CSR different view of the concept of CSR for

disclosure perform by business perspective

market performance

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empirical research aims to analyze effect of corporate social responsibility
information disclosure and corporate financial performance on market
performance by companies listed at Indonesia Stock Exchange. This research used
quantitative methods with positivism approach. Research objects were 140
companies listed at Indonesia Stock Exchange based on population criteria with
observation period 2012-2014. This research used secondary data derived from
annual reports and financial statements. Data analysis used was SPSS Analysis. The
results show corporate social responsibility information disclosure impact on market
performance measurement namely Earnings per Share(EPS) with corporate financial
performance measurement namely Debt Equity Ratio (DER), Return on Equity (ROE)
and Net Profit Margins (NPM). Corporate social responsibility disclosure and
corporate financial performance have positive affect and significant on market
performance that measured by EPS.

Corporate Social
Responsibility, annual reports, market performance, and corporate financial


Corporate Social Responsibility (CSR)
focus on voluntary action by the company reflected in the values ??of moral and legal arrangements with
improved social and environmental conditions and materials related to the
improvement of CSR itself. Many studies examine the motivations and determinants
of CSR and also caused the economic consequences. CSR issue provides a special
attraction for companies to improve performance can be outperformed compared to
the others (Dhaliwalet al.,2011).
Previous research suggests a different view of the concept of CSR for managers
who speculate and transparency of corporate financial reporting (Calomirisetal.,2010). Ali et al
(2014), showed that the conduct of activities based on social responsibility demonstrated
greater financial disclosure, and it shows the company considers more
disclosure as a form of socially responsible behavior in the time acting all
practices related to CSR. If the company has a better CSR culture, they
maintain the same level of superior standards in financial reporting and more
likely to be those associated with a higher level of transparency and there is
a negative relationship between it and hide the bad news from investors (Ali et
al, 2014).


Social impact of corporations large and small are become a
very important issue in business administration. Bad social impact, in fact,
may increase risk of company, may cause wrong relationship with many parties
and can affect reputation of company (MishraandSuar, 2010).
In most cases, the result is a decrease in the value of company and, sometimes,
the end of the corporation itself. That is why in recent years, many companies
began to develop and communicate their strategies to reduce conflicts between
the community and the company itself (Salewski, 2014). CSR
emerged as a result of conflicts between communities and companies because of
the effects arising from the presence of companies and operations on the
environment. In its existence, the company cannot be separated from society as
a supporter of the external environment (Ali et al 2014). This important aspect
should be considered in order to create synergies between them. The Existence
of company will provide any changes for the better, the progress of the country
and to improve living standards (Dhaliwal et al, 2011).


Most researches have been done about the relationship and
influence between CSR and corporate performance, particularly in the financial
and corporate value. The results are still inconclusive due to many factors
(Margolis and Walsh 2003; Margolis et al, 2007). This creates an opportunity
for further investigation and research. Mishra and Suar (2010) states the
relationship between Corporate Social Responsibility (CSR) and Corporate Financial
Performance (CFP) has created a lot of interest among researchers. The
relationship between CSR and CFP largely inconclusive and has been reported in
most studies. Some studies reveal a positive correlation (Joand
Margolis and Walsh 2003; Orlitzky et al., 2003). Some others show a negative
relationship (Wright and Ferris 1997) and even there is no relationship between
CSR and CFP due to understand the complex relationship (Crisostomoetal.,2011).


Most previous studies focused on specific industries. Many
companies also indirectly related to CSR, such as the retail trade. Companies
that are included in the retail trade sector consumes large amounts of
resources, such as paper and energy, and creates waste (Ullmanetal.,1985; Margolis et al, 2007). Therefore,
policies on how they contribute to the conservation of energy and natural
resources and recycling activities are an important aspect of their social
activities. Retail trade may not be in contact with the environment directly,
but still have the responsibility to report on their activities in a
transparent and open to the public.Based on the above, there are two research
gaps. Firstly, there is no clear relationship between CSR study on financial
performance and corporate value. There is little empirical evidence from
previous studies in the retail trade company in addition to the manufacturing
company (Branco and Rodrigues, 2006).


Research aims


Previous studies have shown inconsistent results obtained by
different researchers The purpose of this study was to determine the impact of
Corporate Social Responsibility (CSR) of the company’s stock price to analyze
how CSR can contribute to improve the stock return. This study empirically
investigates cases of companies in the retail trade sector listed on the
Indonesia Stock Exchange (IDX) over three years based on the CSR report
contained in the annual report of the company. Corporate Social Responsibility
(CSR) so become an important task, but the problem is in understanding whether
CSR is compatible with the creation of value or not and understanding is the
best disclosure policy CSR.

question is:


can CSR disclosure and corporate financial performance give impact to market


3. Literature reviews


CSR is an increasingly
important issue for economic players as the new attention to all aspects of the
company’s activities and relationships with stakeholders. In fact, the
company’s attitude towards disclosure related to social responsibility
activities can develop and maintain good relationships with the stakeholders in
general (Branco and
Rodrigues, 2006). Corporate
Social Responsibility is a concept that is growing worldwide. In addition CSR
has a variety of potential meanings: it can be considered as a way of integrating
the private sector economic interests, social, and environmental activities(Dhaliwaletal.,2011).Barnett (2005) focuses on two main characteristics
of CSR in the form of social welfare orientation and orientation to the
relationship with stakeholders. As business has increased and adopted from the
practice of corporate social responsibility, managers face increasing pressure
to justify the allocation of scarce resources company and accurate measures of
the results of corporate social responsibility is needed (Barnett, 2005).


theorists of the first group (GravesandWaddock1994; GriffinandMahon1997;WaddockandGraves1997;MargolisandWalsh2003;Orlitzkyetal.,2003) found that
investment in CSR has a great return in terms of image and overall financial
results: related benefits, the in fact, greater than the related costs. Ruf and
al. (2001) defines a period of years (3) positively affected by changes in the
CSR (learn sales growth and, obviously, the index ROS). This seems really
interesting, due to the fact that other authors showed the opposite trend
associated with the same phenomenon (Preston and O’Bannon (1997).


In this perspective, in
fact, corporate responsibility broader than maximizing value to shareholders
and in this sense CSR is a way of responding to the needs of stakeholders.
Satisfy their interests and be responsible to them really can have a positive
impact on all dimensions of the company, including financial performance (Chanetal.2008). CSR is currently an important
aspect in the company’s strategy, mainly because of financial scandals and
decline in investor confidence. CSR, in fact, is very connected with the idea
of ??a
company’s reputation. Barnett, (2005), assume that
the CSR initiatives can lead to gains a reputation as an improvement in
investor confidence, new market opportunities and the positive reaction of the
capital market.


Positive reputation is
often associated with positive financial returns. However, their value is
linked to the inability of competitors to imitate reputation (Klein and Dawar,
2004). Margoliset
(2007) proposes that CSR has the value of the
company as a form of insurance policy against negative events. Their studies
show that consumers are more willing to punish the bad behavior of a company to
reward good behavior (Roberts and Dowling, 2002).


Following on the use of CSR disclosure in developed
countries, Indonesian companies have been engaging in CSR disclosure over the
last three decades. As such, Indonesian businesses are concerned about the
impact of their activities on the environment, communities, employees and other
relevant stakeholders. Since the 1990’s, many Indonesian companies have been
involved and have developed CSR frameworks in order to maintain their
reputations (Foran, 2001). There are several frameworks on CSR such as UN
Global Compact, ISO, OECD, GRT and Indonesian Stock Exchange (IDX) framework
which can be used by Indonesian companies to report their CSR related
activities. However, those frameworks may have some limitations for businesses
in Indonesian because those frameworks have been developed in western
countries, which are different from developing countries, particularly from
Indonesian companies, because economics, regulations and culture are different
in Indonesian as compared to western countries. In Indonesia, CSR is based on
mandatory action by companies. There are currently some regulations from the
Indonesian government for companies to conduct CSR. The development of CSR in
Indonesia intensified in 2007, when the Indonesian Stock Exchange (IDX)
announced the first IDX CSR Awards for public companies which show outstanding
responsibility towards communities and society (CSRI, 2011). The Corporate
Social Responsibility Institute (CSR Institute) was founded in 2007 by IDX. At
the same time a working group was founded by IDX in order to encourage public
firms to adopt CSR in their business and launch CSR guidelines for Indonesia
business as a mandatory concept (Purwanto, 2011). CSR disclosure is mandated by the
Indonesian government, but it has been supported by the government. In February
2011, the Ministry of Finance in Indonesian launched 1S026000 guidelines for
social responsibility on a mandatory basis to assist Indonesian companies to
meet customers’ expectations, enhance competitiveness, and maintain their
reputations. In September 2013, the CSR Institute published a disclosure
framework on CSR best practices for each industry, which was adopted from UNGC,
GRI and ISO 26000. These guidelines would help and encourage listed companies
on IDX and market for alternative investment (MAT).


4. Hypothesis development


Empirical studies by Ruf et
al., (2001) reported that there is a positive relationship between corporate
social performance and the change in short-term benefits (for example, sales
growth) and long-term benefits (eg ROS). Orlitzky et al. (2003) used a meta-analysis
to find that CSR related to financial performance demonstrated by ROE. Chand
(2006) used measures of profitability ROE and DER to find that CSR is
positively related to the CFP. According to Inoue and Lee (2010), using the ROE
indicates that four tourism learning (eg, airlines, casinos, hotels,
restaurants) can improve their financial performance through every level of the
different dimensions of Corporate Social Responsibility. Setiawan and Darmawan
(2011) said that if CSR has a positive effect on the company’s financial
performance, the company must further consider existing CSR activities.However,
research conducted by Dkhili and Ansi (2012) stated that CSR was negatively
related to the financial performance demonstrated by ROE. Similarly Fiori et al
(2007) found the ratio DER have a negative effect on the share price, while the
ROE has a positive effect and aspects of CSR disclosure has no effect on stock


There are two perspectives
on the relationship between CSR, corporate financial performance (CFP) and
market performance (MP). First, CSR can be regarded as a distinctive resource
or means – or a way management can run the organization to generate higher
revenues or reduce costs, both of which improve corporate financial
performance. Second, a positive CSR-CFP-MP relationship suggests that CSR
engagement creates the appearance of doing “good”, even if there is no
substantive benefit in the CSR engagement itself (reputational value and repeat
customers). Recently, two theoretical frameworks have been proposed.

The first one advocates a
positive relationship between CSR and performance whilst the second proposes a
negative relationship. The instrumental stakeholder theory predicts that high
CSR engagement leads to better CFP. However, the slack resources theory suggests
that the reverse is true. It is prior superior CFP that leads to higher
subsequent CSR engagement (Waddock and Graves, 1997). From the stakeholder
theory, legitimacy theory, review of the literature and research questions, two
main hypotheses have been developed to explain CSR disclosure, corporate
financial performance and market performance in Indonesia.

The first alternative
hypothesis defines CSR disclosure as independent variable.

The first alternative hypotheses are as

Ha1     There is a positive relationship between
CSR disclosure and Return On  

Assets (ROA).

Hb1     There is a positive relationship between
CSR disclosure and Net Profit

Margin (NPM).

The second hypothesis is
based on the impact between each dimension of CSR disclosure and Corporate
Financial Performance (CFP) on Market Performance (MP), which defines each
level of CSR disclosure and each variables of CFP as independent variable.

The alternative sub categories of hypotheses
are as follows.

Ha2      There is a positive and significant
effect between each level of CSR disclosure

and Return on Assets (ROA) on per share (EPS)

Hb2      There is a positive and significant
relationship between each level of CSR

disclosure and Net profit margin (NPM) on per
share (EPS)