Corporate Social Performance of Indonesian State-Owned and Private Companies

The objectives of this study are to analyze the difference of corporate social performance between State-owned and private companies in Indonesia, and also to analyze the correlation between the corporate social performance (CSP) and the corporate financial performance by using company size, and institutional ownership as control variables. The population of this study is Indonesian state owned and private companies in the year of 2001-2004. Purposive sampling was used in this study, and final samples are 461 companies. The CSP or CSR (Corporate social responsibility) score is measured by content analysis of corporate annual report using seven item developed by Michael Research Jantzi Research Associate, Inc. The data is tested by independent t-test to determine the mean difference and by using partial correlation test to know the correlation between the corporate social performance and financial performance. The results of this study are that there is no significant difference mean of corporate social performance between state-owned and private owned companies in Indonesia. In addition, the correlation test indicates that there is no association between corporation social performance and financial performance both in SOCs and POCs

The Relationship between Environmental Disclosure and Financial Performance of Industrial companies with Using a New Theory: Literature Review

This paper primarily examines the link between the environmental disclosure of industrial companies in Iraq and their financial performance. The inductive approach used in this paper entails surveying, studying, comparing and summarizing all papers published in prominent accounting journals in the past nineteen years. The paper found that environmental disclosure is weak in Iraq compared to developing countries in the analyzed studies. It also found that financial performance and environmental disclosure have a more positive relationship (61.29%) than negative (38.71%). The researchers used the accountability theory as a new theory in determining the link between both variables. Hence, this paper attempts to determine the link between environmental disclosure and financial performance among industrial companies in Iraq using the accountability theory

A comparative analysis of intellectual capital disclosure practices between Malaysian and Indonesia / Amrizah Kamaluddin, Zuraida Mohamad Nor and Erlane K Ghani.

This study examines the extent of intellectual capital (IC) disclosure practices between Malaysian and Indonesian agricultural companies. This study relied on content analysis on the annual reports of public listed agricultural companies in Malaysia and Indonesia. The results show that the extent of IC disclosure practices of the companies between the two countries are similar. However, the Malaysian companies disclose more information on human capital and more quantitative in nature whilst the Indonesian companies disclose more information on relational capital and more qualitative. The results also show a significant positive relationship between the extent of IC capital disclosure and companies’ performance. The findings in this study contribute further understanding on the extent of IC capital disclosure in the agriculture industry. This study extends the understanding of the role of IC and its interaction in generating competitive edge from the perspective of a developing nation such as Malaysia and Indonesia

The Effect of Related Party Transactions on the Performance of Indonesian Listed Companies

Abstract. The purpose of this paper is to analyze the impact of related party transactions (RPTs) on company performance using a panel data regression on 388 non-financial companies listed in Indonesia Stock Exchange during the 2015-2018 period. RPT variables used in this study are divided into several categories, namely transactions with related parties in the operational field (operational RPTs), financial field (financial RPTs), other fields (other RPTs), and total RPTs (sum of the three previous types). The study finds a significant negative relationship between financial RPTs and other RPTs on company performance. This finding is consistent with the precedent research that non-operational RPTs (i.e., financial RPTs and other RPTs) are commonly used by controlling shareholders as tunneling channels to expropriate minority shareholders. The results suggest policymakers to monitor more closely RPTs, particularly financial and other RPTs, that are more likely to be used as tunneling activities that are detrimental to firm performance. The results of this study are robust to various proxies of firm performance, providing additional empirical studies on RPTs in emerging countries with concentrated ownership structure, and shedding direct light on which type of RPTs that is mainly used as tunneling channel.Keywords: Efficient transaction hypothesis, firm performance, Indonesia, related party transactions, type II agency problemAbstrak. Tujuan dari makalah ini adalah untuk menganalisis pengaruh transaksi pihak berelasi (RPT) terhadap kinerja perusahaan dengan menggunakan regresi data panel pada 388 perusahaan nonkeuangan yang terdaftar di Bursa Efek Indonesia selama periode 2015-2018. Variabel RPT yang digunakan dalam penelitian ini dibagi menjadi beberapa kategori yaitu transaksi dengan pihak berelasi di bidang operasional (RPT operasional), bidang keuangan (RPT finansial), bidang lainnya (RPT lainnya), dan total RPT (penjumlahan dari ketiga jenis RPT yang disebutkan sebelumnya). Penelitian ini menemukan hubungan negatif yang signifikan antara RPT finansial dan RPT lainnya terhadap kinerja perusahaan. Temuan ini sejalan dengan penelitian sebelumnya bahwa RPT nonoperasional (RPT finansial dan RPT lainnya) biasanya digunakan oleh pemegang saham pengendali sebagai sarana untuk mengambil alih dari pemegang saham minoritas. Hasilnya menyarankan para pembuat kebijakan untuk melakukan pemantuan lebih terhadap RPT, terutama RPT finansial dan lainnya, yang lebih mungkin digunakan sebagai aktivitas tunneling yang merugikan kinerja perusahaan. Penelitian ini menunjukan hasil yang kuat untuk berbagai proksi kinerja perusahaan, sehingga memberikan studi empiris tambahan tentang RPT di negara-negara berkembang dengan struktur kepemilikan terkonsentrasi, dan menjelaskan langsung jenis RPT yang terutama digunakan sebagai saluran tunneling.Kata kunci: Efficient transaction hypothesis, Indonesia, masalah keagenan tipe II, performa perusahaan, transaksi pihak berelas

The Effect of Related Party Transactions on the Performance of Indonesian Listed Companies

Abstract. The purpose of this paper is to analyze the impact of related party transactions (RPTs) on company performance using a panel data regression on 388 non-financial companies listed in Indonesia Stock Exchange during the 2015-2018 period. RPT variables used in this study are divided into several categories, namely transactions with related parties in the operational field (operational RPTs), financial field (financial RPTs), other fields (other RPTs), and total RPTs (sum of the three previous types). The study finds a significant negative relationship between financial RPTs and other RPTs on company performance. This finding is consistent with the precedent research that non-operational RPTs (i.e., financial RPTs and other RPTs) are commonly used by controlling shareholders as tunneling channels to expropriate minority shareholders. The results suggest policymakers to monitor more closely RPTs, particularly financial and other RPTs, that are more likely to be used as tunneling activities that are detrimental to firm performance. The results of this study are robust to various proxies of firm performance, providing additional empirical studies on RPTs in emerging countries with concentrated ownership structure, and shedding direct light on which type of RPTs that is mainly used as tunneling channel.Keywords: Efficient transaction hypothesis, firm performance, Indonesia, related party transactions, type II agency problemAbstrak. Tujuan dari makalah ini adalah untuk menganalisis pengaruh transaksi pihak berelasi (RPT) terhadap kinerja perusahaan dengan menggunakan regresi data panel pada 388 perusahaan nonkeuangan yang terdaftar di Bursa Efek Indonesia selama periode 2015-2018. Variabel RPT yang digunakan dalam penelitian ini dibagi menjadi beberapa kategori yaitu transaksi dengan pihak berelasi di bidang operasional (RPT operasional), bidang keuangan (RPT finansial), bidang lainnya (RPT lainnya), dan total RPT (penjumlahan dari ketiga jenis RPT yang disebutkan sebelumnya). Penelitian ini menemukan hubungan negatif yang signifikan antara RPT finansial dan RPT lainnya terhadap kinerja perusahaan. Temuan ini sejalan dengan penelitian sebelumnya bahwa RPT nonoperasional (RPT finansial dan RPT lainnya) biasanya digunakan oleh pemegang saham pengendali sebagai sarana untuk mengambil alih dari pemegang saham minoritas. Hasilnya menyarankan para pembuat kebijakan untuk melakukan pemantuan lebih terhadap RPT, terutama RPT finansial dan lainnya, yang lebih mungkin digunakan sebagai aktivitas tunneling yang merugikan kinerja perusahaan. Penelitian ini menunjukan hasil yang kuat untuk berbagai proksi kinerja perusahaan, sehingga memberikan studi empiris tambahan tentang RPT di negara-negara berkembang dengan struktur kepemilikan terkonsentrasi, dan menjelaskan langsung jenis RPT yang terutama digunakan sebagai saluran tunneling.Kata kunci: Efficient transaction hypothesis, Indonesia, masalah keagenan tipe II, performa perusahaan, transaksi pihak berelas

Impact on Environmental, Social, and Governance Score on Market Reaction: Evidence of Top 80 Companies Listed From IDX80

This paper will discuss the impact of the individual Environmental, Social, and Governance scores on market reaction. This study will specifically focus on the IDX80 index, which lists companies that are not only profitable but also have good ESG scores. The panel data for the study will be taken from 2019 to 2023, and the Dynamic Panel Model will be used to see how the scores over the year influenced the market price. The final sample consists of 31 companies with 155 firm-years for the observation. The findings show that the Environmental scores have a significant positive impact on market reactions, but are not significantly impacted by Social and Governance scores. The study suggests an early stage of ESG adoption in Indonesia and the positive trend growth will be beneficial for companies to promote ESG activities. The limitation of this study is that the data for the individual scores for the Environmental, Social, and Governance are limited making the sample size small. A further limitation is that the data analyzed during and post-COVID-19 time might suggest a different result comparably

The effect of COVID-19 and CEO tenure on environmental and social disclosure scores

Research aims: The study aims to understand the effect of COVID-19 and the tenure of Chief Executive Officers (CEOs) on environmental and social disclosure scores.Design/Methodology/Approach: The research sample included listed Indonesian firms, excluding those in the financial sector, for 2015-2021. The samples were analyzed by cross-sectional data regression and controlled by corporate governance mechanisms proxied by the number of women and independent Boards of Commissioners, leverage, size, profitability, and growth opportunity proxied by price-to-book-value ratio and capital-expenditure-to-depreciation ratio.Research Findings: The COVID-19 pandemic has positively affected environmental and social disclosure scores. While CEO tenure negatively affected social disclosure scores, its effect on environmental disclosure scores was statistically insignificant.Theoretical Contribution/Originality: The study provides empirical evidence on the progression of change in environmental and social disclosure scores triggered by COVID-19.Practitioner/Policy Implications: CEOs need to be persuaded and incentivized to increase their firms’ commitment to enhancing social performance and disclosure scores after COVID-19.Research Limitation/Implications: The effect of the COVID-19 pandemic and CEO tenure on environmental and social disclosure scores from firms with high stock market capitalization were analyzed. The data did not yet consider the medium and small stock market capitalization firms

Optimizing Food & Baverage Company Performance Through Governance and Social Responsibility: Random Effect Model Approach

The purpose of this study is to improve the efficiency of food and beverage companies listed on the Indonesia Stock Exchange by implementing GCG & CSR principles. Using panel data from 95 companies covering the period 2018-2022 and using the Random Effects model, the regression analysis shows that the Board of Commissioners has no statistically significant effect on company performance. In contrast, the Audit Committee shows a significant and beneficial impact. The novelty of this study emphasizes the complex nature of the interaction between GCG parameters, CSR, and business success in the food and beverage industry. Practical suggestions include increasing the authority of the Audit Committee to improve performance and applying CSR more contextually to reduce the impact of the Board of Commissioners. The contribution of this research is a valuable understanding of the interaction between governance dynamics and CSR in the context of strategic decision-making

The Effect Of Corporate Culture On Sustainability Report Quality

This research aims to examine the effect of corporate culture on sustainability report quality. The total research samples are 68 observations on the index of Sri Kehati. Corporate culture includes cultures of clan, adhocracy, hierarchy, and market. Sustainability report quality is measured by the scoring method. Data analysis uses regression tests. Based on data analysis, low clan culture, high hierarchy culture, and high market culture lead to high sustainability report quality. However, there is no effect of adhocracy culture on sustainability report quality. This research contributes to investigating how far the implementation of POJK no. 51/POJK.03/2017 can lead firms to have high-quality sustainability reports. This research also contributes to providing evidence in emerging countries such as Indonesia

Corporate governance mechanisms, corporate sustainability concerns and company financial performance : evidence from public listed Indonesian commercial banking companies

This thesis investigates the relationship between corporate governance mechanisms, corporate sustainability concerns and company financial performance for public listed of Indonesian commercial banking companies throughout the period 2007-2014. Corporate governance mechanisms are defined by the construct of the board of commissioners' (BoCs) role, executive compensation and ownership structure. Meanwhile, corporate sustainability concerns are defined by the corporate social responsibility activities, which are disclosed in the bank's published reports (i.e., annual report or sustainability report). This thesis also employs the combination of two different measures of company financial performance: company financial health and market value, measured by the Altman's Z-Score Revision Model and Tobin's Q, respectively.The thesis employs a decision-making model framework, the Throughput Model, which is developed by Rodgers (1997) to describe the relationship among those constructs by adopting the shareholder and stakeholders perspectives. Data is presented from 252 firm-year observations as an unbalanced data panel of 39 commercial banking companies publicly listed on the Indonesia Stock Exchange throughout 2007-2014. Then, Partial Least Square-Structural Equation Modelling (PLS-SEM) is used to analyse data and provide results about potential influences among those aforementioned constructs.The thesis contains seven chapters, including three chapters of empirical findings, which are presented in chapters four, five and six. For each chapter of empirical findings, the study built and tested the potential influences among the constructs in four different research models: a simultaneous and separate current period analysis, a year time-lagged analysis, a moderation effect analysis and a reverse (changing) direction of framework analysis.The first empirical finding is presented in chapter four. It addresses the issue of whether mandatory internal corporate governance mechanisms, particularly the role of board of commissioners as the board supervision function, could influence corporate sustainability concerns as the construct of corporate responsibility disclosure. Further, this study examines whether there is an extended impact of the relationship of corporate sustainability concern on financial performance, in terms of both financial health and market value performance. This study provides evidence that the board of commissioners could be an important control mechanism to encourage the company to be more concerned with corporate sustainability with respect to economic, environment, and social activities. Further, viewed from the shareholder perspective, the positive influence brought by the board of commissioners on corporate sustainability concerns may dampen the firm's market value. On the other hand, according to the stakeholder perspective, the positive influence of the board of commissioners on corporate sustainability concern will improve company market value performance through its financial health performance. Moreover, this study also reveals that the motive of Indonesian banking companies in engaging in corporate sustainability initiatives tends to be altruistic. Indonesian commercial banking companies conduct corporate social responsibility activities only for their own sake, which influences the reduction of the company’s financial performance, both financial health and market value performance.The second empirical finding is provided in chapter five. It explores the potential influence of executive compensation on corporate sustainability concerns and company financial performance. Interestingly, by investigating the pay-for-performance relationship, this study finds that executive compensation has a direct significant positive impact on corporate sustainability concerns and both company financial health and market value performance. Meanwhile, by adopting a shareholder perspective, this study reveals that higher executive compensation can encourage managers to adopt more corporate sustainability concerns for the shareholders' and/or managers' benefits; however, this will reduce the firm's value. However, a counter-balance mechanism occurs when employs the stakeholders' perspective is employed. High executive compensation motivates managers to implement more corporate sustainability concerns to serve all stakeholders’ interests, which may to increase the firm's market value through company financial health.The third empirical finding is described in chapter six. It investigates whether the BoCs' role simultaneously with executive compensation could shape the motivation of the top management or executives to achieve company goals of higher company financial performance in a concentrated ownership dominant context. This study discovers that both the BoCs' role and ownership structure have a direct significant positive influence on executive compensation. This study reveals that the BoCs' role and ownership structure in two-tiered corporate governance systems promote higher payment of executive compensation and better company financial performance. Thus, there is a substitution and complementarity effect among the constructs and indicators of corporate governance mechanisms in determining company financial performance. This study also finds that concentrated ownership strengthens the positive relationship between the role of board of commissioners and executive compensation in order to increase company financial health and market value performance