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PROFITABILITY AND CORPORATE SOCIAL RESPONSIBILITY: AN ANALYSIS OF INDONESIA’S LISTED COMPANY
Abstract
Studies in Corporate Social Responsibility (CSR) and financial performance have been subject to debates due to various results between these variables. In several cases, the effect of CSR and financial performance varies across industries and countries, which convey further scrutiny. In developing countries, listed companies are aware of the importance of CSR reporting, which correspond to their financial performance. Hence, the purpose of this study is to test whether companies‟ profitability contributes to Corporate Social Responsibility in the Indonesian context. The research includes company‟s profitability of net profit margin, ROA and ROE, in relation to number of lines in CSR disclosure. Firm‟s size, Kompas100 companies and industry-specific are included as control variables. The samples are taken from 543listed companies in Indonesia from 2007 to 2009 after fulfilling certain requirements. The result suggests not all profitability ratios are significantly correlated to CSR disclosure.Kompas100 and industry-specific tend to have a relationship with number of lines in the CSR report. This study suggests that the motivation of Indonesian CSR disclosure is merely to maintain good reputation to shareholders, rather than a consequence of allocating surplus funds.
Keywords: return of equity (ROE), return of asset (ROA), net profit margin (NPM), corporate social responsibility (CSR), Bowman and Haire, kompas 100.