The Effect of Corporate Social Responsibility (CSR) Performance on Firm’s Financial Performance with CSR Committees as Moderating Variable

Abstract

Stakeholders are the Important element to be considered on company’s sustainability. Companies respond to stakeholder pressure by developing corporate social responsibility strategy or initiative. Sustainability development and reporting have been considered as essential aspects affecting the companies’ economic and financial performance. This study aims to analyze the effect of CSR performance on firm’s financial performance and to investigate the ability of CSR committees in moderating the effect of CSR performance on financial performance of companies in Indonesia. The sample used in this study includes 20 non financial companies that are listed in the Indonesia Stock Exchange and disclose environmental, social, and governance (ESG) scores as a proxy of CSR performance for the period of 2013 to 2020. This study uses panel data which is processed using fixed effect and random effect panel data regression. The results imply that CSR performance has significant and positive effect towards Return on Assets. However, no significant effect between CSR performance and Tobin's Q and Sales Growth which It indicates that CSR performance has not affected the market value and sales revenues. Moreover, the results indicate that CSR committees do not have the ability to moderate CSR performance and firm’s financial performance. Based on the research findings, this study is hoped to be a consideration for the company in reviewing CSR strategies and evaluating the formation of appropriate CSR committees.

Keywords: CSR performance, firm’s financial performance, CSR committees.