CSR & Performance: Any Evidence from Indonesian LQ45?

Abstract

This research investigates the corporate social responsibility (CSR) and firm financial performance. The CSR and firm financial performance are gathered and calculated from the annual reports and managerial reports of publicly-listed firms in the LQ45 of the Indonesian Stock Exchange. These collections of firms in LQ45 represent the most liquid firms across industries.

The sampling process began with searching for the accurate information on total numbers of publicly-listed firms in LQ45 during the period of 2004-2011. In order to investigate how the CSR affects stock prices, 13 firms were selected due to their consistency in performance, which make them constantly appear in LQ45 from 2004-2011. Based on the available data, regression analysis is utilized in this study.

The results indicated that CSR employee, CSR community, size, profitability, and leverage have significant effect on stock price. It prescribed that firms may want to pay more attention onto CSR initiatives, particularly toward employee and community. The other significant variables toward stock price, which were profitability, size, and leverage, prescribed that firms may want to notice their selected financial indicators. Hence, it is safe to conclude that there were sufficient evidences, which indicated that CSR influenced the level of firm’s performance.

Keywords: corporate social responsibility, CSR, firm financial performance, financial crisis, panel data estimation

JEL Classification: L20, L60, M14, M10