The Influence Of Financial Performance On Company Value By Disclosure Of Corporate Social Responsibility As A Moderation Variable In Manufacturing Companies Listed On The Indonesia Stock Exchange

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The Influence of Financial Performance on Company Value: The Role of Corporate Social Responsibility Disclosure in Manufacturing Companies on the Indonesia Stock Exchange

Introduction

In today's business landscape, companies are not only evaluated based on their financial performance but also on their social and environmental responsibilities. Corporate Social Responsibility (CSR) has become a crucial aspect of a company's strategy, as it not only contributes to the well-being of society but also enhances the company's reputation and competitiveness. This study aims to examine the effect of financial performance on company value, with the disclosure of CSR as a moderation variable in manufacturing companies listed on the Indonesia Stock Exchange (IDX).

Background

Financial performance is a critical aspect of a company's success, and it is often measured using key performance indicators (KPIs) such as return on equity (ROE). On the other hand, CSR disclosure is becoming increasingly important, as it reflects a company's commitment to social and environmental responsibilities. The Indonesia Stock Exchange (IDX) has implemented various regulations to promote CSR disclosure among listed companies. However, the impact of CSR disclosure on company value remains unclear.

Methodology

This study uses a quantitative approach, analyzing the data of manufacturing companies listed on the IDX during the 2007-2008 period. The population of this study consists of all manufacturing companies listed on the IDX during the specified period. The analysis method used is simple regression and multiple regression.

Variables

The variables used in this study are:

  • Return on Equity (ROE): This is a measure of a company's profitability, calculated as net income divided by shareholder equity.
  • Corporate Social Disclosure Index (CSDI): This is a measure of a company's CSR disclosure, calculated based on the company's annual report and other publicly available information.
  • Price to Book Value (PBV): This is a measure of a company's value, calculated as the market price per share divided by the book value per share.

Results

The results of this study show that ROE has no significant influence on PBV. Similarly, CSDI also does not have a significant influence on PBV, indicating that CSDI does not act as a moderation variable.

Further Analysis

The results of this study indicate that financial performance, proxied by ROE, did not have a significant effect on company value. This may be caused by several factors, including:

  • Market Factors: The stock market conditions in Indonesia in the 2007-2008 period, which were colored by the global financial crisis, can affect investor assessment of the company.
  • Internal Factors: Manufacturing companies in Indonesia may have different business strategies in managing financial performance and company value.
  • Limitations of Data: CSR data used in this study may not fully represent the actual CSR disclosure in Indonesian manufacturing companies.

The Importance of CSR Disclosure

Although CSDI is not proven to be a moderation variable in this study, this does not necessarily eliminate the importance of CSR disclosure for the company. CSR disclosure has several benefits for the company, including:

  • Increasing reputation: CSR disclosure can increase the company's trust and reputation in the public eye, investors, and other stakeholders.
  • Strengthening relationships with stakeholders: CSR disclosure can increase company transparency and accountability, as well as strengthen relationships with stakeholders.
  • Increasing competitiveness: Companies that care about CSR can increase their competitiveness by attracting investors who care about sustainability aspects.

Recommendation

This research can be continued by expanding the scope of research, research period, and variables used. Further research can also be carried out by considering other factors that can affect the relationship between financial performance, CSR disclosure, and company value.

Conclusion

This study shows that ROE and CSDI have no significant influence on PBV on manufacturing companies on the Indonesia Stock Exchange for the 2007-2008 period. The results of this study indicate that other factors, such as market conditions and company business strategies, may be more influential on the company's value. Although CSDI is not proven to be a moderation variable, CSR disclosure is still important for companies to build reputation and competitiveness.

Limitations of the Study

This study has several limitations, including:

  • Limited sample size: The study only analyzed data from manufacturing companies listed on the IDX during the 2007-2008 period.
  • Limited variables: The study only used ROE, CSDI, and PBV as variables, which may not fully capture the complexity of the relationship between financial performance, CSR disclosure, and company value.
  • Limited data quality: The study relied on publicly available data, which may not be accurate or up-to-date.

Future Research Directions

Future research can build on this study by:

  • Expanding the sample size: Analyzing data from a larger sample of companies, including those from different industries and countries.
  • Using more variables: Incorporating additional variables, such as environmental performance, social performance, and governance performance, to capture the complexity of the relationship between financial performance, CSR disclosure, and company value.
  • Using more advanced analysis methods: Employing more advanced analysis methods, such as structural equation modeling or machine learning algorithms, to better capture the relationships between the variables.

By addressing these limitations and expanding the scope of research, future studies can provide a more comprehensive understanding of the relationship between financial performance, CSR disclosure, and company value.
Q&A: The Influence of Financial Performance on Company Value

Introduction

In our previous article, we discussed the influence of financial performance on company value, with the disclosure of Corporate Social Responsibility (CSR) as a moderation variable in manufacturing companies listed on the Indonesia Stock Exchange (IDX). In this article, we will answer some of the most frequently asked questions (FAQs) related to this topic.

Q: What is the relationship between financial performance and company value?

A: Financial performance is a critical aspect of a company's success, and it is often measured using key performance indicators (KPIs) such as return on equity (ROE). However, the relationship between financial performance and company value is complex, and it can be influenced by various factors, including market conditions, company business strategies, and CSR disclosure.

Q: Why is CSR disclosure important for companies?

A: CSR disclosure is important for companies because it reflects their commitment to social and environmental responsibilities. It can increase the company's trust and reputation in the public eye, investors, and other stakeholders. CSR disclosure can also strengthen relationships with stakeholders and increase competitiveness by attracting investors who care about sustainability aspects.

Q: What are the benefits of CSR disclosure for companies?

A: The benefits of CSR disclosure for companies include:

  • Increasing reputation: CSR disclosure can increase the company's trust and reputation in the public eye, investors, and other stakeholders.
  • Strengthening relationships with stakeholders: CSR disclosure can increase company transparency and accountability, as well as strengthen relationships with stakeholders.
  • Increasing competitiveness: Companies that care about CSR can increase their competitiveness by attracting investors who care about sustainability aspects.

Q: Why did the study find that ROE and CSDI have no significant influence on PBV?

A: The study found that ROE and CSDI have no significant influence on PBV because of several factors, including:

  • Market Factors: The stock market conditions in Indonesia in the 2007-2008 period, which were colored by the global financial crisis, can affect investor assessment of the company.
  • Internal Factors: Manufacturing companies in Indonesia may have different business strategies in managing financial performance and company value.
  • Limitations of Data: CSR data used in this study may not fully represent the actual CSR disclosure in Indonesian manufacturing companies.

Q: What are the limitations of the study?

A: The study has several limitations, including:

  • Limited sample size: The study only analyzed data from manufacturing companies listed on the IDX during the 2007-2008 period.
  • Limited variables: The study only used ROE, CSDI, and PBV as variables, which may not fully capture the complexity of the relationship between financial performance, CSR disclosure, and company value.
  • Limited data quality: The study relied on publicly available data, which may not be accurate or up-to-date.

Q: What are the future research directions?

A: Future research can build on this study by:

  • Expanding the sample size: Analyzing data from a larger sample of companies, including those from different industries and countries.
  • Using more variables: Incorporating additional variables, such as environmental performance, social performance, and governance performance, to capture the complexity of the relationship between financial performance, CSR disclosure, and company value.
  • Using more advanced analysis methods: Employing more advanced analysis methods, such as structural equation modeling or machine learning algorithms, to better capture the relationships between the variables.

Conclusion

In conclusion, the relationship between financial performance and company value is complex, and it can be influenced by various factors, including market conditions, company business strategies, and CSR disclosure. While the study found that ROE and CSDI have no significant influence on PBV, CSR disclosure is still important for companies to build reputation and competitiveness. Future research can build on this study by expanding the sample size, using more variables, and employing more advanced analysis methods.