The Influence Of Corporate Social Responsibility, Equity Market Value, Information Asymmetry, Market Beta And Earnings Management On Equity Capital Costs In Property And Real Estate Companies Listed On The Indonesia Stock Exchange In 2018-2020

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The Influence of Corporate Social Responsibility, Equity Market Value, Information Asymmetry, Market Beta, and Earnings Management on Equity Capital Costs in Property and Real Estate Companies Listed on the Indonesia Stock Exchange in 2018-2020

Introduction

In recent years, the importance of corporate social responsibility (CSR) has become increasingly prominent in the business world. Companies are not only expected to generate profits but also to contribute to the well-being of society and the environment. However, the impact of CSR on equity capital costs in property and real estate companies listed on the Indonesia Stock Exchange (IDX) remains unclear. This study aims to analyze the effect of CSR, equity market value, information asymmetry, market beta, and earnings management on equity capital costs in these companies during the 2018-2020 period.

Literature Review

Corporate social responsibility (CSR) refers to a company's efforts to improve the social and environmental impact of its operations. CSR can take many forms, including philanthropy, community development, and environmental sustainability. The benefits of CSR include increased brand reputation, improved employee morale, and enhanced investor confidence. However, the impact of CSR on equity capital costs is not well understood.

Equity market value is a key determinant of equity capital costs. Companies with higher market values tend to have lower equity capital costs due to increased investor confidence and reduced risk. Information asymmetry, on the other hand, can increase equity capital costs by creating uncertainty and reducing investor confidence. Market beta is a measure of systematic risk that can affect equity capital costs. Companies with higher market beta tend to have higher equity capital costs due to increased risk.

Earnings management refers to the practice of manipulating financial statements to present a more favorable picture of a company's performance. Earnings management can increase equity capital costs by reducing investor confidence and increasing uncertainty.

Methodology

This study uses secondary data obtained from registered company financial statements. The sample consists of property and real estate companies listed on the IDX during the 2018-2020 period. The data analysis is carried out using multiple linear regression, as well as t-tests and tests with the help of SPSS 25 software.

Research Findings

The results of the study showed that simultaneously, CSR, market value, information asymmetry, market beta, and earnings management have a significant effect on equity capital costs. However, when analyzed partially, only the market value of equity that has a negative effect on the cost of equity capital. Meanwhile, CSR, information asymmetry, market beta, and earnings management do not show a significant effect on the cost of equity capital.

Effect Analysis

  1. Corporate Social Responsibility (CSR): Although CSR is expected to increase the company's reputation and attract investors, this study found that CSR had no significant effect on equity capital costs. This may be caused by the low public awareness or investors regarding CSR efforts made by these companies. On the other hand, companies that are active in CSR may still face challenges in terms of transparency and measurement of the impact of the programs implemented.

  2. Equity Market Value: It was found that the market value of equity had a negative effect on equity capital costs. This shows that the higher the market value of equity, the lower the cost of capital that must be borne by the company. This may be related to investor confidence which increases along with good financial performance, which in turn reduces risk in investment.

  3. Asymmetry of Information: Asymmetry information is often a problem in the capital market, where unbalanced information between the company and investors can affect investment decisions. However, in this study, it was found that information asymmetry had no significant effect on the cost of equity capital. This might reflect that the company has succeeded in reducing uncertainty by increasing transparency and communication with investors.

  4. Beta Market: Beta Market is a systematic risk indicator that shows the volatility of a stock compared to the overall market. The results showed that market beta had no significant effect on equity capital costs. This may be caused by the characteristics of the property industry which is often more stable than other sectors.

  5. Profit Management: Profit management, which includes strategies to manage financial statements to make it look better, also does not show a significant effect on the cost of equity capital. This may indicate that investors are more intelligent and able to detect accounting manipulation, so that its effect on investment decisions becomes minimal.

Conclusion

Overall, this research provides important insights on the factors that affect the cost of equity capital in the property and real estate sector in Indonesia. Although some variables do not show significant effects, it is important for companies to continue to increase transparency, market value, and real CSR implementation. Thus, companies can improve their position in the eyes of investors and reduce the cost of equity capital in the future. This research can be a reference for companies and stakeholders in more effective and sustainable financial management strategies.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Increase transparency and communication with investors: Companies should increase transparency and communication with investors to reduce information asymmetry and increase investor confidence.
  2. Improve CSR implementation: Companies should improve CSR implementation to increase the impact of CSR on equity capital costs.
  3. Increase market value: Companies should increase market value by improving financial performance and reducing risk.
  4. Reduce earnings management: Companies should reduce earnings management to increase investor confidence and reduce equity capital costs.

By implementing these recommendations, companies can improve their position in the eyes of investors and reduce the cost of equity capital in the future.
Frequently Asked Questions (FAQs) on the Influence of Corporate Social Responsibility, Equity Market Value, Information Asymmetry, Market Beta, and Earnings Management on Equity Capital Costs in Property and Real Estate Companies Listed on the Indonesia Stock Exchange in 2018-2020

Q: What is the main objective of this study? A: The main objective of this study is to analyze the effect of Corporate Social Responsibility (CSR), Equity Market Value, Information Asymmetry, Market Beta, and Earnings Management on Equity Capital Costs in Property and Real Estate Companies Listed on the Indonesia Stock Exchange (IDX) during the 2018-2020 period.

Q: What is the significance of this study? A: This study provides important insights on the factors that affect the cost of equity capital in the property and real estate sector in Indonesia. The findings of this study can be used by companies and stakeholders to develop more effective and sustainable financial management strategies.

Q: What are the key findings of this study? A: The key findings of this study are:

  • CSR, market value, information asymmetry, market beta, and earnings management have a significant effect on equity capital costs simultaneously.
  • However, when analyzed partially, only the market value of equity has a negative effect on the cost of equity capital.
  • CSR, information asymmetry, market beta, and earnings management do not show a significant effect on the cost of equity capital.

Q: What are the implications of this study? A: The implications of this study are:

  • Companies should increase transparency and communication with investors to reduce information asymmetry and increase investor confidence.
  • Companies should improve CSR implementation to increase the impact of CSR on equity capital costs.
  • Companies should increase market value by improving financial performance and reducing risk.
  • Companies should reduce earnings management to increase investor confidence and reduce equity capital costs.

Q: What are the limitations of this study? A: The limitations of this study are:

  • The study only focuses on property and real estate companies listed on the IDX during the 2018-2020 period.
  • The study uses secondary data obtained from registered company financial statements.
  • The study does not consider other factors that may affect equity capital costs.

Q: What are the future research directions? A: The future research directions are:

  • To conduct a similar study on other industries or sectors.
  • To use primary data collection methods to gather more accurate and reliable data.
  • To consider other factors that may affect equity capital costs.

Q: What are the practical implications of this study? A: The practical implications of this study are:

  • Companies can use the findings of this study to develop more effective and sustainable financial management strategies.
  • Investors can use the findings of this study to make more informed investment decisions.
  • Regulators can use the findings of this study to develop more effective policies and regulations.

Q: What are the theoretical implications of this study? A: The theoretical implications of this study are:

  • The study contributes to the existing literature on the factors that affect equity capital costs.
  • The study provides new insights on the role of CSR, market value, information asymmetry, market beta, and earnings management in affecting equity capital costs.
  • The study can be used to develop new theories and models on the factors that affect equity capital costs.