The Mediating Role of Financial Performance in The Relationship Between Competitive Advantage and Corporate Reputation
DOI:
https://doi.org/10.26905/afr.v7i3.13324Keywords:
Competitive advantage, Corporate reputation, Financial performance, Firm size, LiquidityAbstract
This study examines the impact of competitive advantage, company size, and liquidity on corporate reputation and financial performance. The research focuses on non-financial companies listed on the Indonesia Stock Exchange from 2015 to 2021, as these firms serve as key indicators of economic performance due to their high liquidity, large assets, and strong fundamentals. Using regression analysis, the findings reveal that competitive advantage, liquidity, and firm size positively influence corporate reputation and financial performance. Additionally, financial performance acts as a mediating variable in this relationship. This study contributes to the understanding of corporate reputation and financial outcomes, offering insights for business strategy and policy-making.
JEL Classification: G32, G02, M1
Downloads
References
Abbas, D. S., Rahandri, D., Kismanah, I., & Ardiyanti, A. (2022). Competitive Advantage as Role Moderation Between System-Driven Performance and Economic Performance. Quantitative Economics and Management Studies, 3(2), 235–244.
Abdelhak, E. El., Hussainey, K., & Albitar, K. (2023). Covid-19 disclosure: do internal corporate governance and audit quality matter? International Journal of Accounting & Information Management, 31(1), 170–194. https://doi.org/10.1108/IJAIM-05-2022-0108
Andreas, R. B., Bachtiar, Y., Koroy, T. R., & Haryanto, S. (2023). Financial Performance: Is it Managerial Capability That Investors Respond to? AFRE Accounting and Financial Review, 6(1), 85–93.
Archer-Brown, C., & Kietzmann, J. (2018). Strategic knowledge management and enterprise social media. Journal of Knowledge Management, 22(6), 1288–1309. https://doi.org/10.1108/JKM-08-2017-0359
Aydin, S., & Dube, M. (2018). Knowledge management, innovation, and competitive advantage: is the relationship in the eye of the beholder? Knowledge Management Research and Practice, 16(3), 402–413. https://doi.org/10.1080/14778238.2018.1496564
Bagna, E., Ramusino, E. C., & Denicolai, S. (2021). Innovation through patents and intangible assets: Effects on growth and profitability of european companies. Journal of Open Innovation: Technology, Market, and Complexity, 7(4). https://doi.org/10.3390/joitmc7040220
Bahta, D., Yun, J., Islam, M. R., & Bikanyi, K. J. (2021). How does CSR enhance the financial performance of SMEs? The mediating role of firm reputation. Economic Research-Ekonomska Istrazivanja , 34(1), 1428–1451. https://doi.org/10.1080/1331677X.2020.1828130
Bamhdi, A. M. (2024). Analysis of intangible assets reporting standards and automation in KSA within an Islamic context – a case study. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/JIABR-08-2023-0273
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distiction in social psychological research: conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182. https://doi.org/10.1037/0022-3514.51.6.1173
Bel, R. (2018). A property rights theory of competitive advantage. Strategic Management Journal, 39(6), 1678–1703. https://doi.org/10.1002/smj.2707
Bergh, D. D., Ketchen, D. J., Boyd, B. K., & Bergh, J. (2010). New Frontiers Of The Reputation-Performance Relationship: Insights From Multiple Theories. Journal Of ManagementJournal Of Management. https://doi.org/https://doi.org/10.1177/0149206309355320
Black, E. L., Carnes, T. A., Richardson, V. J., & . (2000). The Market Valuation Of Corporate Reputation. Corporate Reputation Review, 3(1). https://doi.org/https://doi.org/10.1057/Palgrave Crr. 1540097
Brønn, C. (2015). A systems approach to understanding how reputation contributes to competitive advantage. Corporate Reputation Review, 18(2), 69–86. https://doi.org/10.1057/crr.2015.5
Brønn, C., & Brønn, P. S. (2015). A systems approach to understanding how reputation contributes to competitive advantage. Corporate Reputation Review, 18(2), 69–86. https://doi.org/10.1057/crr.2015.5
Budiman, M. F. M., & Krisnawati, A. (2021). Can Good Corporate Governance Influence the Firm Performance? Empirical Study from Indonesia Transportation Firms. AFRE (Accounting and Financial Review), 4(1), 119–128. https://doi.org/10.26905/afr.v4i1.6017
Çağlıyan, V., Attar, M., & Abdul-Kareem, A. (2021). Assessing the mediating effect of sustainable competitive advantage on the relationship between organisational innovativeness and firm performance. Competitiveness Review. https://doi.org/10.1108/CR-10-2020-0129
Cantele, S. (2018). Is sustainability a competitive advantage for small businesses? An empirical analysis of possible mediators in the sustainability–financial performance relationship. Journal of Cleaner Production, 182, 166–176. https://doi.org/10.1016/j.jclepro.2018.02.016
Cantele, S., & Zardini, A. (2018). Is sustainability a competitive advantage for small businesses? An empirical analysis of possible mediators in the sustainability–financial performance relationship. Journal of Cleaner Production, 182, 166–176. https://doi.org/10.1016/j.jclepro.2018.02.016
Chen, L., Feldmann, A., & Tang, O. (2015). The relationship between disclosures of corporate social performance and financial performance: Evidences from GRI reports in manufacturing industry. International Journal of Production Economics, 170, 445–456. https://doi.org/10.1016/j.ijpe.2015.04.004
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: A review and assessment. Journal of Management, 37(1), 39–67. https://doi.org/10.1177/0149206310388419
D’Oria, L., Crook, T. R., Ketchen, D. J., Sirmon, D. G., & Wright, M. (2021). The Evolution of Resource-Based Inquiry: A Review and Meta-Analytic Integration of the Strategic Resources–Actions–Performance Pathway. In Journal of Management (Vol. 47, Issue 6). https://doi.org/10.1177/0149206321994182
D’Souza, C. (2018). Small and medium size firm’s marketing competitive advantage and environmental initiatives in the Middle East. Journal of Strategic Marketing, 26(7), 568–582. https://doi.org/10.1080/0965254X.2017.1318945
Diamond, D. W., & Verrecchia, R. E. (1991). Disclosure, Liquidity, and the Cost of Capital. Journal of Finance, XLVI(4), 1325–1359.
Duangekanong, D. (2021). Use of strategic human resources management (SHRM) in Thailand’s High-tech firms: Adoption and firm non-financial outcomes. Humanities, Arts and Social Sciences Studies, 21(1), 1–10. https://doi.org/10.14456/hasss.2021.1
Eberl, M., & Schwaiger, M. (2005). Corporate Reputation: Disentangling The Effects On Financial Performance. European Journal of Marketing, 39(7), 838–854. https://doi.org/Https://Doi.Org/10.1108/03090560510601798
Fransisca, S., Robiani, B., Meutia, I., & Yusnaini, Y. (2024). Development of Carbon Emission Disclosure Indicators in Indonesia and Analysis of Determining Factors. Qubahan Academic Journal, 4(3), 242–262. https://doi.org/10.48161/qaj.v4n3a617
Gamayuni, R. R. (2015). The Effect Of Intangible Asset Financial Performance And Financial Policies On The Firm Value. International Journal of Scientific & Technology Research, 4(1), 202–212.
Hall Jr., E. H., & Lee, J. (2014). Assessing the Impact of Firm Reputation on Performance: An International Point of View. International Business Research, 7(12), 1–13. https://doi.org/10.5539/ibr.v7n12p1
Haryanto, S., Aristanto, E., Assih, P., Aripin, Z., & Bachtiar, Y. (2021). Loan to Deposit Ratio , Risiko Kredit, Net Interest Margin dan Profitabilitas Bank. AFRE Accounting and Financial Review, 4(1), 146–154.
Holmström Olsson, H., & Bosch, J. (2017). From ad hoc to strategic ecosystem management: the “Three-Layer Ecosystem Strategy Model” (TeLESM). Journal of Software: Evolution and Process, 29(7). https://doi.org/10.1002/smr.1876
Iglesias, O., Markovic, S., Bagherzadeh, M., & Singh, J. J. (2020). Co-creation: A Key Link Between Corporate Social Responsibility, Customer Trust, and Customer Loyalty. Journal of Business Ethics, 163(1), 151–166. https://doi.org/10.1007/s10551-018-4015-y
Istikomah, Rahmawati, & Amperawati, E. D. (2023). The Impact of ESG Risk Scores on Firm Value: Foreign Ownership as A Moderating Role. AFRE Accounting and Financial Review, 6(1), 139–147. https://jurnal.unmer.ac.id/index.php/afr
Javed, M., Rashid, M. A., Hussain, G., & Ali, H. Y. (2019). The effects of corporate social responsibility on corporate reputation and firm financial performance: moderating role of responsible leadership. Corporate Social Responsibility and Environmental Management, 27(3), 1395–1409. https://doi.org/10.1002/csr.1892
Jemunu, M. D. P., Apriyanto, G., & Parawiyati. (2020). Good Corporate Governance Dan Pengungkapan Sustainability Report Terhadap Nilai Perusahaan. AFRE Accounting and Financial Review, 3(2), 93–102. http://repository.unair.ac.id/97940/
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics. https://doi.org/10.2139/ssrn.94043
Jo, H., Hsu, A., Llanos-Popolizio, R., & Vergara-Vega, J. (2021). Corporate Governance and Financial Fraud of Wirecard. European Journal of Business and Management Research, 6(2), 96–106. https://doi.org/10.24018/ejbmr.2021.6.2.708
Kamukama, N., Kyomuhangi, D. S., Akisimire, R., & Orobia, L. A. (2017). Competitive advantage: Mediator of managerial competence and financial performance of commercial banks in Uganda. African Journal of Economic and Management Studies, 8(2), 221–234. https://doi.org/10.1108/AJEMS-10-2016-0142
Khan, M. (2019). Corporate Governance, ESG, and Stock Returns around the World. Financial Analysts Journal, 75(4), 103–123. https://doi.org/10.1080/0015198X.2019.1654299
Kim, S. K., Jo, D. H., Kwon, C. H., & Kim, H. C. (2021). Path Analysis to Management Performance of Small and Medium-sized Manufacturing Firms’ Strategic Orientation. In Proceedings - 2021 21st ACIS International Semi-Virtual Winter Conference on Software Engineering, Artificial Intelligence, Networking and Parallel/Distributed Computing, SNPD-Winter 2021 (pp. 122–126). https://doi.org/10.1109/SNPDWinter52325.2021.00035
Lagodiienko, V., Karyy, O., Ohiienko, M., Kalaman, O., Lorvi, I., & Herasimchuk, T. (2019). Choosing effective internet marketing tools in strategic management. International Journal of Recent Technology and Engineering, 8(3), 5220–5225. https://doi.org/10.35940/ijrte.C5868.098319
Lassoued, M. (2018). Comparative study on credit risk in Islamic banking institutions: The case of Malaysia. Quarterly Review of Economics and Finance, 70, 267–278. https://doi.org/10.1016/j.qref.2018.05.009
Li, S., Ragu-Nathan, B., Ragu-Nathan, T. S., & Subba Rao, S. (2006). The impact of supply chain management practices on competitive advantage and organizational performance. Omega, 34(2), 107–124. https://doi.org/10.1016/j.omega.2004.08.002
Mahdi, O. R., & Nassar, I. A. (2021). The business model of sustainable competitive advantage through strategic leadership capabilities and knowledge management processes to overcome covid-19 pandemic. Sustainability (Switzerland), 13(17), 1–27. https://doi.org/10.3390/su13179891
Martínez-Ferrero, J., Banerjee, S., & García-Sánchez, I. M. (2016). Corporate Social Responsibility as a Strategic Shield Against Costs of Earnings Management Practices. Journal of Business Ethics, 133(2), 305–324. https://doi.org/10.1007/s10551-014-2399-x
Maury, B. (2018). Sustainable competitive advantage and profitability persistence: Sources versus outcomes for assessing advantage. Journal of Business Research, 84(October 2016), 100–113. https://doi.org/10.1016/j.jbusres.2017.10.051
Mendoza-Silva, A. (2020). Innovation capability: a systematic literature review. European Journal of Innovation Management, 24(3), 707–734. https://doi.org/10.1108/EJIM-09-2019-0263
Migdadi, M. M. (2022). Knowledge management processes, innovation capability and organizational performance. International Journal of Productivity and Performance Management, 71(1), 182–210. https://doi.org/10.1108/IJPPM-04-2020-0154
Mousa, G., & Hassan, N. T. (2015). Legitimacy theory and environmental practices: Short notes. International Journal of Business and Statistical Analysis, 2(01).
Muchlish, M., & Tjahyono, M. E. S. (2022). Influence of TQM on increasing sustainable competitive advantage with transformational leadership as a mediation variable. International Journal of Research in Business and Social Science (2147- 4478), 10(8), 100–106. https://doi.org/10.20525/ijrbs.v10i8.1473
Myšková, R., & Kuběnka, M. (2019). Information sharing in the context of business cooperation – as a source of competitive advantage. Journal of International Studies, 12(3), 169–182. https://doi.org/10.14254/2071-8330.2019/12-3/14
Newburry, W., Deephouse, D. L., & Gardberg, N. A. (2019). Global aspects of reputation and strategic management. In Research in Global Strategic Management (Vol. 18, pp. 1–20). https://doi.org/10.1108/S1064-485720190000018009
Nguyen, D. K., & Vo, D. T. (2020). Enterprise risk management and solvency: The case of the listed EU insurers. Journal of Business Research, 113(September), 360–369. https://doi.org/10.1016/j.jbusres.2019.09.034
Nishitani, K., Nguyen, T. B. H., & Kokubu, K. (2024). Does the economic motivation of firms to address the United Nations’ Sustainable Development Goals (SDGs) promote the SDGs or merely SDG-washing? Critical empirical evidence from Japan and Vietnam. Review of Managerial Science. https://doi.org/10.1007/s11846-024-00755-z
Olalere, O. E., Bin Omar, W. A., & Kamil, S. (2017). Bank Specific and Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Nigeria. International Journal of Finance & Banking Studies (2147-4486), 6(1), 25. https://doi.org/10.20525/ijfbs.v6i1.627
Olorunsola, V. O., Saydam, M. B., Ogunmokun, O. A., & Ozturen, A. (2022). Service beyond the status quo: the ripple effect of corporate social responsibility and internal marketing on employee’s customer-oriented behavior. International Journal of Bank Marketing, 40(4), 820–841. https://doi.org/10.1108/IJBM-07-2021-0321
Park, E., Kim, K. J., & Kwon, S. J. (2017). Corporate social responsibility as a determinant of consumer loyalty: An examination of ethical standard, satisfaction, and trust. Journal of Business Research, 76, 8–13. https://doi.org/10.1016/j.jbusres.2017.02.017
Park, K. J., Mo, K., & Yoon, N. (2018). CEO pension and auditors’ going-concern opinion. Journal of Legal, Ethical and Regulatory Issues, 22(4).
Pattiruhu, J. (2020). Effect of Liquidity, Profitability, Leverage, and Firm Size on Dividend Policy. Journal of Asian Finance, Economics and Business, 7(10), 35–42. https://doi.org/10.13106/jafeb.2020.vol7.no10.035
Pham, H. S. T., & Tran, H. T. (2020). CSR disclosure and firm performance: The mediating role of corporate reputation and moderating role of CEO integrity. Journal of Business Research, 120, 127–136. https://doi.org/10.1016/j.jbusres.2020.08.002
Porter, M. E., & Kramer, M. R. (2006). Strategy and Society: the link between competitive advantage and corporate social responsibility. Harvard Business Review.
Pramisti, A. A., & Istiqomah, D. F. (2024). The Influence of Environmental Social Governance (ESG) on Company Value with Financial Perfromance As a Mediation Variable. Jurnal Aplikasi Akuntansi, 9(1), 34–45. https://doi.org/10.29303/jaa.v9i1.423
Putra, Y. S. (2018). Analysis Of Differentiation Strategies To Create Competitive Advantages In Facing Global Markets. Kne Social Sciences. https://doi.org/Https://Doi.Org/10.18502/Kss. V3i3.1888
Putri, R., Nyoman, D., Werastuti, S., Risfandy, T., & Dewi, T. R. (2023). The Determinants of Company Value: Green Accounting, CSR, and Profitability. AFRE Accounting and Financial Review, 6(1), 115–126. https://jurnal.unmer.ac.id/index.php/afr
Rajapathirana, R. P. J., & Hui, Y. (2018). Relationship between innovation capability, innovation type, and firm performance. Journal of Innovation and Knowledge, 3(1), 44–55. https://doi.org/10.1016/j.jik.2017.06.002
Roberts, P. W., & Dowling, G. R. (2002). Corporate Reputation And Sustained Superior Financial Performance. Strategic Management Journal. https://doi.org/Https://Doi.Org/10.1002/Smj.274
Roy, K., & Karna, A. (2015). Doing social good on a sustainable basis: Competitive advantage of social businesses. Management Decision, 53(6), 1355–1374. https://doi.org/10.1108/MD-09-2014-0561
Sekaran, U., & Bougie, R. (2016). Research Methods for Business A Skill-Building Approach (Seventh ed). John Wiley & Sons Ltd.
Singh, D. K., Dash, M. K., & Kumar, A. (2016). Using TOPSIS and modified TOPSIS methods for evaluating the competitive advantages of internet shopping malls. International Journal of Business Information Systems, 22(4), 476–494. https://doi.org/10.1504/IJBIS.2016.077839
Soewarno, N., & Ramadhan, A. H. A. (2020). The effect of ownership structure and intellectual capital on firm value with firm performance as an intervening variable. International Journal of Innovation, Creativity and Change, 10(12), 215–236.
Spence, M. (1973). Job Market Signaling. The Quarterly Journal of Economics, 87(3), 355–374.
Subramanyam Wild. (2010). Financial Statement Analysis.
Suchman, M. C. (2014). Managing Legitimacy: Strategic and Approaches. Academy of Management Review, 20(3), 571–610.
Taliento, M., Favino, C., & Netti, A. (2019). Impact of environmental, social, and governance information on economic performance: Evidence of a corporate “sustainability advantage” from Europe. Sustainability (Switzerland), 11(6). https://doi.org/10.3390/su11061738
Tumwebaze, Z., Bananuka, J., Kaawaase, T. K., Bonareri, C. T., & Mutesasira, F. (2022). Audit committee effectiveness, internal audit function and sustainability reporting practices. Asian Journal of Accounting Research, 7(2), 163–181. https://doi.org/10.1108/AJAR-03-2021-0036
Wang, C. H., & Chen, K. L. (2018). Guanxi: competitive advantage or necessary evil?: Evidence from high-tech firms in Taiwan science parks. Review of International Business and Strategy, 28(1), 110–127. https://doi.org/10.1108/RIBS-07-2017-0058
Wickert, C., Scherer, A. G., & Spence, L. J. (2016). Walking and Talking Corporate Social Responsibility: Implications of Firm Size and Organizational Cost. Journal of Management Studies, 53(7), 1169–1196. https://doi.org/10.1111/joms.12209
Wild, J. J., & Subramanyam, K. R. (2010). Financial Statement Analysis (10th editi). McGraw Hill.
Wu, M. W., & Shen, C. H. (2013). Corporate social responsibility in the banking industry: Motives and financial performance. Journal of Banking and Finance, 37(9), 3529–3547. https://doi.org/10.1016/j.jbankfin.2013.04.023
Xu, S., Liu, D., & Huang, J. (2015). Corporate social responsibility, the cost of equity capital and ownership structure: An analysis of Chinese listed firms. Australian Journal of Management, 40(2), 245–276. https://doi.org/10.1177/0312896213517894
Yang, F., Liao, D., Fan, Y., Gao, R., Wu, X., Rahman, T., Yong, T., Liu, W., Liu, J., Du, J., Shu, K., Wang, X., & Yang, W. (2017). Effect of narrow-row planting patterns on crop competitive and economic advantage in maize-soybean relay strip intercropping system. Plant Production Science, 20(1), 1–11. https://doi.org/10.1080/1343943X.2016.1224553
Zhang, J., Li, Y., Si, Y., Peng, B., Xiao, F., Luo, S., & He, L. (2022). A Low‐Grade Road Extraction Method using SDG‐DenseNet Based on the Fusion of Optical and SAR Images at Decision Level. Remote Sensing, 14(12). https://doi.org/10.3390/rs14122870
Zhao, Q., Tsai, P. H., & Wang, J. L. (2019). Improving financial service innovation strategies for enhancing China’s banking industry competitive advantage during the fintech revolution: A hybrid MCDM model. Sustainability (Switzerland), 11(5), 1419. https://doi.org/10.3390/su11051419
Additional Files
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 AFRE (Accounting and Financial Review)
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish in this journal agree to the following terms:
The copyright of the received article shall be assigned to the journal as the publisher of the journal. The intended copyright includes the right to publish the article in various forms (including reprints). The journal maintains the publishing rights to the published articles. Authors must agree to the copyright transfer agreement by checking the Copyright Notice column at the initial stage when submitting the article.
