Corporate Social Responsibility and Indonesian Stock Market Valuation

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Fanny Soewignyo


In this study the importance of corporate social responsibility performance was established in predicting stock market valuation of companies listed on the Indonesia Stock Exchange. Based on 237 observations from 2013 to 2018, the findings indicated a negative and significant effect of overall corporate social responsibility performance on stock market valuation measured by Tobin’s Q. The market considered corporate social responsibility as a costly activity that can reduce company profits, thereby reducing shareholders’ wealth. Furthermore, considering the different categories of corporate social responsibility, the findings showed a negative and significant effect of the community category on stock market valuation. This indicated that the market was not convinced that investing in the community can have a profitable impact. The effectiveness of community service activities was doubted by the market. Meanwhile, the three other categories, namely, employee, environment, and governance did not have a significant effect on stock market valuation. This could be related to investors’ view that corporate social responsibility activities were conducted just to comply with legal and regulatory requirements rather than motivated by a sense of responsibility or ethical behavior.

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Research Articles


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