The effect of Corporate Social Responsibility and Corporate Governance on Cost of Debt in Indonesian Companies

Abstract

Companies worldwide are increasingly recognizing the significance of integrating sustainability aspects into their strategy and corporate governance practices for their long-term success. Given the increasing attention of lenders, it is reasonable to expect that a high level of CSR can lead companies to obtain a reduction in the cost of debt. This study also considers the effect of corporate governance required to achieve their financial goals. Companies listed on the Indonesia Stock Exchange (IDX), which are currently included in the LQ45 index and have been included in the LQ45 index from 2017 to 2021 were selected and observed. Our study finds that while corporate social responsibility has a significant influence, it has a positive effect on the cost of debt, which is not in accordance with some previous studies. Meanwhile, corporate governance has a significant influence on the cost of debt. These findings suggest that if companies implement CSR only to obtain a favorable reduction in the cost of debt, it is possible that the impact of CSR implementation may not satisfy their expectation.