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BINUS INTERNATIONAL BINA NUSANTARA UNIVERSITY
Major Accounting Sarjana Ekonomi Thesis Semester Even Year 2007
CORPORATE SOCIAL RES PONSIBILITY (CSR) REPORTING AND ITS RELATION TO BUSINESS ECONOMIC PERFORMANCE IN INDONESIA:
A CONTENT ANALYSIS STUDY ON LISTED COMPANIES
Indira Syarifa 0700675633
Abstract
Objectives This research intended to investigate the trend of CSR reporting in Indonesia as well as assess the correlation between company size, profitability, and stock market performance with frequency level of the disclosure. Hence, this exploratory study is supported by hypotheses testing.
Method The method used in this study is content analysis assisted with tabulation tables and Global Reporting Initiative (GRI) framework. The variables were measured against sentences as unit of analysis over three (3) years of annual reporting of fifty (50) listed companies in Indonesia.
vi Preface
First of all, the author would like to dedicate her gratitude to Allah SWT for the blessing throughout the completion of this thesis. This thesis entitled Corporate Social Responsibility (CSR) Reporting and Its Relation to Business Economic Performance in Indonesia: A Content Analysis Study on Listed Companies, was prepared and designated to fulfill the final requirement for a completion of undergraduate degree on Accounting Major, School of Accounting, Bina Nusantara International University.
This thesis will be a final project that had been planned and prepared during the undergraduate study period. The completion is expected to provide value added to readers so that further research in this particular topic can be conducted and may contribute to the development of this research.
With regard to this opportunity, the author would like to thank the following people: 1. Mr. Firdaus Alamsjah as the executive director of the Joseph Wibowo Center for
giving the author an opportunity to study at Binus International.
2. Mr. Minaldi Loeis as the program director of Bina Nusantara International. 3. Mr. Dezie L. Warganegara, the head of Accounting School of Bina Nusantara
International, for his support and dedication throughout these semesters.
4. Mrs. Ersa Tri Wahyuni, the deputy of Accounting School of Bina Nusantara International, for being such a great advisor and a very passionate lecturer. 5. Mr. Dominique Razafindrambinina, the deputy of Accounting School of Bina
Nusantara International, for his interesting and hilarious sessions and for giving me very meaningful advices in life.
6. Mr. Edward Tanujaya, for his dedication in the thesis supervision and for giving me such meaningful inputs and feedbacks during the supervisory period.
7. The author’s families for their daily support and prayer for the completion of the degree.
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9. Binus International Accounting students batch 2007 who have been together through the goods and the bads; and for the solid friendship and support throughout these years.
10. Yulia Sanjaya, a senior colleague, for her time in tutoring and giving the author deeper understanding on comprehensive accounting subjects.
11. For all the lecturers in Binus International for the chances given to obtain wider knowledge in all subjects.
12. Faculty me mber and staff of Bina Nusantara International for helping the author in finishing the degree.
13. Everyone and parties who have supported the author for the degree completion.
The author believes that the involvement and support given by every party named above had been greatly contribute to the completion of the undergraduate degree. Furthermore, the author realizes that this thesis is not perfect, thus, it is hoped for advices and suggestion for further improvements on this paper. Lastly, the author expects that this thesis would provide useful knowledge for herself as well as the readers for further references in similar study.
Jakarta, July 20th, 2007 Author
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Table of Contents
Page
Cover Page……….. i
Title Page………... ii
Certificate of Approval…….………... iii
Statement of Examiner………... iv
Abstract……….. v
Preface………... vi
Table of Contents………... viii
List of Tables………. xii
List of Figures……… xiv
List of Graphs………. xv
List of Appendices………. xvi
Chapter 1 Introduction………... 1
1.1 Background of the Problem……… 1
1.2 Problem Identification……… 5
1.3 Scope of Research………... 5
1.4 Research Objectives and Benefits……….. 6
1.5 Research Hypotheses……….. 6
1.6 Research Methodology………... 7
1.6.1 Population and Samples……….. 7
1.6.2 Data Gathering Methods………. 8
1.6.3 Data Analysis……….. 8
1.7 Thesis Structure……….. 9
Chapter 2 Theoretical Foundations on Corporate Social Respons ibility (CSR)……… 10
2.1 Concept of Corporate Social Responsibility (CSR)……... 10
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Indonesia……… 16
2.2 Corporate Social Responsibility (CSR) Reporting...…….. 19
2.2.1 Corporate Social Reporting and Good Corporate Governance (GCG)……… 21
2.2.2 Motivation for Reporting……… 23
2.2.2.1 Stakeholder Theory……….. 24
2.2.2.2 Legitimacy Theory………... 27
2.2.2.3 Political Economy of Accounting (PEA) Theory………. 28
2.2.3 International Reporting Guideline……….. 30
2.2.4 CSR Reporting in Indonesia…...……… 31
2.2.5 Past Empirical Research and Findings…………... 33
2.3 Business Economic Performance Measurements………... 36
Chapter 3 Research Methodology………... 40
3.1 Research Hypotheses and Aims……….. 40
3.2 Time and Place………... 42
3.3 Research Design………. 44
3.3.1 Purpose of the Study………... 44
3.3.2 Type of Investigation……….. 44
3.3.3 Extent of Researcher Interference……….. 45
3.3.4 Study Setting………... 45
3.3.5 Unit of Analysis………. 45
3.3.6 Time Ho rizon……….. 47
3.3.7 Sampling Design………. 47
3.3.8 Data Collection Method……….. 47
3.3.9 Measurement and Measures………... 49
3.3.10 Data Analysis……… 50
3.3.10.1 Content Analysis……… 51
3.3.10.2 Hypotheses Testing……… 53
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disclose Corporate Social Responsibility (CSR) in annual
reports?... 55
4.1.1 Trend of CSR Reporting in Indonesia……… 55
4.1.2 Themes of CSR Reporting in Indonesia…………. 59
4.1.3 Location of CSR Reporting……… 62
4.2 Do company characteristics (i.e. size and industry grouping) influence the frequency and type of CSR disclosure in annual reports?... 64
4.2.1 Company Size and the Level of CSR Reporting… 64 Net Assets……… 65
Net Sales……….. 66
Market Capitalizations………. 66
4.2.2 Company Size and Type of Reporting……… 67
Small Company………... 67
Mid-size Company……….. 68
Large Company………... 69
4.2.3 Industry Grouping and Type of Reporting………. 71
Infrastructure, utilities, and transportation……….. 72
Finance……… 73
Miscellaneous industry……… 74
Consumer goods industry……… 74
Mining………. 75
Basic industry and chemicals……….. 76
Trade, service, and investment……… 77
Agriculture……….. 77
Property, real estate, and building construction………... 77
4.3 To what extent does CSR reporting contribute to business economic performances?... 78
4.3.1 Company Profitability……… 78
Return on Assets (ROA)……….. 79
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Gross Profit Margin………. 80
4.3.2 Stock Market Performances………... 82
Stock Prices………. 82
Price to Earnings (PER)……….. 83
Price to Book Value (PBV)……… 84
Jakarta Composite Index (JCI)……… 84
Chapter 5 Conclusions, Limitations, and Recommendations……….. 87
5.1 Conclusions………. 87
5.2 Recommendations………... 88
5.3 Limitations……….. 88
5.4 Avenue for Further Research……….. 89
References……….. 90
Curriculum Vitae……… 98
xii List of Tables
No. Table Page
2.1 Evolution of Corporate Philanthropy in the USA……….. 16
2.2 High Profile CSR Events in Indonesia………... 18
2.3 Components of GRI-Sustainability Reporting Guideline Categories………... 32
2.4 Selected papers which have used a form of content analysis as a research method………. 35
3.1 List of Samples: 50 Listed Companies……….. 48-49 4.1 Descriptive Statistics of CSR Reporting per Year………. 56
4.2a CSR Reporting per Company in Sentences: 2003-2005..………. 58
4.2b CSR Reporting per Company in Sentences: 2003-2005 (continued)……….. 59
4.3 Coding Sheet – Summary of CSR Reporting 50 Listed Companies: 2003-2005………... 60
4.4 Summary of CSR Reporting: 2003-2005………... 61
4.5 Location of CSR Reporting: 2003-2005……… 62
4.6 Summary on Correlation Tests: CSR-Company Size: 2003 – 2005……… 65
4.7 Composition of Sample Based on Market Capitalization 2003 - 2005……… 67
4.8 Proportion of CSR Reporting in Small Company……….. 67
4.9 Proportion of CSR Reporting in Mid-size Company………. 69
4.10 Proportion of CSR Reporting in Large Company……….. 69
4.11 Composition of Sample Based on Industry Grouping ………..…. 71
4.12 3 Years Average Percentage of Reporting per Theme per Industry: 2003-2005……….. 72
4.13 Summary on Correlation Tests: CSR-ROA………….………….. 79
4.14 Summary on Correlation Tests: CSR-ROE………... 80
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4.16 Spearman’s rho Correlation test: Level of CSR Reporting and
Company Profitability……… 81
4.17 Summary on Correlation Tests: CSR-Stock Prices……… 83
4.18 Summary on Correlation Tests: CSR-PER……… 83
4.19 Summary on Correlation Tests: CSR-PBV……… 84
4.20 Spearman’s rho Correlation: CSR-JCI………... 85
xiv List of Figures
No. Figure Page
2.1 Sustainability Triangle……….……….. 13
2.2 A Shareholder Model for Corporation………... 25
3.1 Research Process……….………... 43
xv List of Graphs
No. Graph Page
4.1 Trend of CSR Reporting per Year……….………. 56 4.2 Proportion of Reporting Based on Size Classification:
2003-2005……… 70
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List of Appendices
No. Appendix Page
