THE INFLUENCE OF STRATEGIC CORPORATE SOCIAL RESPONSIBILITY ON OPERATING PERFORMANCE: AN INVESTIGATION USING DATA ENVELOPMENT ANALYSIS IN INDONESIA - Binus e-Thesis
BINUS INTERNATIONAL BINUS UNIVERSITY
Accounting Minor in Information Systems
Sarjana Ekonomi thesis Even Semester year 2012
THE INFLUENCE OF STRATEGIC CORPORATE SOCIAL RESPONSIBILITY
ON OPERATING PERFORMANCE: AN INVESTIGATION USING DATA
ENVELOPMENT ANALYSIS IN INDONESIA
Annisa Kusumawardhani Sabran
1200961666
Abstract
Objectives The purpose of this thesis is to investigate the relationship between
strategic Corporate Social Responsibility (CSR) and operating performance as well as the individual elements of strategic CSR affecting operating performance.
Method Annual reports were analyzed using content analysis using Global
Reporting Index framework and to calculate the aggregate score for CSR, Data Envelopment Analysis is conducted. The test included in the study was descriptive test, correlation test and multiple regression test.
Results From the correlation and multiple regression tests, no significant relationship was found between strategic CSR and operating performance.
However, when the elements of strategic CSR were investigated individually, different results were obtained. For financial companies, in correlation testing Environment and Product Responsibility is positively associated and Labour Practice is negative; while in regression test the positive relationship is observed in Human Rights and Product Responsibility element. For non-financial companies, in both test no elements were found to have a significant relationship with operating performance.
Conclusion There is no significant relationship between strategic CSR and
operating performance in Indonesian publicly listed companies. For the individual elements, Human Rights, Product Responsibility and Environment is shown to affect operating performance in financial companies. While in non- financial companies none of the elements of CSR has an affect on the operating performance of the company.
Keywords Strategic CSR, operating performance, Data Envelopment Analysis,
PREFACE
This thesis entitled: “THE INFLUENCE OF STRATEGIC CORPORATE SOCIAL
RESPONSIBILITY ON OPERATING PERFORMANCE: AN INVESTIGATION
USING DATA ENVELOPMENT ANALYSIS IN INDONESIA” was prepared to
fulfil the requirements of Binus International, Accounting program. Upon the completion of the thesis, the author would like to express gratitude to Allah swt for giving endless blessings and strength to make the completion of the thesis possible. The author would also like to express appreciation, gratitude and acknowledgement to:
1. Mr. Dominique Razafindrambinina, M.A, M.Sc., as the thesis supervisor for the support, time, patience, excellent guidance, meaningful inputs for completion of the thesis.
2. Mr. Dr. Junius Tirok, PhD, for his valuable input in understanding Data Envelopment Analysis topic.
3. Mr. Dezie L. Warganegara, PhD, for his valuable suggestion in improving the thesis during predefense and defense.
4. Ms. Pinky Rusli, MBA, for her valuable suggestion in improving the thesis during predefense and defense.
5. Mr. Ahmad Seiichi Ramadhan, SE., MM, for his help in understanding the statistical analysis output.
6. Mr. Dian Triasurya, MBA, as the Head of Accounting School for his understanding and support during the preparation of the thesis.
7. Mr. Ari Barkah Djamil, S.E., M.Sc, as the Head of Programme for Accounting School, for his support during the preparation of the thesis.
8. Ms. Ir. Yanthi Rumbina Ianova Hutagaol, M.Acc., Ph.D, for her informative lectures that were helpful in writing the thesis.
9. All the lecturers of Binus International who taught the author who shared their
10. My mother and father, for always having faith in me even when I lost faith in myself. Also, for their numerous attempts to make jokes to cheer me up. Thank you for being the two best role models in my life.
11. My part-time sisters and full-time friends: Nadya and Tami, for the endless laughter, encouragement and moral support.
12. Renny, Rissa, Fina, Citra, Denny, Bismo and Nada for being the awesome friends you are.
13. Accounting students 2012 for being there through thick and thin: Maureen, Angel, Monic, Yully, Lita, Michelle, Arvi, Daniel, Sato, Valin, Yaya.
14. Binus International Pool of English Debaters (BIPEDS), for improving my critical thinking and public speaking, especially to our brilliant coach Bong.
From intensive training to tournament euphoria: Invi, Eunike, Steven, Raj, Jaran, Ravina, Andrew, Astrio, Chris, Ian, Ric, Caroline, Felice, Nouzar, Mutia, Sergio, Tjoe, Dave, Shellen, Henri, Irene, Andree.
15. Linkin Park, for being an inspiration and an epitome of how perseverance and hard work will pay off and their concern on humanitarian issues.
16. Adam Young, for helping me stay optimistic and sane throughout university and writing the thesis.
17. Everyone else the author could not mention by name but have supported the author in completing the degree. The author believes without the support of the people mentioned, the thesis and the completion of the undergraduate programme could not have been possible. The author also acknowledges that the thesis is not perfect, but hopefully the result and findings could contribute to current knowledge of the subject and generate ideas for further research.
Jakarta, 11 June 2012 Annisa Kusumawardhani Sabran
TABLE OF CONTENTS
Cover Page i
Title Page ii
Certificate of Approval iii
Abstract iv Preface v Table of Contents vii
List of Tables x
List of Figures xi
List of Appendices xi
CHAPTER 1 INTRODUCTION
1.1 Background
1
1.1.1 Concept of Sustainable Development
2
1.1.2 Current trend in Corporate Social
4 Responsibility
1.1.3 Corporate Social Responsibility in Indonesia
5
1.1.4 Views of Operating Performance by
7 Companies
1.1.5 Previous Corporate Social Responsibility
8 Research
1.2 Scope
10
1.3 Aims and Benefits
11
1.3.1 Aims
11
1.3.2 Benefits
11
1.4 Research Question
12
1.5 Hypothesis
13
1.6 Research Methodology
13
1.7 Thesis Structure
14
CHAPTER 2 THEORETICAL FOUNDATION
42
2.7 Corporate Social Responsibility Framework
37
2.7.1 SA8000
38
2.7.2 AA1000
39
2.7.3 Global Reporting Initiative
40
2.8 Definition of Operating Performance
2.9 Measurement of Operating Performance
2.6.4 Sustainable Asset Management
43
2.9.1 Stock Price
43
2.9.2 Economic Value Added
45
2.9.3 Return on Asset
47
2.10 Determinants of Operating Performance
49 CHAPTER 3 RESEARCH METHODOLOGY
3.1 Research Aim and Hypotheses
37
37
2.1 Definition of Corporate Social Responsibility
2.3 Corporate Social Responsibility Issues
16
2.2 Rationality Behind Conducting Corporate Social Responsibility
18
2.2.1 Stakeholder Theory
18
2.2.2 Legitimacy Theory
24
2.2.3 Institutional Theory
27
28
2.6.3 CoreRatings
2.4 Corporate Social Responsibility Elements
32
2.5 Approaches to Corporate Social Responsibility
33
2.6 Corporate Social Responsibility Rating
34
2.6.1 Kinder Lydenburg Domini
36
2.6.2 Sustainable Investment Research International Company Ltd.
36
51
3.2 Research Hypotheses
3.6.1.3 Multiple Regression Analysis
64
3.5.4 Model for Research
66
3.6 Data Collection Method
67
3.6.1 Statistical Method Used in Research
68
3.6.1.1 Descriptive Characteristics
68
3.6.1.2 Correlation Analysis
68
69
64
3.7 Data Interpretation
70
3.7.1 Statistical Software For Data Interpretation
70 CHAPTER 4 FINDINGS AND ANALYSIS
4.1 Descriptive Statistics
71
4.2 Correlation Test
76
4.2.1 Hypothesis 1: Financial Companies
76
4.2.2 Hypothesis 1: Non-financial Companies
3.5.3 Control Variables
3.5.2 Dependent Variable
51
54
3.2 The Time and Place Where Research is Conducted
52
3.3 Research Design
53
3.3.1 Purpose of the Study
53
3.3.2 Type of Investigation
53
3.3.3 Extent of Researcher Interference
54
3.3.4 Study Setting
3.3.5 Unit of Analysis
60
54
3.3.6 Time Horizon
54
3.3.7 Sampling Design
54
3.3.8 Research Flowchart
56
3.4 Type of Data Used in Research
57
3.5 Research Variables
57
3.5.1 Independent Variable
78
4.2.4 Hypothesis 2: Non-financial Companies
4.3.5 Hypothesis 2: Non-financial Companies
APPENDICES
107
REFERENCE
5.4 Suggestion for Further Research 106
5.3 Recommendation 104
5.2 Limitation 104
5.1 Conclusion 103
99 CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS
96
85
4.3.4 Hypothesis 2: Financial Companies
92
4.3.3 Hypothesis 1: Non-financial Companies
90
4.3.2 Hypothesis 1: Financial Companies
86
4.3.1 Multicollinearity Test
86
4.3 Multiple Regression Test
120
CURRICULUM VITAE
LIST OF TABLES
84 Table 4.9 Multicollinearity test: Model 1, Financial companies
97
94 Table 4.16 Regression results for Hypothesis 1, Financial Companies
90 Table 4.15 Regression results for Hypothesis 2, Financial Companies
89 Table 4.14 Regression results for Hypothesis 1, Non-financial Companies
86 Table 4.13 Regression results for Hypothesis 1, Financial Companies
86 Table 4.12 Multicollinearity test: Model 2, Non-financial companies
86 Table 4.11 Multicollinearity test: Model 2, Financial companies
86 Table 4.10 Multicollinearity test: Model 1, Non-financial companies
80 Table 4.8 Correlation test for Non-financial Companies, CSR element
Table 2.1 Strength and Weakness of EVA76 Table 4.7 Correlation test for Financial Companies, CSR element
74 Table 4.6 Correlation test for Non-financial Companies
72 Table 4.5 Correlation test for Financial Companies
71 Table 4.4 Descriptive Statistics for Non-financial Companies
70 Table 4.3 Descriptive Statistics for Financial Companies CSR elements
69 Table 4.2 Descriptive Statistics for Non-financial Companies
63 Table 4.1 Descriptive Statistics for Financial Companies
44 Table 3.3 Control Variables
129
LIST OF FIGURES
Figure 3.1 Conceptual Map of Research54 Figure 3.2 Research Process Flowchart
56 Figure 3.3 Research Design Scheme
57 Figure 3.4 Research Variables
55 LIST OF APPENDICES