Main Article Content
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.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Copyright: Asia-Pacific International University reserve exclusive rights to publish, reproduce and distribute the manuscript and all contents therein.
Aditya, F., & Juniarti. (2016). Corporate social responsibility (CSR) performance and accrual quality: Case study on firms listed on Indonesia Stock Exchange (IDX). Business and Economic Research, 6(2), 51–64.
Afiff, S., & Anantadjaya, S. P. D. (2013). CSR & performance: Any evidence from Indonesian LQ45? Review of Integrative Business & Economics Research, 2(1), 85–101.
Alajlani, S. E., & Posecion, O. T. (2018). Measuring market valuation of Amman stock exchange industrial sectors: Tobin’s Q ratio as investors’ market performance indicator. Research Journal of Finance and Accounting, 9(6), 77–84.
Andrini, L. (2016). Mandatory corporate social responsibility in Indonesia. Mimbar Hukum, 28(3), 512–525.
Angelia, D., & Suryaningsih, R. (2015). The effect of environmental performance and corporate social responsibility disclosure towards financial performance (Case study to manufacture, infrastructure, and service companies that listed at Indonesia Stock Exchange). Procedia - Social and Behavioral Sciences, 211, 348–355.
Ararat, M., Black, B. S., & Yurtoglu, B. B. (2017). The effect of corporate governance on firm market value and profitability: Time-series evidence from Turkey. Emerging Markets Review, 30(C), 113–132.
Bajic, S., & Yurtoglu, B. (2018). Which aspects of CSR predict firm market value? Journal of Capital Markets Studies, 2(1), 50–69. https://doi.org/10.1108/JCMS-10-2017-0002
Bartlett, A., & Preston, D. (2000). Can ethical behaviour really exist in business? Journal of Business Ethics, 23(2), 199–209. https://doi.org/10.1023/A:1006037107565
Chen, H., & Wang, X. (2011). Corporate social responsibility and corporate financial performance in China: An empirical research from Chinese firms. Corporate Governance, 11(4), 361–370. https://doi.org/10.1108/ 14720701111159217.
Cheng, S., Lin, K. Z., & Wong, W. (2016). Corporate social responsibility reporting and firm performance: Evidence from China. Journal of Management & Governance, 20, 503–523. https://doi.org/10.1007/s10997-015-9309-1
Chung, C. Y., Jung, S. J., & Young, J. (2018). Do CSR activities increase firm value? Evidence from the Korean market. Sustainability, 10(9), 3164. https://doi.org/10.3390/su10093164
Chung, K. H, Wright, P., & Chroenwong, C. (1998). Investment opportunities and market reaction to capital expenditure decisions. Journal of Banking & Finance, 22, 41–60.
Cordeiro, J., & Tewari, M. (2015), Firm characteristics, industry context, and investor reactions to environmental CSR: A stakeholder theory approach. Journal of Business Ethics, 130(4), 833–849. https://doi.org/10.1007/ s10551-014-2115-x.
Davidson, I., & Leledakis, G., & Okunev, J. (2002). Tobin's Q and the cross-sectional variation of stock returns. ResearchGate. https://www.researchgate.net/publication/258305690_Tobin's_q_and_the_Cross-Sectional_ Variation_of_Stock_Returns_Evidence_from_the_ London_Stock_Exchange
Deloitte. (2011). Investment decisions and corporate social responsibility. Deloitte Survey Report. http://respectindex.pl/pub/REPORT-Investment_Decisions_and_CSR.pdf
Downs, D. H., Ooi, J. T. l., Wong, W. C., & Ong, S. E. (2016). Related party transactions and firm value: Evidence from property markets in Hong Kong, Malaysia and Singapore. Journal of Real Estate Finance and Economics 52(4), 408–427.
Ekberg, J., Chowdhuri, R., Soejachmoen, M. P., & Hermanus, B. (2015). Financial deepening in Indonesia: Funding infrastructure development-catalyzing economic growth. Oliver Wyman & Mandiri Institute. https://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2015/sep/Financial_Deepening_In_ Indonesia.pdf
Erhemjamts, O., Li, Q., & Venkateswaran, A. (2013). Corporate social responsibility and its impact on firms’ investment policy, organizational structure, and performance. Journal of Business Ethics, 118(2), 395–412.
Fell, J. (2001). What can Tobin’s “Q” tell us about stock market valuation? (pp. 1–9) ResearchGate. https://doi.org/10.13140/RG.2.1.3623.4720
Friedman, M. (2007). The social responsibility of business is to increase its profits. In W. Ch. Zimmerli, M. Holzinger, & K. Richter (Eds.), Corporate ethics and corporate governance (pp. 173–178). Springer.
Gao, F., Lisic, L. L., & Zhang, I. X. (2014). Commitment to social good and insider trading. Journal of Accounting and Economics, 57(2–3), 149–175.
Garriga, E., & Melé, D. (2004). Corporate social responsibility theories: Mapping the territory. Journal of Business Ethics, 53(1/2), 51–71.
Gayo, S., & Yeon, A. (2013, November 13–14). Mandatory CSR law in Indonesia: New emerging policy [Conference session]. 7th Universiti Utara Malaysia International Legal Conference, Kuala Lumpur, Malaysia. https://www. researchgate.net/publication/258567475_Mandatory_CSR_Law_in_Indonesia_New_Emerging_Policy
Ghafoorifard, M., Sheykh, B., Shakibaee, M., & Joshaghan, N. S. (2014). Assessing the relationship between firm size, age and financial performance in listed companies on Tehran Stock Exchange. International Journal of Scientific Management and Development, 2(11). https://www.researchgate.net/publication/330486266_ Assessing_the_Relationship_between_Firm_Size_Age_and_Financial_Performance_In_Listed_Companies_ on_Tehran_Stock_ExchangeInternational Journal of Scientific Management and Development
Government Regulation of the Republic of Indonesia No. 47. of 2012 on Social and Environmental Responsibility of Limited Liability Company (2012). http://extwprlegs1.fao.org/docs/pdf/ins170140.pdf
Guthrie, J., & Parker, L. D. (1989). Corporate social reporting: A rebuttal of legitimacy theory. Accounting and Business Research, 19(76), 343–352. https://doi.org/10.1080/00014788.1989.9728863
Hendarto, K. A., & Purwanto, B. M. (2012). Market reactions of mandatory implementation of corporate social responsibility: Indonesia context. Asia Pacific Management Review, 17(4), 379–402.
Holmes Report. (2016, December 18). Investors see benefits of corporate social responsibility. https://www.provokemedia.com/research/article/investors-see-benefits-of-corporate-social-responsibility#:~: text=83%25%20of%20professional%20investors%20are,reporting%2c%20resulting%20in%20lower%20risk
Hopkins, M. (2014). What is corporate social responsibility all about? Aspirare, 1,1–21. https://www. researchgate.net/ publication/246912286_What_is_corporate_social_responsibility_all_about
Karim, K., Suh, S.H., & Tang, J. (2016). Do ethical firms create value? Social Responsibility Journal, 12(1), 54–68. https://doi.org/10.1108/SRJ-09-2014-0127.
Katsikides, S., Markoulis, S., & Papaminas, M. (2016). Corporate social responsibility and stock market performance: An event study approach. International Journal of Engineering and Advanced Technology, 6(2), 1–8.
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761–796.
Krüger, P. (2015). Corporate goodness and shareholder wealth. Journal of Financial Economics, 115(2), 304–329. https://doi.org/10.1016/j.jfineco.2014.09.008.
Kyriakou, S. (2018). Why is CSR important for investors? FT Adviser. https://www.ftadviser.com/investments/ 2018/06/14/why-is-csr-important-for-investors/?
Law of the Republic of Indonesia No. 25. of 2007 Concerning Investments. (2007). https://www.indonesia-investments.com/id/business/foreign-investment/investment-law-indonesia/item8322
Law of the Republic of Indonesia No. 40. of 2007 Concerning Limited Liability Companies. (2007). http://dlplawoffices.com/pdf/limitedliabilitycompanies.pdf
Law on the Handling of the Poor and Needy (Law No. 13/2011). (2011), Chapter 3. https://www.ilo.org/dyn/ natlex/ natlex4.detail?p_isn=91167&p_lang=en
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. Journal of Finance, 72(4), 1785–1824.
Madorran, C., & Garcia, T. (2016). Corporate social responsibility and financial performance: The Spanish case. São Paulo, 56(1), 20–28.
Maignan, I., Ferrell, O. C., & Hult, G. T. M. (1999). Corporate citizenship: Cultural antecedents and business benefits. Journal of the Academy of Marketing Science, 27(4), 455–469.
Muttakin, M. B., Khan, A., & Azim, M. I. (2015). Corporate social responsibility disclosures and earnings quality. Managerial Auditing Journal, 30(3), 277–298.
Natanagara, D. M., & Juniarti. (2015). The effect of corporate social responsibility disclosure on the response of firm value in the cement, ceramics, plastics, and chemical sub-sectors. Business Accounting Review, 3(2), 271–280.
Omar, B. F., & Zallom, N. O. (2016). Corporate social responsibility and market value: Evidence from Jordan. Journal of Financial Reporting and Accounting, 14(1), 1–46.
Park, E., Kim, K. J., & Kwon, S. J. (2017). Corporate social responsibility as a determinant of consumer loyalty: An examination of ethical standard, satisfaction, and trust. Journal of Business Research, 76(2017, July), 8–13.
Phuong, T., & Rachman, D. (2017, October 5). CSR landscape in Indonesia: The past, present and the future. Sustainable Square. https://sustainablesquare.com/evolution-csr-landscape-indonesia/#:~:text=Unlike%20 Western%20 companies%2C%20laws%20governing,to%20disclose%20their%20CSR%20activities.
Pontefract, D. (2017, November 18). Stop confusing CSR with purpose. Forbes. https://www.forbes.com/sites/ danpontefract/2017/11/18/stop-confusing-csr-with-purpose/?sh=672cb4df3190
Rettab, B., Brik, A. B., & Mellahi, K. (2009). A Study of management perceptions of the impact of corporate social responsibility on organisational performance in emerging economies: The case of Dubai. Journal of Business Ethics, 89(3), 371–390.
Saji, T. G. (2019). Market valuation of nifty firms in India: The Tobin's Q approach. Saudi Journal of Economics and Finance, 3(7), 298–304. https://doi.org/10.21276/sjef.2019.3.7.4
Waagstein, P. R. (2011). The mandatory corporate social responsibility in Indonesia: Problems and implications. Journal of Business Ethics, 98(3), 455–466.
Wang, Y. G. (2011). Corporate social responsibility and stock performance—Evidence from Taiwan. Modern Economy, 2(5), 788–799.