Firm Value, Financial Performance, and Corporate Social Responsibility in the Indonesian Banking Industry

Siti Rochmah Ika, Nurhidayati, Joko Purwanto Nugroho and Ari Kuncara Widagdo ()
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Siti Rochmah Ika: Janabadra University, Faculty of Economics and Business
Nurhidayati: Janabadra University, Faculty of Economics and Business
Joko Purwanto Nugroho: Janabadra University, Faculty of Economics and Business
Ari Kuncara Widagdo: Sebelas Maret University, Faculty of Economics and Business

A chapter in Proceedings of the 1st International Conference on Management and Business (ICoMB 2022), 2023, pp 66-76 from Springer

Abstract: Abstract This research aims to examine whether a company's financial performance and corporate social responsibility (CSR) reporting affect the value of the banking firms listed on the Indonesia Stock Exchange (IDX). This study uses 33 banks as a sample for three-year periods from 2016 to 2018, resulting in 99 bank-year observations. Financial performance was measured by bank financial ratios such as capital adequacy ratio (CAR), return on equity (ROE), net interest margin (NIM), net profit margin (NPM), non-performing loan (NPL), operating expense to operating revenue (BOPO), and loan to deposit ratio (LDR). Meanwhile, CSR reporting was measured by a checklist based on Global Reporting Initiatives (GRI) G4 sustainability reporting guidelines. Firm value was calculated by price to book value, a ratio that reflects the stock market's estimate of a company's present and future profits and growth prospects. Multivariate regression analysis suggests that CSR reporting does not affect firm value, while three financial ratios, namely ROE, CAR, and LDR, affect firm value. The results indicate that investors in investing their money in the banking industry do not consider the company's CSR but its financial condition. The descriptive statistic reveals that the level of CSR reporting made the Indonesian banking companies is relatively low, 26 percent on average. This research provides evidence about the amount of CSR reporting of the Indonesian banking companies that may not impact firm value. The capital market authority agency then may release some regulations to enhance CSR reporting.

Keywords: Firm value; Corporate social responsibility; Corporate social responsibility disclosures; Financial performance; Bank industry; Indonesia (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-160-9_8

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DOI: 10.2991/978-94-6463-160-9_8

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