THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON COMPANY’S FINANCIAL PERFORMANCE (EMPIRICAL STUDY IN LISTED COMPANIES IN CONSUMER GOODS SECTOR OF INDONESIAN STOCK EXCHANGE PERIOD OF 2011-2012)

Abstract

There are many debates concerning the value of being a socially responsible business. Many views of the role of a company in society whether wealth maximization should be the sole goal of corporation. This research attempts to address the question whether corporate social responsibility has influence on financial performance. The data is analyzed using secondary data in the form of panel. Using purposive sampling method, the samples are selected from consumer foods sector listed in IDX. The data set covers the years 2011-2012 that CSR policy requires all limited companies to engage with CSR practice. The influence is tested by the software Eviews 7.0 version using whether period-fixed effect regression model and random effect regression model. Financial performance is measured by return on equity (profitability accounting-based measure), total stock return (market-based measure) and Tobin’s Q (company value measure). The results indicate that CSR has positive influence on financial performance in which the influence of CSR on return on equity and Tobin’s Q is statistically significant. Meanwhile, the influence of CSR on total stock return is statistically insignificant. The research has practical implication for regulators, governments, and practitioners since CSR practice attempts to give attentions to the stakeholders. Since the evidence suggest that socially responsible in company impact positively on company’s financial performance, it empowers corporate managers to carrying out CSR as a strategic component of firm and motivates investors to consider CSR practice when they make an investment.