Enhancing firm value: The role of enterprise risk management, intellectual capital, and corporate social responsibility

Abstract

For the company, the firm value shows how effectively the company's performance is achieved. While for investors, it is an indicator of how the market values the company. The high firm value indicates good company performance, giving a positive signal to investment decisions. This research aims to examine the effect of enterprise risk management (ERM), intellectual capital (IC), and corporate social responsibility (CSR) on firm value (FV). The technique analysis used Structural Equation Model with Partial Least Squares (SEM-PLS) to process 162 annual reports from 54 manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. The research results indicated that ERM, IC, and CSR positively affected FV. The higher ERM, IC, and CSR values, the higher the FV. The originality of this research is in the research model that proved the effect of ERM, IC, and CSR disclosures on increasing FV. This research contributes to ERM, IC, CSR and FV literature. The ERM mechanism can help management identify and unlock synergies by aggregating and sharing all company data and risk factors and evaluating them in a consolidated format. It is supported by the company's intangible assets, namely IC and the implementation of CSR activities. Thus, manufacturing companies should always be committed to managing ERM, IC, and CSR. The government needs to consistently encourage the implementation of ERM through mitigating risk activities (COSO ERM and ISO 31000) and improve social disclosure regulations through GRI (Global Reporting Initiative), ISO (International Organization for Standarzation) 26000, and SDGs (Sustainable Development Goals) to achieve the company's sustainability in the future.