidence from Australian Publicly Listed Companies. Journal of Cleaner Production, 102: 324-332.
[43] Nguyen, T., Locke, S., and Reddy, K. 2015. Ownership concentration and corporate performance from a dynamic perspective: Does national governance quality matter? . International Review of Financial Analysis 41: 148-161
[44] Parkinson, J. 1994. Corporate power and responsibility: Oxford University Press.
[45] Pfeffer, J., and Salancik, G. R. 1978. The External Control of Organizations. New York: Harper & Row.
[46] Porta, R. L., Lopez-De-Silanes, F., and Shleifer, A. 1999. Corporate Ownership Around the World. The Journal Of Finance, LIV(2): 471 - 517.
[47] Porter, M. E., and Linde, C. v. d. 1995. Green and competitive: Ending the stalemate. Harvard Business Review, 73(5): 120-134.
[48] Post, C., Rahman, N., and McQuillen, C. 2015. From Board Composition to Corporate Environmental Performance Through Sustainability-Themed Alliances. Journal Business Ethics, 130: 423-435.
[49] Purnomo, Karin, P., and Widianingsih, Patricia, L. 2012. The Influence Of Environmental Performance On Financial Performance With Corporate Social Responsibility (CSR) Disclosure As A Moderating Variable: Evidence From Listed Companies In Indonesia. Society Of Interdisciplinary Business Research 1(1): 57-69.
[50] Russo, M. V., and Fouts, P.A. 1997. A Resource-Based Perspective On Corporate Environmental Performance and Profitability. Academy of Management Journal, 40(3): 534-559.
[51] Sharma, S., Pablo, A. L., and Vredenburg, H. 1999. Corporate environmental responsiveness strategies: The importance of issue interpretation and organizational context. Journal of Applied Behavioral Science, 35(1): 87-108.
[52] Shleifer, A., and Vishny, R. W. 1997. A Survey of Corporate Governance. The Journal of Finance LII(2): 737 - 783.
[53] Thomsen, S., and Pedersen, T. 2000. Ownership Structure and Economic Performance in the Largest European Companies. Strategic Management Journal, 21: 689-705.
[54] Turban, D. B., and Greening, D. W. 1997. Corporate social performance and organizational attractiveness to prospective employees. The Academy of Management Journal, 40(3): 658-672.
[55] Ullmann, A. A. 1985. Data in Search of a Theory: A Critical Examination of the Relationships among Social Performance, Social Disclosure, and Economic Performance of U. S. Firms. The Academy of Management Review, 10(3): 540-557
[56] Vintila, G., and Gherghinaa, S. C. 2014. The Impact of Ownership Concentration on Firm Value. Empirical Study of The Bucharest Stock Exchange Listed Companies. Procedia Economics and Finance, 15: 271 – 279.
[57] Wahla, K.-U.-R., Shah, S. Z. A., and Hussain, Z. 2012. Impact of Ownership Structure on Firm Performance Evidence from Non-Financial Listed Companies at Karachi Stock Exchange. International Research Journal of Finance and Economics (84): 6-13.
[58] Walls, J. L., Berrone, P., and Phan, P. H. 2012. Corporate governance and environmental performance: Is there really a link? Strategic Management Journal, 33(8): 885-913.
[59] Warrad, L., Almahamid, S. M., Slihat, N., and Alnimer, M. 2013. The Relationship Between Ownership Concentration And Company Performance, A Case of Jordanian Non-Financial Listed Companies. Interdisciplinary Journal of Contemporary Research In Business, 4(9).
[60] Yasser, Q. R., and Mamun, A. A. 2015. Effects of ownership concentration on firm performance: Pakistani evidence. Journal of Asia Business Studies, 9(2): 62 - 176.
[61] Zou, H. L., Lin, S. X. Z. H., and Xie, X. M. 2015. Top executives’ compensation, industrial competition, and corporate environmental performance Evidence from China. Management Decision, 53(9): 2036 - 2059.
Published
2019-05-18
How to Cite
UTOMO, Mohamad Nur et al. Linking Ownership Concentration to Firm Value: Mediation Role of Environmental Performance. Journal of Environmental Management and Tourism, [S.l.], v. 10, n. 1, p. 182-194, may 2019. ISSN 2068-7729. Available at: <https://journals.aserspublishing.eu/jemt/article/view/3220>. Date accessed: 27 may 2022. doi: https://doi.org/10.14505//jemt.10.1(33).18.