*2.2. Key Variables*

The dependent variable in the model is CSR adoption. CSR is a complex construct to measure due to its multidimensionality and invisibility. Various empirical and theoretical studies measure CSR in many distinct methods. In our research, CSR adoption is measured by a dummy variable, which takes the value of 1 if the company has implemented CSR and 0 if it has not. Measuring CSR by using a dichotomous variable was already measured in several previous studies [45–49].

FP indicators used in the previous studies can be roughly split into market and accounting measures. Market measures (e.g., Tobin Q) are calculated from the investors' points of view on a particular date. Accounting measures (e.g., EPS, ROA, ROE) are calculated on time results [50]. Unlike market measures, accounting measures can reflect managerial performance and the internal decision-making process [4]. Moreover, identifying the relationship between CSR and FP using accounting measures rather than market measures is more appropriate for detection [51]. Therefore, based on the previous research, we consider six independent variables (ROA, ROE, EBIT, Enterprise Value to EBITDA, EBITDA per Share, and Beta coefficient) as the possible factors that may influence the adoption of CSR strategy.

Return on Assets (ROA) is the first variable related to the company's FP. Profitability ratios show the company's ability to generate profit. One of the main profitability indicators is the ROA used by investors for investment decisions depending on potential returns [52]. Some studies show that ROA has a positive effect on goodwill. In this way, higher returns and rates of return force investors to invest, thereby increasing share prices and goodwill [53]. ROA is a measure of financial performance, commonly used in analyzing the effect of CSR on company finance [48,54–57].

Return on Equity (ROE) is an FP measure calculated by dividing the net income by equity. ROE demonstrates a company's ability to turn capital investments into profits. In other words, it measures the returns made on each monetary unit of equity. It is one

of the all-time favorite and most widely used general measure of corporate financial performance [58], also confirmed by Monteiro [59]. ROE is popular with investors because it combines the income statement (net profit/loss) with the balance sheet (equity). The fact that ROE results from a structured financial ratio analysis, known as the Du Pont analysis, also contributes to its popularity with analysts, financial managers and shareholders [60]. ROE is already used in research on this topic [47,50].

Earnings Before Interest and Taxes (EBIT) is the company's net income before taxes and interest costs. EBIT is used to analyze the effectiveness of the company's core business without capital structure costs and tax expenses affecting profit. The approach of using EBIT in terms of CSR adoption is already presented in the literature [55,61,62].

EBITDA stands for earnings before interest, taxes, depreciation, and amortization, and is used to evaluate a company's operating performance. It can be seen as a representative of the cash flow of the business of the entire company. EBITDA is already analyzed in the literature as a financial performance measure regarding CSR adoption [63,64].

In terms of the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV EBITDA), the enterprise value (EV) includes both debt and equity, and EBITDA is the profit available to investors. Since a change in capital structure has no systematic effect on company performance, this ratio is less susceptible to manipulation by changes in capital structure. Only when such a change lowers the cost of capital will it lead to a higher multiple [65].

The Beta coefficient (BETA) measures an investment's volatility and risk compared to the overall market. Beta is a statistical tool, which gives an idea of how a fund will move in relation to the market. In other words, it is a statistical measure that shows how sensitive a fund is to market moves. EV EBITDA and the Beta coefficient have not been previously used in the literature to analyze the FP–CSR relationship.
