Csr expenditure and company performance: Charity or signal? Evidence from Indonesia

Abstract

Purpose: The purpose of this study are: first, to investigate CSR expenditures made by public companies in Indonesia are whether aimed at the charity, and second, whether CSR expenditure is related to the corporate’s performance in the future. Methodology/Approach: The samples are taken from 53 companies registered at the Indonesia Stock Exchange. Measurement of CSR expenditure uses monetary unit because CSR expenditure is the actual expenditure of the company. Company performance variables use ROA and CFO. Findings: The result indicates that CSR expenditures by companies in Indonesia are aimed at charity and are not related to their future performance. In addition, the CFO is also not related to CSR expenditure. This finding indicates that the expenditure of corporate CSR in Indonesia is only limited to fulfilling corporate social responsibility to the community without expecting repayment and to fulfill applicable regulatory obligations. Thus the resulting decision is a charity decision, not a signal. Research Limitation/implication: Sample in this study is limited to only company that reports CSR expenditure data in its annual report. The problem is that this disclosure is not mandatory in Indonesia so we cannot put all of public companies into our study. Our findings must be interpreted with this sample limitation problem. Originality/Value of paper: Our study contributes to understanding of motives of corporation in CSR spending. Corporations that operate in Indonesia are not only local corporations. Some are foreign companies that operate in Indonesia. Even though this Indonesian-based foreign corporation has its CSR program running in Indonesia, the program actually made by its home office abroad. While the CSR activity is used as signal in the home country, the purpose is not the same in Indonesia. Category: Research paper.