MOTIVES FOR ENGAGING CORPORATE SOCIAL RESPONSIBILITY PROGRAM

Abstract

This study aims to determine the motive of company’s Corporate Social Responsibility (CSR) activities in relation to the company's financial performance in the future. Motives for conducting and reporting their CSR activities is whether just for charity, investment, or a signaling about the company's financial performance in the future. This research uses quantitative approach in solving the research problem. This study took sample data from companies listed in the Indonesia Stock Exchange during 2012-2014, that were published a stand-alone CSR report or known as Sustainability Report. CSR variable is measured by indexing the Sustainability Report based on the CSR reporting standards issued by the Global Reporting Index (GRI) G4 for environmental and social categories. Firm’s future financial performance is measured by changes of the Return on Asset (ROA) in year t + 1 and t, changes of Cash Flow from Operations (CFO) in year t + 1 and t, and the Average Stock Return (ASR) in year t + 1. The samples used in the study are 75 companies. The study’s finding that there was no significant relationship between the indexes of CSR with the company's future financial performance. However, this study found that the motive of Indonesia’s companies in conducting and reporting CSR activities is only for charitable purposes and the companies do not expect any reward. This is showed by most companies reported social criteria in their sustainability reports more than any other criteria. CSR activities are generally because of the good condition of the previous year company's financial performance. In addition, most companies in Indonesia still perform and report its CSR activities only as compliance with the applicable regulations.

Keywords: CSR, Company's financial performance, and Sustainability Report