The Effect of Business Strategy and Firm Reputation on Financial
Performance and Its Implications for Shipping Companies' Stock
Returns
PRASADJA RICARDIANTO1, ENI KOSENDANG1, ZAENAL ABIDIN1, RINI SETIAWATI2,
NOFRISEL1, SRI HANDAYANI1, ONI YUDO SUNDORO1, DIAN ARTANTI ARUBUSMAN1,
TIGOR FRANKY DEVANO SIANTURI1, ENDRI ENDRI3
1Postgraduate Program, Institute of Transportation and Logistic Trisakti, INDONESIA
2Faculty of Management and Business, Universitas Bina Nusantara, INDONESIA
3Faculty of Economics and Business, Universitas Mercu Buana, INDONESIA
Abstract: - The purpose of this research is to analyze the impact of business strategy and firm reputation on
financial performance and its implication for stock return shipping companies. Important stock return to
investors requires improvement through the business strategy, firm reputation, and financial performance. The
research used a quantitative method and the data analysis used descriptive statistics and path analysis with the
SmartPLS3 application. The total sample is 45 consisting of 9 companies with a 5-year observation period
taken by purposive sampling technique and was listed on the Indonesian Stock Exchange between 2015 and
2019. The result of the research shows, that there is a direct impact of business strategy on financial
performance, there is no direct impact of firm reputation on financial performance, there is no impact of
business strategy on stock return, there is a direct impact of firm reputation on stock return, and there is no
direct impact of financial performance on stock return. Companies must be able to implement appropriate
business strategies by taking into account their internal and external conditions to improve their financial
performance. They also have to consistently maintain and enhance their firm reputation by continuously
improving the whole organization's performance so that the capitalization of the stock market will increase as
well.
Key-Words: - Business strategy, Firm reputation, Financial performance, Stock return, Shipping companies.
Received: October 21, 2022. Revised: March 4, 2023. Accepted: March 27, 2023. Published: April 7, 2023.
1 Introduction
Transportation has a very vital role in the economy
of a country. Therefore, the transportation sector
develops in line with economic growth, [1].
Transportation consists of land, air, and sea
transportation. Sea transportation or shipping also
develops along with the implementation of the
cabotage principle. Presidential Instruction of 2005
concerning the Empowerment of the National
Shipping Industry emphasizes that the cabotage
principle is carried out consistently by involving
parties with authority. The enactment of the Law
of 2008 concerning Shipping reaffirms the state's
commitment to the application of the cabotage
principle, which is reflected in Article 8 that
domestic sea transportation activities are carried out
by national sea transportation companies, with
Indonesian-flagged vessels and manned by
Indonesian citizens. The successful application of
the cabotage principle, which is marked by the
increasing number of national commercial fleets
controlling the inter-island shipping market in
Indonesia, has the potential to help increase
supervision of Indonesia's territorial waters.
The success of the cabotage principle is also
expected to increase the performance of shipping
companies, especially shipping companies listed on
the Indonesia Stock Exchange. The condition of the
Stock Exchange is one indicator of a country's
economic success, [2]. If the stock exchange
conditions are good, then the economy will be in a
positive state. However, the share price of shipping
companies listed on the Indonesia Stock Exchange
has decreased from year to year so stock returns
have also decreased. Return of shares is very
important for investors who put their funds in stock
investment as income received when the shares
are sold back, [3]. Stock return indicates the
success of the firm in managing its business and
that the Firm has good prospects in the future. The
combination of funding sources to finance capital-
intensive projects in recent times is very important
and will give a direct impact on the cost of capital,
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Prasadja Ricardianto, Eni Kosendang,
Zaenal Abidin, Rini Setiawati, Nofrisel,
Sri Handayani, Oni Yudo Sundoro,
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[4], [5].
Business strategy is a tool for integrating and
coordinating the commitment and actions designed
to exploit the core competencies to raise the
competitive position of the company's products and
services in certain market segments. Therefore, if
the company does not implement the appropriate
business strategy, it may decrease the stock return.
Shipping companies are capital intensive industry.
Thus, a cost leadership strategy can be
implemented by reducing costs relatively compared
to the competitors so that they can sell at low
prices. If a company fails to implement cost
efficiency then it will lose in the competition with
others. Meanwhile, from the business strategy of
the shipping companies listed on the Indonesia
Stock Exchange with the indicator of decreased
efficiency ratio, it is concluded that the companies
do not succeed to make efficiency in asset
utilization. Research by Shin and Shin, [6] found
that shipping companies are expected to actively
introduce and utilize more modern technology in
response to environmental changes and to turn the
organizational strategy into a prospector strategy.
A good firm's reputation can increase stock return
and on the contrary, a bad firm's reputation can
lower stock return. From the available data, the
capitalization of the stock market as a reputation
indicator of shipping companies listed on the
Indonesia Stock Exchange decreases. The result of
the research done by Delgado-Garcia et a., [7]
states that the accumulation of ownership in a few
major stockholders will lower the firm reputation.
Burke et al., [8], and Wheelen and Hunger, [9],
state that reputation needs to be maintained for the
company's benefit and it can become a strategic
resource. The company's financial report does not
reflect the real condition, it will affect the
company's reputation, [10]. Financial performance
is an assessment of the company’s financial
condition carried out based on the analysis of the
company’s financial ratios so that the degree of the
company’s success in its operation can be known,
which reflects the performance in a certain period.
Decreased financial performance can lower the
firm reputation and stock return and also affects the
success of the business strategy. Financial
performance is also regarded as the company’s
ability to meet its financial objectives, [11], [12],
[13]. The company's performance may also
determine its social contribution and can be
measured in the company's profitability, [14], [15].
2 Literature Review
2.1 Stock Return
Stock return is very important for investors who
invest their funds in the form of stock as revenue if
it is sold. The stock return also indicates the
success of a company in managing the business and
the company has good prospects in the future. If the
stock return is low, investors will not invest in the
company's stock so the price of its stock will not
increase and consequently the company owner’s
wealth will not increase either. Stock return is the
difference between the amount received and the
amount invested divided by the amount invested,
[16]. The stock return consists of two components,
namely Capital Gain and Yield. For the listed
shipping companies, their stock return increases
with the exposure diversified to their businesses,
[17]. The charter strategy the shipping companies
implement in a long-term contract succeeds to
reduce the impact of short-term evolution from the
delivery index at the stock price, [18]. According to
Thalassinos et al, [19], if the stock price decreases
continuously, it will lower the prestige of the firm
in the eyes of investors or prospective investors.
Thus, the stock return can be synthesized as the
result obtained from stock investment in the form
of realized return that has occurred or an expected
return that has not occurred yet but is expected to
occur in the future.
2.2 Business Strategy
Strategy according to Pearce II et al, [20], is a plan
on a big scale, oriented to the future, to interact
with the competitive condition to achieve the
company objectives. Strategy is the focus on
achieving a certain objective by involving
resources and implies consistency, integration, or
cohesiveness of decision and action, [21]. Hubbard
and Beamish, [22] define a competitive strategy as
the effort of an organization to position its business
to be more competitive than its competitors.
Competitive strategy is also a strategy to fight all
competitors with advantages. According to Porter,
there are three generic strategies in business units
that can be selected by companies from various
industries to gain a competitive advantage for the
firm's business, [23]. Thus, it can be concluded that
business strategy is a tool for integrating and
coordinating commitment and action designed to
exploit the core competencies to raise the
competitive position of the company's products and
services in certain market segments with the
research variables are cost leadership strategy,
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differentiation strategy, and focus strategy.
2.3 Firm Reputation
A firm reputation is several perceptions and
company evaluations concerning the relevant
stakeholders and specific supporting potentials that
describe the whole company when compared with
its competitors. Apart from Indonesia Stock
Exchange being influenced by business strategy,
stock returns can also be influenced by a firm
reputation. Sivertzen et al., [24] define a firm's
reputation as an integral part of a firm's social
characteristics, determined by the actions that the
firm has taken and its possible future. Buss, [25],
and Gonzalez-Perez and Leonard, [26], say that a
firm reputation is several company perceptions and
evaluations concerning the relevant stakeholders
and specific supporting potentials such as purchase,
word of mouth, and defense against criticism. In
addition, Shaw, [27], also argues that a good
reputation results in benefits and is more valuable,
that is the company is at a controlled risk. More
complex is a belief about how other people see the
firm. Abeyesekere, [28], explains that the
dimensions of reputation variables among others
are long-term investment, firm reputation, policy
on assets, management quality, quality of products
or services, innovation, responsibility for the
community and environment, as well as company
growth. In addition, a firm reputation consists of
two attributes: (1) the stakeholder's perception of
the ability of a company to produce quality
products, and (2) the company's advantages.
Eisend, [29], says there are four dimensions of firm
reputation necessary to be handled, namely: (1)
credibility (2) trustworthiness, (c) reliability, and
(4) responsibility. Whereas Martin-de Castro, [30],
argues that firm reputation is divided into three
main dimensions, namely: (1) managerial
reputation; (2) financial reputation, and (3) product
reputation.
Thus, it can be concluded that firm reputation
is the company's perception and evaluation
concerning the relevant stakeholders and specific
supporting potentials that describe the whole
company when compared with its competitors, with
the dimension of firm reputation variable as the
market capitalization counted by multiplying the
closing price of the stock by the volume of
outstanding stocks.
2.4 Financial Performance
Apart from Indonesia Stock Exchange being
influenced by the firm's business strategy and
reputation, stock returns can also be influenced by
financial performance. Through financial
performance, assets and equity can be managed,
[31], [32]. [33], [34], [35]. Financial performance
will show how effectively and efficiently a
company achieves its objectives and the financial
statement issued will represent the company's
financial performance, [36]. Financial performance
control according to Iskandar et al.,[37], must be
done so that the company will be efficient to get
maximum profit. According to Endri et al., [38],
financial performance is the combination of the
organization's financial health, ability to fulfill the
commitment, and long-term financial obligations to
provide services in the future. Financial
performance measurement is carried out to know
the success of a company in achieving its target
based on the company's financial report. The
indicators of financial performance are among
others Return on Asset (ROA), Return on Equity
(ROE), and Net Profit Margin (NPM). Thus,
financial performance can be synthesized as the
assessment of a company's financial condition
based on the analysis of financial ratios to know the
success of a company in its operation which
reflects its performance in a certain period, with the
dimension of research variable being ROE [39].
Based on those research problems, it can be
concluded that the aims of this research are as
follows; (1) to know and analyze the contribution
of business strategy to the financial performance of
the shipping companies listed on the Indonesia
Stock Exchange (IDX), (2) to know and analyze the
contribution of firm reputation to the financial
performance of the shipping companies, (3) to
know and analyze the contribution of business
strategy to the shipping companies’ stock return,
(4) to know and analyze the contribution of firm
reputation to the shipping companies’ stock return,
and (5) to know and analyze the contribution of
financial performance to the shipping companies’
stock return.
Based on the literature review and previous
research, the following hypotheses can be proposed
(Figure 1).
H1: There is an impact of business strategy on
financial performance.
H2: There is an impact of a firm reputation on
financial performance.
H3: There is an impact of business strategy on stock
return.
H4: There is an impact of firm reputation on stock
return.
H5: There is an impact of financial performance on
stock return.
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Prasadja Ricardianto, Eni Kosendang,
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H6: There is an indirect impact of business strategy
on the stock return through the mediation of
financial performance
H7: There is an indirect impact of a firm reputation
on the stock return through the mediation of
financial performance.
3 Research Methods
This research uses Path Analysis with the analysis
tool Partial Least Square (PLS) through the
SmartPLS3 application. The research sample is as
many as 45 port service users consisting of nine
shipping companies listed on the Indonesia Stock
Exchange in the period 2015-2019. Then to
examine the significance of the path coefficient, the
t-test is used, and the obtained value of the t-statistic is
compared with the value of the t-table. In the path
analysis, the influence of independent variables on
the dependent variable can be direct. In another
word, multiple regression analysis takes into
account the existence of direct influence. In this
research business strategy, and firm reputation are
independent variables, and stock return is the
dependent variable whereas financial performance
is the intervening variable.
4 Results
The path coefficient of the impact of business
strategy on the financial performance obtained in
the direct influence of business strategy on
financial performance is 0.256. The path coefficient
has a positive value, indicating that the
improvement of business strategy can improve
financial performance.
Fig. 1: Conceptual Framework
Meanwhile, the value of the t-statistic obtained
is 1.925, so it can be concluded that business
strategy has a direct impact on financial
performance. The path coefficient of the impact
of firm reputation on the financial performance
obtained in the direct influence of firm reputation
on financial performance is 0.065. The path
coefficient has a positive value, indicating that the
improvement of a firm reputation can improve
financial performance. Meanwhile, the value of the t-
statistic obtained is 0.708, so it can be concluded that a
firm reputation does not influence financial
performance. The path coefficient of the impact
of business strategy on stock return obtained in
the direct influence of business strategy on
stock return is -0.248. The obtained path
coefficient is negative, indicating that a poor
Business Strategy can lower the stock return.
The value of the t-statistic obtained is 1.588, so it
can be concluded that business strategy does
not directly influence stock return. The path
coefficient of the impact of firm reputation on
stock return obtained in the direct influence of
firm reputation on stock return is 0.148. The
path coefficient has a positive value, indicating
that a good firm's reputation can increase the
stock return. The value of the t-statistic obtained is
1.683, so it can be concluded that a firm
reputation has a positive direct impact on stock
return. The path coefficient of the impact of
financial performance on stock return obtained in
the direct influence of financial performance on
stock return is 0.067. The path coefficient has a
positive value, indicating that good financial
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performance can increase the stock return. The
value of the t-statistic obtained is 0.974, so it can be
concluded that financial performance does
influence stock return.
The path coefficient of the indirect Impact of
business strategy on stock return mediated by
financial performance obtained in the indirect
influence of business strategy on stock return
mediated by financial performance is 0.017. The
path coefficient has a positive value, indicating that
the business strategy supported by financial
performance can increase the stock return.
Meanwhile, the value of the t-statistic obtained is 0.442,
so it can be concluded that business strategy does
not indirectly influence stock return with the
mediation of financial performance. The path
coefficient of the indirect impact of a firm
reputation on stock return with the mediation of
financial performance is 0.004. The path coefficient
has a positive value, indicating that the firm
reputation supported by financial performance can
increase the stock return. Meanwhile, the value of
the t-statistic obtained is 0.251, so it can be concluded
that a firm reputation does not indirectly influence
stock return with the mediation of financial
performance.
All the path coefficients and the results of the t-
test concerning the influence of ownership structure
and financial performance on investment (Table 1).
Table 1. Summary of Path Coefficients
Path
Path
Coefficient
t-table
= 0.05
=0.01
X1 – Y1
0.256
1.67
2.41
X2 – Y1
0.065
1.67
2.41
X1 – Y2
-0.248
1.67
2.41
X2 – Y2
0.148
1.67
2.41
Y1 – Y2
0.067
1.67
2.41
X1 – Y2 – Y1
0.017
1.67
2.41
X2 – Y2 – Y1
0.004
1.67
2.41
* Significant path coefficient (t-statistic> t-table at α = 0.05)
ns Path coefficient is not significant (t-statistic <t-table at α = 0.05)
Fig. 2: Path Coefficients of the Impact of Business Strategy and Firm Reputation on
Financial Performance and Stock Return
Stock Return
Financial Performance
Firm Reputation
Business Strategy
0,066
Y1
X1
X2
0,077
1.000
1.000
-0.248
0.256
0.067
1.000
0.148
0.065
Y2
1.000
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The results of this research show that business
strategy directly and positively influences financial
performance, firm reputation does not influence
financial performance, the business strategy does
not influence stock return, firm reputation directly
and positively influences stock return, financial
performance does not influence stock return, the
business strategy does not indirectly influence
stock return with the mediation of financial
performance, and firm reputation does not
indirectly influence stock return with the mediation
of financial performance.
The results of statistical calculation with path
analysis are processed using Smart PLS 3
application to become the research hypotheses with
Path Coefficient and Tstatistic (Figure 2 and Figure
3).
The path coefficient of business strategy (X1)
toward financial performance (Y1) is 0.256,
meaning that business strategy positively influences
financial performance. The path coefficient of firm
reputation (X2) toward financial performance (Y1)
is 0.065, meaning that firm reputation positively
influences financial performance. The path
coefficient of business strategy (X1) toward stock
return (Y2) is -0.248, meaning that business
strategy negatively influences stock return. The
path coefficient of firm reputation (X2) toward
stock return (Y2) is 0.148, meaning that firm
reputation positively influences stock return. And
the path coefficient of financial performance (Y1)
toward stock return (Y2) is 0.067, meaning that
financial performance positively influences stock
return.
Fig. 3: Tstatistic of the Impact of Business Strategy and Firm Reputation on Financial
Performance and Stock Return
The t-statistic of business strategy (X1) toward
financial performance (Y1) is 1.925, meaning that
business strategy influences financial performance.
The path coefficient of firm reputation (X2) toward
financial performance (Y1) is 0.708, meaning that
firm reputation does not influence financial
performance. The path coefficient of business
strategy (X1) toward stock return (Y2) is 1.588,
meaning that business strategy does not influence
stock return. The path coefficient of firm reputation
(X2) toward stock return (Y2) is 1.683, meaning
that firm reputation influences stock return. And
the path coefficient of financial performance (Y1)
toward stock return (Y2) is 0,974, meaning that
financial performance does not influence stock
return.
5 Discussion
5.1 Impact of Business Strategy on Financial
Performance
The results of this study empirically prove that
business strategy has a positive and significant
direct impact on financial performance. Business
strategy is a means of integration and coordination
of commitments and actions designed to exploit core
competencies to enhance the competitive position
of a firm's products or services in a particular
market segment. When the business strategy is
executed properly where the resources owned by
the firm are used efficiently to increase the
competitiveness of the product or service, this
condition will increase the firm's sales. Business
strategies with cost leadership implemented by the
Stock Return
Financial Performance
Firm Reputation
Business Strategy
Y1
X1
X2
0.000
0.000
1.588
1.925
0.974
0.000
1.683
0.708
Y2
0.000
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f irm c a n increase firm profits. By reducing
costs, the firm can sell its services cheaper to
competitors so that firm revenue increases, which in
turn can increase firm profits. With increased
profits, it can improve financial performance, which
is an assessment of the firm's financial condition
based on an analysis of the firm's financial ratios so
that it can be seen that the firm's success rate in
carrying out its operational activities reflects work
performance in a certain period, with an indicator of
Return on Equity (ROE). The results of this study
are in line with research by Gorondutse and Hilman,
[40], who show that business strategy has an impact
on performance. The survey conducted by
Yuliansyah et al., [41], on 157 finance managers in
Indonesia is used to examine the direct and indirect
influence among the variables being hypothesized.
The result of research by Suryatini et al., [42],
indicates that both relations and competitive
strategy influence financial performance. This
research is in line with the study by Alexandrou et
al., [43], explaining that shipping companies with
proactive strategy have better financial
performance. Their study contributes to the decision
on the shipping companies' environmental
management strategy to improve their financial
gain. Thus, the findings of this study support the
results of previous studies that business strategy has
an impact on financial performance.
5.2 Impact of Firm Reputation on Financial
Performance
The results of this study empirically prove that the
firm's reputation does not have a direct impact on
financial performance. The firm's reputation is
several perceptions and evaluations of the firm
related to relevant stakeholders and the specific
potential that supports the firm as a whole when
compared to its competitors. The firm's reputation
with an indicator of stock market capitalization. The
reputation of this firm is in the view of investors.
According to investors, a high firm's reputation
cannot affect financial performance. This condition
means that the firm's reputation does not improve
financial performance, namely an assessment of the
firm's financial condition based on an analysis of
the firm's financial ratios so that the firm's success
rate in carrying out its operational activities can be
seen, which reflects work performance in a certain
period, with the Return on Equity (ROE). The
results of this study are not in line with the research
of Carroll and Shabana, [44], that a Firm reputation
has an impact on financial performance. They
emphasize that a firm reputation can help the
organization achieve a robust competitive
advantage, improving the performance of the stock
market. The key finding of the research by Lee and
Roh, [45], is that a firm reputation is significantly
and positively related to most corporate financial
performance. Whereas Shi, [46], re-examines the
relations between reputation and financial
performance and shows that the competition in the
industry partly changes the dynamic between
financial performance and firm reputation.
However, based on the analysis of several state
companies in Indonesia, especially from the
investor’s perspective, it is found that financial
performance does not influence a firm reputation,
[47]. The result of this research is in line with the
research by Caliskan, [48], concluding that a firm
reputation does not influence financial performance.
Thus, the findings of this study support the results
of previous studies because a firm reputation has no
direct impact on financial performance.
5.3 Impact of Business Strategy on Stock
Return
The results of this study also empirically prove that
business strategy has no direct impact on stock
return prices. Business strategy is a means of
integration and coordination of commitments and
actions designed to exploit core competencies to
enhance the competitive position of a firm's
products or services in a particular market segment.
The business strategy carried out by the firm may
not be well analyzed by investors. The business
strategy adopted by the firm is not recognized by
investors as outsiders. Investors do not consider the
firm's business strategy in the share purchase
decision. This condition will not affect stock
returns, namely the results obtained from stock
investments in the form of real return which has
been already obtained, or in the form of expected
return which has not been obtained yet but is
expected to be obtained in the future. The previous
research by Nocco and Stulz, [49], studies the
relationship between the measurement of Business
Strategy and the risk of falling stock price and
shows that the companies being assessed have a too
high risk -- on average, they have a higher risk of
falling stock price. The finding by Fathony et
al.,[50], explains that financial performance and
ROA altogether affect a company's stock return.
However, the other findings by Tanani and
Mohebkhah, [51], and Razak et al., [52], indicate
that there is no significant impact between corporate
strategy and stock return. Thus, the findings of this
study support the results of previous studies because
the business strategy has no direct impact on stock
return prices.
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5.4 Impact of Firm Reputation on Stock
Return
The results of this study empirically prove that a
firm reputation has no direct impact on stock return
prices. A firm reputation is several perceptions and
evaluations of the firm related to relevant
stakeholders and the specific potential that supports
the firm as a whole when compared to its
competitors. When the firm reputation is good, it
means that the Firm's condition and prospects are
good when compared to its competitors. When the
firm reputation is good, it means that the firm is in
good shape as a whole and has good prospects for
the future. With this condition, investors will
respond by buying firm shares. High interest in
buying stocks will increase stock prices from time
to time, thereby increasing stock returns, namely the
results obtained from stock investments in the form
of real return which has been already obtained, or in
the form of expected return which has not been
obtained yet but is expected to be obtained on the
future. Rose and Thomsen, [53], argue that
reputation can affect stock returns in the future. The
findings by Bravo, [54], indicate that future-
oriented financial information has a significant
impact on the capital market. In addition, the result
of the research shows that a firm reputation affects
the volatility of stock returns. The perceived
reputation driven by nonfinancial aspects is more
relevant in the future rather than the perceived
reputation driven by previous financial
performance, [55]. Although, the results of
research by Gonzalez Sanchez and Morales de
Vega, [56], show that there is a negative impact on
a firm reputation on excess stock returns, which
means that a good firm's reputation will reduce
abnormal stock returns. Thus, the findings of this
study support the results of previous studies that a
firm reputation has no direct impact on stock return
prices.
5.5 Impact of Financial Performance on
Stock Return
The results of this study empirically prove that
financial performance has no direct impact on stock
return prices. Financial performance is an
assessment of the firm's financial condition which is
carried out based on an analysis of the Firm's
financial ratios so that the Firm's success rate in
carrying out its operational activities can be seen,
which reflects work performance in a certain
period, with an indicator of Return on Equity
(ROE). Financial performance with the ROE
indicator is not too volatile and low so investors are
not too interested in investing their funds to buy
stocks. This condition does not affect stock returns,
namely the results obtained from stock investment
in the form of realized returns that have occurred or
expected returns that have not occurred but are
expected to occur in the future. The result of
research by Iwayan and Anom, [57], of several
companies listed on the Indonesia Stock Exchange
shows that Financial Performance such as Return on
Investment (ROI) insignificantly affects stock
return, Earning per share also insignificantly affects
stock return, and operational cash flow negatively
and significantly affects stock return. In addition,
according to the study by Saleh, [58], in Pakistan,
financial performance such as NPM and ROA also
negatively affects stock returns. However, indeed in
the previous research by Khan et al.,[59], and
Nugroho, [60], find that the financial structure of a
company like a book-to-market ratio positively and
significantly affects stock return; Return on Assets
(ROA), as a proxy of expected profitability, also
significantly affects stock return. Thus, the findings
of this study do not support the results of previous
studies because financial performance has no direct
impact on stock return prices.
5.6 Indirect Impact of Business Strategy on
Stock Return mediated by Financial
Performance
The results of this study empirically prove that
business strategy has no indirect impact on stock
return prices by mediating financial performance.
Based on the research results, shows that business
strategy has a direct impact on financial
performance and financial performance does not
directly affect the stock return price. This does not
open the opportunity for an indirect impact of
business strategy on stock returns by mediating
financial performance.
5.7 Indirect Impact of Firm Reputation on
Stock Return mediated by Financial
Performance
The results of this study empirically prove that a
firm reputation does not have an indirect impact on
stock return prices by mediating financial
performance. Based on the research results, shows
that the firm's reputation has no direct impact on
financial performance and financial performance
does not directly affect the stock return price. This
does not open the opportunity for an indirect
influence of a firm reputation on stock return prices
by mediating financial performance. Based on some
theoretical discussions and by comparing some
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.76
Prasadja Ricardianto, Eni Kosendang,
Zaenal Abidin, Rini Setiawati, Nofrisel,
Sri Handayani, Oni Yudo Sundoro,
Dian Artanti Arubusman,
Tigor Franky Devano Sianturi, Endri Endri
E-ISSN: 2224-2899
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Volume 20, 2023
previous research, it can be explained that the four
variables in this research, namely; Business
Strategy, Firm Reputation, Financial Performance,
and Stock Return can be regarded as a new
combination of variables. This combination of
variables has never been analyzed simultaneously
especially related to stock return in several shipping
companies. As another novelty, several hypotheses
do not affect directly and positively as in the impact
of Firm Reputation on Financial Performance,
Business Strategy on Stock Return, Firm Reputation
on Stock Return, and Financial Performance in
Stock Return.
6 Conclusion
Indonesian shipping companies can improve their
financial performance and stock return through the
business strategy of cost leadership. They try to
reduce their costs to be able to sell their services
competitively so that they win the competition in
the shipping industry. They must implement an
appropriate business strategy while taking into
account the company's internal and external
conditions so that the implemented business
strategy can improve the company’s financial
performance. They should always maintain and
improve the firm reputation by continuously
improving overall organizational performance so
the capitalization of the stock market can be
enhanced as well. They should also improve their
financial performance and maintain its stability if
they have achieved high financial performance by
utilizing capital efficiently to make profits for the
company so that investors are interested in
investing their funds to buy the company's stock. It
is recommended that further research extends the
period of observation and uses other indicators, for
example, Net Profit Margin (NPM) to study
financial performance.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
Conceptualization: Prasadja Ricardianto, Nofrisel,
Eni Kosendang. Data curation: Eni Kosendang,
Zaenal Abidin. Formal analysis: Endri Endri, Dian
Artanti Arubusman. Funding acquisition: Rini
Setiawati, Sri Handayani. Investigation: Endri
Endri, Tigor Franky Devano Sianturi.
Methodology: Prasadja Ricardianto, Endri Endri,
Oni Yudo Sundoro. Project administration: Dian
Artanti Arubusman, Sri Handayani. Resources:
Zaenal Abidin, Tigor Franky Devano Sianturi.
Software: Endri Endri, Rini Setiawati.
Supervision: Endri Endri, Nofrisel. Validation:
Prasadja Ricardianto, Eni Kosendang.
Visualization: Eni Kosendang, Oni Yudo Sundoro.
Writing – original draft: Prasadja Ricardianto,
Eni Kosendang, Sri Handayani. Writing – review
& editing: Endri Endri, Dian Artanti Arubusman.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflict of interest to declare
that is relevant to the content of this article.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.e
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DOI: 10.37394/23207.2023.20.76
Prasadja Ricardianto, Eni Kosendang,
Zaenal Abidin, Rini Setiawati, Nofrisel,
Sri Handayani, Oni Yudo Sundoro,
Dian Artanti Arubusman,
Tigor Franky Devano Sianturi, Endri Endri
E-ISSN: 2224-2899
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Volume 20, 2023