Determinants of Corporate Social Performance (CSP) Through Corporate Social Responsibility (CSR) of Foreign Investment Compantes (PMA) in Indonesia IJER
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IJER @ Serials Publications
13(5),2076:2005-2027
ISSN:0972-9380
DETERMINANTS OF CORPORATE SOGIAL
PERFORMANGE (CSP) THROUGH GORPORATE
soGrAL RESPONSTBTLTTY (CSR) OF FORETGN
TNVESTMENT COMPANTES (PMA) !N
INDONESIA
Azinil I(h olis*, Ade Fatma Azh ar M aksum and Rin
a B uki
t
Abstract:This researchstudied internal anrl external determinants of CSP, This study was
theory which discttsses the role ofaarious stakeholders in determining
a preoious study zuas
:lu preoious study only tests seoeral oarinbles, whether internal or external ctariables u)hich
:nfluence CSR, while the curr ent study combined many models and was based on stakeholder
-.heory. The study was performed on 127
foreign companies inNorth Sumate-ra Prooince,
lndonesia.The testedoarinbles were internttl factors and externnl relatbns ofCSP through
-SRqs an intmtening aariable.The analysistechnique usedwas StructuralEqtation Model
SEM)withthehelp of Amos softwareoersion 21.The researchresult showed that internal
;nd external determinants of CSR uereCompany Policy (CP), Company Reputation (CR),
:mployee Engagement (EE), Gooernment Regtilation (PP), Community Empowerment,
-..tstomer, and Mass Media (MP) influencedCorporate Social Performance (CSP) through
-orporate Social Responsibility (CSR). The limitation of this study was sarnples were limited
:: foreign imtestment companies, so there might be sample bias in Domestic Inaestment
-onrynnies (PMDN). There utas also dfficulty in collecting dta, causing delay in obserusation
::riod. This study also didn't discuss company financial data, so it couldn't assess the
:nnncittl performance prodtrcedby CSR expenses.The suggestions for future studies are to
,nplement this research on companies listed in Indonesia Stock Exchange, to check the
nplementation of CSR in public companies in Indonesia. This study contributes to
-:gtLlations at local gozternments, so that they can check Corporate Social Performance in
::=ir regions by publishing local regulations on CSR.
based on stakeholder
:he
continuity of a company. The difference between this study and
-:.eyzoords:
internal, external factors, Corporate Social Performance, Company Reptttation
Doctoral Accounting Programme of Faculty of Economic and Business, University of Sumatera Utara
No. 12, USU Campus Medan-North Sumatera - Indonesia. Postal Code 20115.
Corresponding author. E-m.ail: azizul*kholis@y alno, com
Jl. Prof. TM Hanafiah
2006
1.
Azizul Kholis, Ade Fqtma, Azhar Maksum and Rina Bukit
INTRODUCTION
ist
Today, there are two primary problems related to thegoingconcemof
a company, which
are Corporate Financial Performance and Corporate Social Performance (CSP).
Corporate financial performance is still the main purpose of a company as a logical
consequence of a profit oriented-business practice, however along with Financial
Performance, Corporate Social Performance is also a focus in business practice.
Ho'
perl
ben
corl
onl)
Corporate financial performance can be defined clearly and is available in
variousmeasurement instruments, such as Retum on Assets (ROA), Return on
Investmmt (ROI), Stock Price, Sales, and Profit. Currently, corporate performance
measurement is only focused on finances (financial performance). \A/hen a company
successfully reaches high profit level, performance measurement may measure its
success, but doesn't necessarily measure and meet the demands of corporate sociai
performance, especially since financial performance assessment is limited by time,
orimted towardshareholdersbased onAgencyTheory,instead of stakehoiders. To soive
the limits of weaknesses of corpoeate performance measurement system, which is
only focused on financial aspectwithoutpaying any attention to non-financial aspcf
Corporate Social Performance discourse is developed. According to K Chopra (2010)
corporate social performance assessmmt clearly can't be separated from the influences
of internal and external environments of a company. Corporate performance
measurement requires non-financial perspective, such as social perspective and political
perspective, such as government regulation and environment. This is because
accounting practive has become an integral part of political system, creating very close
relations between politics, economy, government, and other factors.
The term Corporate Social Performance (CSP)was first used in the 1970s and
becomes increasinglypopular, especiallysince the publication of CannibalsWithForks :
The Triple Bottom Linein 21st Century Business, by John Ekingtonin 2008. According to
him,CSP develops threeimportantcomponentsforeconomic sustainable development,
i.e. economic growth, environmental protection, and social equity, initiate dby the Worla
Commissianon Enoironment and Dmelopment (WCED). Elkington (2008) also classifies
the purposes of CS Pinto three main orientations, 3P, which is short for profit, planet
and people. Studies on socialperformance continue on. The study of Sadosrky (1991,
7995,2005) describes that corporate social performance is important to prioritize in
the business era today and that social perfonnance demands become more equal to
corporate financial performance. The study of Wokutchand Mc Kinney (2010) also
discusses corporate social performance measurement. Tuodolo (2009) even describs
several social issues faced by companies and variables related to corporate social
performance. Chopra (2010) and Baisakalova (2012) also prove and corporate social
responsibility and performance aren't limited to looking for profit, but also payins
attention to the societp which is the most important part of business. Variou=
dimensions, measurements, methodt and approaches are studied by researchers io
determine corporate social performance, all based on stakeholder theory as its main
foundation.
com
regu
is re
beca
phili
IIs
o
outsi
coml
achie
of rel
activi
with j
lftere
CSP
z
amou
whicr
lpost s
inMal
mgo
.
)-i(
.-- ;
:
'-'
-.::rmirunts of Corporate Social Performance (CSP) Through Corporate Social Responsibility... 2007
;
One of the implementations of CSP is Corporate Social Responsibility (CS&) which
Jre social responsibility of the business sector for the society and environment.
--lwever, a company which performs CSR doesn't necessarily achieve its social
.:cormance, because CSR is only acfivity, while according to Visser (2008) CSP should
,-. more measured. The study by Van Buren (2006) also describes that the influence of
r rrporate social perfonnance on corporate social responsibility and vice versa isn't
. rly the performance of CSR activities. F{owever, Van Bruren (2006) states that
-:,mpanies don't have to report those social activities, unless there is a stock market
:egulation on it. Unlike the experts above, Serafeim (2012) states that social performance
-s reached is there is demand, unlike financial performance which must be reached
:ecause it's the main purpose of a company. Serafeim (2012) argues that CSR
:hilanthropy is a social character which doesn't have to be owned by a business unit.
-:'s only generosity, voluntary and not an obligation, because the demand is created
:,utside of company system. Alternately, Sadorsky (2005) states that CSR is a part of
:ompany strategy to survive and even win business competition. In practice, the
:chievement of CSP is systematic implementation of CSR consistent with the aspects
:f regulation compliance, environmental awareness, social contribution, and social
:ctivity reporting which are forms of a company's awareness to improve its relations
-.r,'ith the society and environment. These are internal and extemal factors. Considering
fiere is difference in the views of the experts on the more appropriate way to measure
CSP and how CSR doesn't necessarily descnbe CSP, it's very relevant to study the
amount of the influence of CSR on CSP. Several past studies describe many factors
rvhich influence CSR. For example, the study by Amranand Devi (2008) mentions at
least six internal factors, which are indicated to influence the implementation of CSR
inMalaysia. The factors are/oreign shareholder, government shareholding, dependence
on Bovemment, dependence on foreign partner, industry, size, andprofitability.
Extemal factors can at least refer to the study by Henrique and Sados rky (1999) on 750
Canadian companies as realization of company managements' perceptions on
stakeholder. Maksum (2003) has tested the variables of Government
Regulation,Community Pressure, Mass Media Pressure. Another study by Stead (1996)
addscustomer variabie, and the study by Turner and Stephenson (1994)
includesenvironmental information variableas a contributing factor which influences
the importance of corporate social responsibility.
,
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ln Indonesia, there aren't many studies on CSP. Although there are many studies
on CSR, conceptually they don't necessarily describe social performance achievement.
In Indonesia, CSR activities develop positively along with democracy, increasingly
critical society, globalization arrd free market era. However, only a small number of
companies implement CSR. A survey by Supraptoin 2005 on 375 companies inJakarta
showed that 166 or M,25"/o companies didn't perforn any CSR activity ,209 or 55,75o/o
companies performedthe followingCSR activities , family activities (116 companies),
donation to religious institutions (50 companies), donation to social institutions
2008
Azizul Kholis, Ade Fatma, Azhar Maksum and Rina Bukit
Determinn
(39 companies), and community development (4 companies). The survey also showed
that the CSR performed by the companies depends on the managements. Therefore,
the CSR performed by the companies don't necessarily achieve corporate social
performance, as stated by various social researchers, because social performance must
reach four aspects, which are compliance, environmental awareness, social contribution
and social activity reporting. Another negative implication emerges when a CSR
program isn't utilized well by the society.The financial aids received by the society
aren't used for venture capital, but to meet and buy other needs. It proves that CSR
practice in Indonesia doesn't always meet corporate social performance as in other
countries. Ma.y CSR studies in Indonesia focus on companies in Indonesian Stock
Exchange and the interests of capital market and investors on Colporate Financial
Performance. Studies on CSR related to foreign investrnent companies not listed in
Engagem
the stock exchange are rare.
This study was performed in North Sumatera province because this province is
one of the center of economic growth in the westem region. North Sumatera is currently
in corridor II of Master Plan of Indonesian Economic Development Acceleration
(MP3ED. MP3EI is supported by the existence of SeMangkei Special Economic Zone
(KEK) and Kuala Tanjunglndustrial Area and Port as an Intemational Hub Port. KEK
will draw foreign investorsto North Sumatera, so the current PMA should be studied
in terms of CSP and CSR to be beneficial for the government of North Sumatera
province. On the other hand, North Sumatera province is also located in a regional
economic cooperation zone, Indonesia Malaysia Thailand - Growth Triangle (IMTGT), so investment is expected to grow in this region, particularly in the era of ASEAN
Economic Community (MEA). Data of Investrnent and Promotion Agency of North
Sumatera shows that until 201.4, there had been 783 Foreign Investment Companie*.
(PMA) which entered North Sumatera. However, onlyaround 224 companies activelr'
submitted operational activity reports. Based on the background above, the
formulations of the research problem are:
1.
Do Company Policy (CP),Company Reputation (CR), Employee Engagemmi
(EE), Govemment Regulation (GR), Communify Empowerment (CE'
Customer (C), and Mass Media (MM) directly influence Corporate SociaResponsibility (CSR)?
2.
Do Company Policy (CP), Company Reputation (CR), Employee Engagemer'-:
(EE), Government Regulation (GR), Community Empowerment
(CE
Customer (C), and Mass Media (MM) indirectly influence Corporate SociPerformance (CSP) through Corporate Social Responsibility (CSR)
3.
Does Corporate Social Responsibilify (CSR) directly influence Corpora::
Social Performance (CSP)
?
The pulposes of this study were to test and arralyze determinants of corpora=
social performance, i.e. Company Policy (CP), Company Reputation (CR), Emplor -
Custome
Corporal
conceptu
also be z
determin
2.
THE(
2.1. Stake
Stakeholdr
can influe
SUCC€SS dftr
interests
o.
performan
2.2. Corpor
CSPcan be
lis responsir
:nd
genera
,-*.:*-'.:s
0f Corporate Social Perfornnnce (CSP) Through Corporate Social
Responsibility... 2OOg
--=:ent (EE), Govemment Regulation (GR), Community Empowerment (CE),
-:=: (C), and Mass Media (MM) on Corporate Social Responsibility (CSR) and
'* :::e Social Performance (CSP). Academically, this will provide theoretical
:r -il contribution on the implementations of CSP and CSR in Indonesia. It will
:= academic reference for various CSP and CSII studies in Indonesia by
r=::lng the importance of the role of stakeholder in company operations.
-.{ E ORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT
..
::eke Holder Theory
" :-
-
.
,
rlder theory according to Fieeman (1984) means every group or individual which
--luence the achievement of organizational purpose. This theory states that the
and goingcomcernof a companyhighly depends on its ability tobalancevarious
of the stakeholders.Stakeholders which become the focus of corporate social
maximizingbusiness profit.
::rrance achievementhave the main role
=;
-:.-:Lc
--
il
*'
-orporate Social Performance (CSP)
-::anbedefinedas"aconstructionwhichemphasizesthatacompanymustperform
-=-onsibility to various stakeholders, such as employees, environment, mass media,
- : ieneral public, around the company aside from traditional responsibility to
STAKEHOLDER MODEL
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Figure 1: Stakeholder model, Visser (2008)
Azizul Kholis, Ade Fatma, Azhar Maksum and Rina Bukit
2010
Determinnnts q
economic shareholders, to achieve its social performance" (Turban and Greening7996,
p.658). According to Viser (2008), CSP at least includes four things, which are
1. compliance to companyintemal and extemal
2. environmentalawareness,
3. company social contribution,
4.
regulations,
social activity reporting.
it is concluded that Corporate
Based on Visser's (2008) argument,
Social
Performance (CSP) assessmentprimarily depends on policies related to managemmt
practices consistent with intemal and external demands and achievement consistent
with stakeholders' demands. According to Maon (2013), there are at least 4 things
which trigger CSP. They are shown in Table 1 below:
2.3. Corporate Social
Responsibility (CSR)
CSR is a business commitment to play a role in economic developmant which can
work with the employees and their representatives, local communities and general
public to improve quality of life in ways which are good for the business and
development. CSR development in developing countries is studied by Visser (2008)
and can be seen in CSRpyramid in Figure 2 below :
The definition of CSR according to Lrtemational Finance Corporation (IFC),2000:
"The commifunent of the business world to contribute to economic sustainabie developmen:
through cooperation with employees, their families, local communities and general public
"
to improve their livelihoods in ways which are good for the business and development.
ISO 26000, in Guidance on Socinl Responsibility, defines CSR as:
" An organtzation's responsibility for the impacts of its decisions and activities on th:
society and environment, which is realized through transparent and ethical behaviors h
Table
CSP
Driver
Economic driaer
1.
2.
Competitive advantage
Shareholders' demand
union
3. Company image and reputation development
4. Management risk minimization
Political driaer
1
Social
drioer
Community and NGO pressures
2. Pressure from trade association and labor
1.
3. Following customer trend
Indiztidual drioer
1. Ethic-orientation of Top Management
Legal policy and government reguiation
frameworks
Individual value of employees and manage2. Pressure from govemment at local and national
personally
levels
1.
Sonrce:
Yisser (2008)
Iine with sus
stakeholders,
integration
I
Lr the Law
t
the Law of Limit
defined as:
"Responsibil
harmonious, r
local commun
kr the text of
However,inther
zrd environmeni
participate in ecc
arv-ironmentwhi
others. PKBLprc
Corrmunity Der,
ahrpriseempow
fulled Parkrershj
bcal communitie
LK releases Decis
hrersandpublic
fiapepam No.3l
L-
DetennirnnisafCorporateSocialPeformance(CSP)ThroughCorporuteSocialResponsibility...20ll
],
Adgpt vsluntary q&des
ol gwemrnat1 and ethlcs
Le{ral
Responsibilitiac
Ui
Enr*r 9@d ral€tlan
dt?t Edva.nmcni
otficlsl$
scl $sido lund$ ror
corporBt€ socl€l /
cffinJrrnlty pr6lcct
llf
mr
fir
P
Eeono*nir
RasponSlbilllies
Prowld6
lhvo*lm6nl,
dfc$le
Jobt, $nd p6y tbxea
Figure 2: C-SR Pltamid for Developing Countr:ies
u
tpl
i:
rf,
h
t
iSource: Visser, 2008)
line with sustainable development andpublic welfare, by considering the expectations of
stakeholders, consistent with laws and international behavioral norms in effect, and in
integration with the organization as a whole."
In the Law of Capital Market, which is used as a reference for CSR obligation in
the Law of Limited Liability Company, in the explanation of Article 15 letter b, CSR is
defined
as:
"Responsibility attached to every company to keep creating relations which are
harmonious, equal,and consistent with the environmen! values, norrns, and cuiture of
local communities."
n
I
ti
In the text of Article 74 of Law of Limited Liability Company, CSR isn,t defineci.
However, intheworkdocrrtnen\ot\\reEorrnrr\atrngT
., there is a detinitr,on. "social
"at Coml,asr\ed cssislbrse*\s
asrd.errrirorrscren\a\responsl\o\\\resartd.L\rNte&LialoN\
parhcrpate m economic sustainable development to improve the quality of life and
envirorunent which is beneficial, for the Limited Liability Companies themselves and
others, PKBlprogram(Pafinership Programof 50Es with Small Enferprises and
Community Development Program) consists of two activities, which are small
enterprise empowerment program by lending revolving fund and providing assistance
(called Partnership Program) and empowerment program for the social condition of
iocal communities (called Community Development Program). Recently, Bapepam
LK releases Decision No. i34lBL /2006 on Obligation to Submit Annual Reports for
Issuers and Public Companies. Compared with the previous reguJation (Decision Letter
ofBapepam No. 38/PM /1996), the amotrnt of information which must be revealed,
lfuBafCorporateSocialPerformance(CSP)ThroughCorporateSocialResponsibility...20l.l
Ehlcr.l
Adopt volunl*ry codes
ql gBermfft ard ethlcs
Respmsibililiet
Lecral
Rsspmsibilitas
Efirurn toad rslallan
wlttr gowarnmont
orrlclrrle
Sal eside lund3 i6f
corporst€
eoclEl /
qomnlr.rnlty
Frgrcal
Econo*ic
Rsspofislbllltio$
Ffovlrr6
lhvsil6dhl,
cle..ld
Jo})s, *nd pav lsxee
Figure 2: CSR Pyramid for Developing Countries
-
'.':sser, 2008)
-,r-ith sustainable development andpublic welfarg by considering the expectations of
ieholders, consistent with laws and internationai behavioral norms in effect, and in
-:.+ation with the organization as a whole."
-
-
=
,:
-ne Law of Capital Market, which is used as a reference for CSR obligation in
--:-,',' of Limited Liability Company, in the explanation of Article 15 letter b, CSR is
,-:l
as:
?esponsibility attached io every company to keep creating relations which are
--:monious, equal,and consistent with the environment, values, norns, and culture of
-;al communities."
Article 74 of Law of Limited Liability C-ompany, CSR isn't defined.
':r'er, in the work document of the FormulatingTeam, there is a definition. "Social
-r. ihe text of
-
: xvirorunental responsibilities and Limited Liability Companies'commitrnent to
-::ipate in economic srrstainable development to improve the quality of life and
' ::crunent which is beneficial, for the Limited Liability Cornpanies themselves and
-:rs. PKBlprogram(Partnership Programof SOEs with Smali Enterprises and
. ,:nmunity Development Program) consists of two activities, which are small
, :erprise empowerment program by lending revolving fund and providing assistance
-=iled Partnership Program) and empowernent program for the social condition of
.-al communities (called Community Development Program). Recently, Bapepam
-r,. releases Decision No. 134/BL /2006 on Obligation to Submit Annual Reports for
. >rers and Public Companies. Clompared with the previous reguJation (Decision Letter
Sapepam No. 3BIPM /199b), the amount of information which must be revealed,
-
Azizul Kholis, Ade Fatma, Azhar Maksum and Rr,-:
-::-trnitwnts of
especially related to Corporate Govemance practice, is higher. In2A07, the
Representatives also authorized Law No. 40 of 20A7 on Limited Liability C
Article 74 of the law requires companies to describe their activities and expen-ce:
related to corporate social responsibility to the society and environment. Trlead to more information of a company's activities which must be revealec
company's annual report, including revealing CSR.
Deterr
2012
satisfa
Sispro
equipr
structL
_1. Compi
Another regulation on CSR is Law No. 25 of 2007 on hrvestment. Article ,:
states that "Every investrnent must perforrn corporate social responsibili!,/'.
this law has regulated in detail sanctions for business entities or limited
companies which ignore CSR (Article 34), the law is only able to regulate :::=.
investors and hasn't dearly regulated CSR for national companies. Generally, tI-.=
of CSR activities are shown in Tabie 2. below :
Charity
Philanthropy
Solving temporary/
current
Management
Internalization
Organizaiion
Helping others
Short term and partial
l.
solvin6
Comm
improv
Cioic
happer
:.
lIass lv
'Jre puL
d
Finding and solving rod
newsp;
pb
enviror
;onditir
Professional:involvemertd
runctior
Organized, programed
Foundation/Trustfund
Rakhrr
experts
Benefit
The poor
General public
General public and ccrr
Social grant
Development grant
Social or development
r:
-
-
Custom
Recipient
Contribution
-Jre
social involvement
td
Several determinants of CSPare
':ndi{fe:
:igger t
-ompan
:ifer.
2.
:
Govemment Regulation, Regulation can come in many forms, such
barl
nf-luen<
2.4. CSP Determinants
1.
sign
as
1n
Committee
Emplo
emplor
process
Spirit/Principle Religion, Traditioru Norm, ethic and universal law: Self enlighienment anc
wealth redistribution
liation with social orde:
custom
Mission
suppor
r.
Table 2
The Scope of CSR Activities
Description
which
a- 0.6. Soall questions werereliable:
Table
3.
5
CP = Companypc
environment
The result of confirmatory factor analysis
No.
CR = Company
Cronbachalpha Variableindicator Confirmatory
Variable
factor
1.
2.
3.
4.
5.
5.
7.
8.
9.
Corporate Social Performance (CSP)
Corporate Social Responsibility (CSR)
Company Policy (CP)
Company Reputation (CR)
Employee Engagement (EE)
Govemment Regulation (GR)
Community Empowerment (CE)
Customer (CT)
Mass media Pressure (MP)
3.3. Research
0.78
0.86
0.66
0.87
0.77
0.73
0.83
0.73
0.75
Q1_Q5
0.0M
Q6.Q
0.005
0.001
0.000
0.006
0.009
8
Qe-Q11
Q12-Q14
Q15-Q17
Q18-Q20
Q21-Q23
Q24-Q26
q27 -Q29
0.002
0.004
5.
EE
6.
GR = Govemment
= Empioyee En
-
CE = Community
communities
0.003
R,
E
Population and Sample
Thepopulation of thisstudywas 4T9ForeignlnvestrnentCompanies (PMA) operating
in North Sumatera Provinces based on the data of Lrvestrnent and Promotion Agencv
of North Sumatera Province in 2013. Referring to PMA license application in North
Sumatera Province, 2.057 companies have been listed since 1952,but many companies
don't continue their operationand some don't operate at all. Therefore, the research
population was companies which operate normally and actively report to of North
Sumatera Provinceuntil 2013, whichwas4T9 companies. This study didn'tusesample
method but census method, which is using all members of the populafion as samples
to increase response rate.
:
CT = Customer
;
MM = Media Massa
of Corporate socinl Performnnce (CSP) Through Corporate socinl Responslbility... zo17
-iable Operationalization
--:,e operationalization in this study adopted and was adapted from Lichtenstein
. i.2A04), and Peterson (2009 and Smidts et al, (2007). Details on variable
scale are shown in Table 6 below :
Table 6
Variable Measurement Scale
:':sble
Score
Indicator
1. Compliance to regulations
2. Environmental awareness
3. Social contribution to communitlr
4. Reporting of corporate activities
1. Company commitment to CSR
-SR = Colporate Social
::sponsibility
2. CSR budget allocation
3. Activify continuity
4. Types of activity
1. CSR-oriented business strategy
-P = Company Policy
:rvironment
2. CSR policy on external environment
3. CSR policy on internal
CR = Company Reputation 1. CSR program continuation
2. CSR campaign by company
:E = Employee Engagement
1, Employee commitment to support
-i? = Corporate Social
- ::al Performance
CSR program
2.
:
r."
l-:,
-
l'
5
Same as above
1 to
5
Same as above
1 to
5
Same as above
1 to
5
Same as above
1 to
5
Same as above
CSR program
Regulation 1. Urgency of govemment involvement
1to5
2.
Ei
1 to
Treatment to employees
CE = Communitv Empowermer-rt 1.
-::'lmunities
krterval with
lickert scale
score model
2. Government shareholding
3. Government regulations on CSR
L-
5
of the company
). Employee engagement in
GR = Govemment
1 to
Scale
Sponsorship for iocal
Same as above
Community involvement in CSR
activities of the company
CT = Customer
3. Contribution to communities
L. Environmentally friendly products
2. Company's readiness for customer
5
Same as above
MM = Media Massa
3. Customer involvement in CSR program
1. CSR reporting
1 to 5
2. Adveriisements of CSR
3. Institutional cooperation betlveen
Same as above
-
-:-
:
!: a-- :-'
1 to
service
company and mass media association
Azizul Kholis, Ade Fatmn, Azhar Maksum and Rina Bukit
2018
3.5.
Determinants of Cr
Modeling Test by SEM
L4.CICICI.000
The hypotheses of this study r-rsed SEM analysis technique with the following model:
1_2.0so.000
Lo.000-oo0,
8.08s-s00.
6.O08.D00,
4.00s.*o0,r
2.000.000.r
Source:
BpMp) 2013
(r, l-
\::,/-
From 33 reg€r
ities. It's due to in
Figure 3r Modeling by SEM
Overall, Best fit Model criteria in SEM are shown in Table Tbelow
;
Distribr-
Table 7
Criteria of Best Fit Model Test
'"",,,''-',,.",.,.'.-.'.,,.J47',
Description of Goodness of fit index
Cut-0ff'-;.-.
12-Chi-Squarey
x2"
Significance Probability
> 0,05
< 0,08
>_0,90
RMSEA
GFI
AGFI
TLI
>0,90
>0,95
CFI
> 0,95
4.
RESEARCHRESULT
4.1.
Description of PMA Data
The growth of PMA investment in North Sumatera fluctuates in the past five ve.=
both in terms of total projects or total realized fund. However, in 2012 there rvL<
=
increase of values of approved and realized investments. Further details are shor':'. :
figure 4 below
_-:--
= o,o5
..
_l
;
Ir
i;ll I
,"t.r:r-"
"I
Figure
i,
*_:
5
origin countr)
5umatera is as
-in"ants
of Corporate Socinl Paformance (CSP) Through Corporate Social Responsibility... 201,9
14.000.oo0,00
12.008.SSS,00
10.0CIo.0f 0,00
8.900-s00,0s
..{-Persetujuan
5.O00.sflB,os
n&*Realistssi
4.000.*go,os
2.0CI9. fis,0s
2CIOB 20CI9
20LO 201L ?0L2
Figure 4: PMA realization in North Sumatera in 2OO8-2O12
. -. , :
:
BPMP) 2013
:rom 33 regencies/cities in North Sumatera, PMA only operate in 21 regencies/
It's due to investment potential in each region.
-.
Di
of PMA in Regencies/Cities in North Sumatera
I
i
I
"*,-':-.-",'l
5 12 7 _2 1. ,j ;
-r::rlflr
I
I
I
,, o o o 11 11 z o 3 t
" rr
:
Figure 5: Distribution of PMA in North Sumatera Regencies/Cities
By origin country, foreign investors who invest in North Sumatera are seen in the
,
::ih Sumatera is as follows:
Azizul Klto,lis, Ade Fatma, Azhar Maksum and Rina Bukit
202A
'l'
Determirnnts of Cot
The table abc
Graph of Origin Countries of PMA Across North Sumatera
'---r*",'
, { --'ro-,
; I I I i ii ; : i :-i l' :
or 52,76o/" resp
50 years old anc
concluded that tt
67
productive age br
respondents hac
undergraduate e
concluded that m
4t4.Lt4
.I
".-.-.-.1...
a..-.,
I
I
t,LJul.sCirlla*rr..JI
ndexing and Reviews: lndexing and Reviews: listed JEL by American Economic
Assaciation (AEA), lndex Copernicus, SCOPUS, E/seyier's bibliographic
database, CAP lnternatianal and lndian Sciences Abstract.
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Author\ Aindrila Biswas and Mousmi Rov
Volume iNo.t3 (2016) Issue No.:5 (2016)
Pages :1963-1977
FACTORS
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Dr. Srini R. Srinivasan
THE INFLUENCE OF ENTREPRENEURSHTP EDUCATION AND
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ENTREPR.ENEURIAL, EXPNR[ENCE,,,,,
SELFEMPLOY}MNT A CASE OF HEIS N\i DHOFAR REGION IN ONIAN
Author : Zaroungt&min gilul, Samir Marrvan Hammami and Syed:ehsan Jamil
Volume: No.l3 (2016) Issue No.:5 (2016)
Pages: l99l-2003
ShowiFlitlc Abslr:rct
Volume : No.ill@ai6),issue No. :5 (2016)
Pages:2A05-2027
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Shou/Hide Ahstract
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INTERNATIONAL JOURNAL OF ECONOMIG....
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''
" RESEARCH
"
"iiirl
Economiic Reseifch is a peer-reviewed journa[; The IJER providti,"'a
publication
of research, both theoretical and empirical, in various spectra of economics.
forum for the
All fields in economics, including those that combine economics and finance, are welcomed.
fhe'lnlernatioidl lourna[:,gf
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SA,\IIR HA}I}TAI\U
Director of Centre for Enllepreneurship
Depaitment of Management I nformationSy stem s
College of Commerce and Business
Administration, Dholar University,
Salalah; Sultantte of Omad ,i':1,,.,,
.
Editofiql Bosfl
Memhq
.
.
, .--,.r,-Prof Mohammad Alswin
Dept. of tsconomics
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llf.ine rs it11r Of J o rdan.::':.
Arnman, Jordan
l1e,,
Priyono,
..:.:.|:......1;:]:l,'MasterofManagementGraduateProgram,
University of Bina Darma Palembang,
Teddy Ghandra,
STIE Pelita lndonesia,
lndonesia.
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Master of management graduate program,
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VerS-ily O.f;Wi dy a.
lndonesia.
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-
IJER @ Serials Publications
13(5),2076:2005-2027
ISSN:0972-9380
DETERMINANTS OF CORPORATE SOGIAL
PERFORMANGE (CSP) THROUGH GORPORATE
soGrAL RESPONSTBTLTTY (CSR) OF FORETGN
TNVESTMENT COMPANTES (PMA) !N
INDONESIA
Azinil I(h olis*, Ade Fatma Azh ar M aksum and Rin
a B uki
t
Abstract:This researchstudied internal anrl external determinants of CSP, This study was
theory which discttsses the role ofaarious stakeholders in determining
a preoious study zuas
:lu preoious study only tests seoeral oarinbles, whether internal or external ctariables u)hich
:nfluence CSR, while the curr ent study combined many models and was based on stakeholder
-.heory. The study was performed on 127
foreign companies inNorth Sumate-ra Prooince,
lndonesia.The testedoarinbles were internttl factors and externnl relatbns ofCSP through
-SRqs an intmtening aariable.The analysistechnique usedwas StructuralEqtation Model
SEM)withthehelp of Amos softwareoersion 21.The researchresult showed that internal
;nd external determinants of CSR uereCompany Policy (CP), Company Reputation (CR),
:mployee Engagement (EE), Gooernment Regtilation (PP), Community Empowerment,
-..tstomer, and Mass Media (MP) influencedCorporate Social Performance (CSP) through
-orporate Social Responsibility (CSR). The limitation of this study was sarnples were limited
:: foreign imtestment companies, so there might be sample bias in Domestic Inaestment
-onrynnies (PMDN). There utas also dfficulty in collecting dta, causing delay in obserusation
::riod. This study also didn't discuss company financial data, so it couldn't assess the
:nnncittl performance prodtrcedby CSR expenses.The suggestions for future studies are to
,nplement this research on companies listed in Indonesia Stock Exchange, to check the
nplementation of CSR in public companies in Indonesia. This study contributes to
-:gtLlations at local gozternments, so that they can check Corporate Social Performance in
::=ir regions by publishing local regulations on CSR.
based on stakeholder
:he
continuity of a company. The difference between this study and
-:.eyzoords:
internal, external factors, Corporate Social Performance, Company Reptttation
Doctoral Accounting Programme of Faculty of Economic and Business, University of Sumatera Utara
No. 12, USU Campus Medan-North Sumatera - Indonesia. Postal Code 20115.
Corresponding author. E-m.ail: azizul*kholis@y alno, com
Jl. Prof. TM Hanafiah
2006
1.
Azizul Kholis, Ade Fqtma, Azhar Maksum and Rina Bukit
INTRODUCTION
ist
Today, there are two primary problems related to thegoingconcemof
a company, which
are Corporate Financial Performance and Corporate Social Performance (CSP).
Corporate financial performance is still the main purpose of a company as a logical
consequence of a profit oriented-business practice, however along with Financial
Performance, Corporate Social Performance is also a focus in business practice.
Ho'
perl
ben
corl
onl)
Corporate financial performance can be defined clearly and is available in
variousmeasurement instruments, such as Retum on Assets (ROA), Return on
Investmmt (ROI), Stock Price, Sales, and Profit. Currently, corporate performance
measurement is only focused on finances (financial performance). \A/hen a company
successfully reaches high profit level, performance measurement may measure its
success, but doesn't necessarily measure and meet the demands of corporate sociai
performance, especially since financial performance assessment is limited by time,
orimted towardshareholdersbased onAgencyTheory,instead of stakehoiders. To soive
the limits of weaknesses of corpoeate performance measurement system, which is
only focused on financial aspectwithoutpaying any attention to non-financial aspcf
Corporate Social Performance discourse is developed. According to K Chopra (2010)
corporate social performance assessmmt clearly can't be separated from the influences
of internal and external environments of a company. Corporate performance
measurement requires non-financial perspective, such as social perspective and political
perspective, such as government regulation and environment. This is because
accounting practive has become an integral part of political system, creating very close
relations between politics, economy, government, and other factors.
The term Corporate Social Performance (CSP)was first used in the 1970s and
becomes increasinglypopular, especiallysince the publication of CannibalsWithForks :
The Triple Bottom Linein 21st Century Business, by John Ekingtonin 2008. According to
him,CSP develops threeimportantcomponentsforeconomic sustainable development,
i.e. economic growth, environmental protection, and social equity, initiate dby the Worla
Commissianon Enoironment and Dmelopment (WCED). Elkington (2008) also classifies
the purposes of CS Pinto three main orientations, 3P, which is short for profit, planet
and people. Studies on socialperformance continue on. The study of Sadosrky (1991,
7995,2005) describes that corporate social performance is important to prioritize in
the business era today and that social perfonnance demands become more equal to
corporate financial performance. The study of Wokutchand Mc Kinney (2010) also
discusses corporate social performance measurement. Tuodolo (2009) even describs
several social issues faced by companies and variables related to corporate social
performance. Chopra (2010) and Baisakalova (2012) also prove and corporate social
responsibility and performance aren't limited to looking for profit, but also payins
attention to the societp which is the most important part of business. Variou=
dimensions, measurements, methodt and approaches are studied by researchers io
determine corporate social performance, all based on stakeholder theory as its main
foundation.
com
regu
is re
beca
phili
IIs
o
outsi
coml
achie
of rel
activi
with j
lftere
CSP
z
amou
whicr
lpost s
inMal
mgo
.
)-i(
.-- ;
:
'-'
-.::rmirunts of Corporate Social Performance (CSP) Through Corporate Social Responsibility... 2007
;
One of the implementations of CSP is Corporate Social Responsibility (CS&) which
Jre social responsibility of the business sector for the society and environment.
--lwever, a company which performs CSR doesn't necessarily achieve its social
.:cormance, because CSR is only acfivity, while according to Visser (2008) CSP should
,-. more measured. The study by Van Buren (2006) also describes that the influence of
r rrporate social perfonnance on corporate social responsibility and vice versa isn't
. rly the performance of CSR activities. F{owever, Van Bruren (2006) states that
-:,mpanies don't have to report those social activities, unless there is a stock market
:egulation on it. Unlike the experts above, Serafeim (2012) states that social performance
-s reached is there is demand, unlike financial performance which must be reached
:ecause it's the main purpose of a company. Serafeim (2012) argues that CSR
:hilanthropy is a social character which doesn't have to be owned by a business unit.
-:'s only generosity, voluntary and not an obligation, because the demand is created
:,utside of company system. Alternately, Sadorsky (2005) states that CSR is a part of
:ompany strategy to survive and even win business competition. In practice, the
:chievement of CSP is systematic implementation of CSR consistent with the aspects
:f regulation compliance, environmental awareness, social contribution, and social
:ctivity reporting which are forms of a company's awareness to improve its relations
-.r,'ith the society and environment. These are internal and extemal factors. Considering
fiere is difference in the views of the experts on the more appropriate way to measure
CSP and how CSR doesn't necessarily descnbe CSP, it's very relevant to study the
amount of the influence of CSR on CSP. Several past studies describe many factors
rvhich influence CSR. For example, the study by Amranand Devi (2008) mentions at
least six internal factors, which are indicated to influence the implementation of CSR
inMalaysia. The factors are/oreign shareholder, government shareholding, dependence
on Bovemment, dependence on foreign partner, industry, size, andprofitability.
Extemal factors can at least refer to the study by Henrique and Sados rky (1999) on 750
Canadian companies as realization of company managements' perceptions on
stakeholder. Maksum (2003) has tested the variables of Government
Regulation,Community Pressure, Mass Media Pressure. Another study by Stead (1996)
addscustomer variabie, and the study by Turner and Stephenson (1994)
includesenvironmental information variableas a contributing factor which influences
the importance of corporate social responsibility.
,
lmr
0nff
t.
hi:*
[-.lmv'-
f:l
l_-
':
:+:
:::a
--:
.l-
ln Indonesia, there aren't many studies on CSP. Although there are many studies
on CSR, conceptually they don't necessarily describe social performance achievement.
In Indonesia, CSR activities develop positively along with democracy, increasingly
critical society, globalization arrd free market era. However, only a small number of
companies implement CSR. A survey by Supraptoin 2005 on 375 companies inJakarta
showed that 166 or M,25"/o companies didn't perforn any CSR activity ,209 or 55,75o/o
companies performedthe followingCSR activities , family activities (116 companies),
donation to religious institutions (50 companies), donation to social institutions
2008
Azizul Kholis, Ade Fatma, Azhar Maksum and Rina Bukit
Determinn
(39 companies), and community development (4 companies). The survey also showed
that the CSR performed by the companies depends on the managements. Therefore,
the CSR performed by the companies don't necessarily achieve corporate social
performance, as stated by various social researchers, because social performance must
reach four aspects, which are compliance, environmental awareness, social contribution
and social activity reporting. Another negative implication emerges when a CSR
program isn't utilized well by the society.The financial aids received by the society
aren't used for venture capital, but to meet and buy other needs. It proves that CSR
practice in Indonesia doesn't always meet corporate social performance as in other
countries. Ma.y CSR studies in Indonesia focus on companies in Indonesian Stock
Exchange and the interests of capital market and investors on Colporate Financial
Performance. Studies on CSR related to foreign investrnent companies not listed in
Engagem
the stock exchange are rare.
This study was performed in North Sumatera province because this province is
one of the center of economic growth in the westem region. North Sumatera is currently
in corridor II of Master Plan of Indonesian Economic Development Acceleration
(MP3ED. MP3EI is supported by the existence of SeMangkei Special Economic Zone
(KEK) and Kuala Tanjunglndustrial Area and Port as an Intemational Hub Port. KEK
will draw foreign investorsto North Sumatera, so the current PMA should be studied
in terms of CSP and CSR to be beneficial for the government of North Sumatera
province. On the other hand, North Sumatera province is also located in a regional
economic cooperation zone, Indonesia Malaysia Thailand - Growth Triangle (IMTGT), so investment is expected to grow in this region, particularly in the era of ASEAN
Economic Community (MEA). Data of Investrnent and Promotion Agency of North
Sumatera shows that until 201.4, there had been 783 Foreign Investment Companie*.
(PMA) which entered North Sumatera. However, onlyaround 224 companies activelr'
submitted operational activity reports. Based on the background above, the
formulations of the research problem are:
1.
Do Company Policy (CP),Company Reputation (CR), Employee Engagemmi
(EE), Govemment Regulation (GR), Communify Empowerment (CE'
Customer (C), and Mass Media (MM) directly influence Corporate SociaResponsibility (CSR)?
2.
Do Company Policy (CP), Company Reputation (CR), Employee Engagemer'-:
(EE), Government Regulation (GR), Community Empowerment
(CE
Customer (C), and Mass Media (MM) indirectly influence Corporate SociPerformance (CSP) through Corporate Social Responsibility (CSR)
3.
Does Corporate Social Responsibilify (CSR) directly influence Corpora::
Social Performance (CSP)
?
The pulposes of this study were to test and arralyze determinants of corpora=
social performance, i.e. Company Policy (CP), Company Reputation (CR), Emplor -
Custome
Corporal
conceptu
also be z
determin
2.
THE(
2.1. Stake
Stakeholdr
can influe
SUCC€SS dftr
interests
o.
performan
2.2. Corpor
CSPcan be
lis responsir
:nd
genera
,-*.:*-'.:s
0f Corporate Social Perfornnnce (CSP) Through Corporate Social
Responsibility... 2OOg
--=:ent (EE), Govemment Regulation (GR), Community Empowerment (CE),
-:=: (C), and Mass Media (MM) on Corporate Social Responsibility (CSR) and
'* :::e Social Performance (CSP). Academically, this will provide theoretical
:r -il contribution on the implementations of CSP and CSR in Indonesia. It will
:= academic reference for various CSP and CSII studies in Indonesia by
r=::lng the importance of the role of stakeholder in company operations.
-.{ E ORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT
..
::eke Holder Theory
" :-
-
.
,
rlder theory according to Fieeman (1984) means every group or individual which
--luence the achievement of organizational purpose. This theory states that the
and goingcomcernof a companyhighly depends on its ability tobalancevarious
of the stakeholders.Stakeholders which become the focus of corporate social
maximizingbusiness profit.
::rrance achievementhave the main role
=;
-:.-:Lc
--
il
*'
-orporate Social Performance (CSP)
-::anbedefinedas"aconstructionwhichemphasizesthatacompanymustperform
-=-onsibility to various stakeholders, such as employees, environment, mass media,
- : ieneral public, around the company aside from traditional responsibility to
STAKEHOLDER MODEL
L. '-:*
htlE
fr\
q9
-_--,_-j-:
-'.^.^r ^- -- -
Figure 1: Stakeholder model, Visser (2008)
Azizul Kholis, Ade Fatma, Azhar Maksum and Rina Bukit
2010
Determinnnts q
economic shareholders, to achieve its social performance" (Turban and Greening7996,
p.658). According to Viser (2008), CSP at least includes four things, which are
1. compliance to companyintemal and extemal
2. environmentalawareness,
3. company social contribution,
4.
regulations,
social activity reporting.
it is concluded that Corporate
Based on Visser's (2008) argument,
Social
Performance (CSP) assessmentprimarily depends on policies related to managemmt
practices consistent with intemal and external demands and achievement consistent
with stakeholders' demands. According to Maon (2013), there are at least 4 things
which trigger CSP. They are shown in Table 1 below:
2.3. Corporate Social
Responsibility (CSR)
CSR is a business commitment to play a role in economic developmant which can
work with the employees and their representatives, local communities and general
public to improve quality of life in ways which are good for the business and
development. CSR development in developing countries is studied by Visser (2008)
and can be seen in CSRpyramid in Figure 2 below :
The definition of CSR according to Lrtemational Finance Corporation (IFC),2000:
"The commifunent of the business world to contribute to economic sustainabie developmen:
through cooperation with employees, their families, local communities and general public
"
to improve their livelihoods in ways which are good for the business and development.
ISO 26000, in Guidance on Socinl Responsibility, defines CSR as:
" An organtzation's responsibility for the impacts of its decisions and activities on th:
society and environment, which is realized through transparent and ethical behaviors h
Table
CSP
Driver
Economic driaer
1.
2.
Competitive advantage
Shareholders' demand
union
3. Company image and reputation development
4. Management risk minimization
Political driaer
1
Social
drioer
Community and NGO pressures
2. Pressure from trade association and labor
1.
3. Following customer trend
Indiztidual drioer
1. Ethic-orientation of Top Management
Legal policy and government reguiation
frameworks
Individual value of employees and manage2. Pressure from govemment at local and national
personally
levels
1.
Sonrce:
Yisser (2008)
Iine with sus
stakeholders,
integration
I
Lr the Law
t
the Law of Limit
defined as:
"Responsibil
harmonious, r
local commun
kr the text of
However,inther
zrd environmeni
participate in ecc
arv-ironmentwhi
others. PKBLprc
Corrmunity Der,
ahrpriseempow
fulled Parkrershj
bcal communitie
LK releases Decis
hrersandpublic
fiapepam No.3l
L-
DetennirnnisafCorporateSocialPeformance(CSP)ThroughCorporuteSocialResponsibility...20ll
],
Adgpt vsluntary q&des
ol gwemrnat1 and ethlcs
Le{ral
Responsibilitiac
Ui
Enr*r 9@d ral€tlan
dt?t Edva.nmcni
otficlsl$
scl $sido lund$ ror
corporBt€ socl€l /
cffinJrrnlty pr6lcct
llf
mr
fir
P
Eeono*nir
RasponSlbilllies
Prowld6
lhvo*lm6nl,
dfc$le
Jobt, $nd p6y tbxea
Figure 2: C-SR Pltamid for Developing Countr:ies
u
tpl
i:
rf,
h
t
iSource: Visser, 2008)
line with sustainable development andpublic welfare, by considering the expectations of
stakeholders, consistent with laws and international behavioral norms in effect, and in
integration with the organization as a whole."
In the Law of Capital Market, which is used as a reference for CSR obligation in
the Law of Limited Liability Company, in the explanation of Article 15 letter b, CSR is
defined
as:
"Responsibility attached to every company to keep creating relations which are
harmonious, equal,and consistent with the environmen! values, norrns, and cuiture of
local communities."
n
I
ti
In the text of Article 74 of Law of Limited Liability Company, CSR isn,t defineci.
However, intheworkdocrrtnen\ot\\reEorrnrr\atrngT
., there is a detinitr,on. "social
"at Coml,asr\ed cssislbrse*\s
asrd.errrirorrscren\a\responsl\o\\\resartd.L\rNte&LialoN\
parhcrpate m economic sustainable development to improve the quality of life and
envirorunent which is beneficial, for the Limited Liability Companies themselves and
others, PKBlprogram(Pafinership Programof 50Es with Small Enferprises and
Community Development Program) consists of two activities, which are small
enterprise empowerment program by lending revolving fund and providing assistance
(called Partnership Program) and empowerment program for the social condition of
iocal communities (called Community Development Program). Recently, Bapepam
LK releases Decision No. i34lBL /2006 on Obligation to Submit Annual Reports for
Issuers and Public Companies. Compared with the previous reguJation (Decision Letter
ofBapepam No. 38/PM /1996), the amotrnt of information which must be revealed,
lfuBafCorporateSocialPerformance(CSP)ThroughCorporateSocialResponsibility...20l.l
Ehlcr.l
Adopt volunl*ry codes
ql gBermfft ard ethlcs
Respmsibililiet
Lecral
Rsspmsibilitas
Efirurn toad rslallan
wlttr gowarnmont
orrlclrrle
Sal eside lund3 i6f
corporst€
eoclEl /
qomnlr.rnlty
Frgrcal
Econo*ic
Rsspofislbllltio$
Ffovlrr6
lhvsil6dhl,
cle..ld
Jo})s, *nd pav lsxee
Figure 2: CSR Pyramid for Developing Countries
-
'.':sser, 2008)
-,r-ith sustainable development andpublic welfarg by considering the expectations of
ieholders, consistent with laws and internationai behavioral norms in effect, and in
-:.+ation with the organization as a whole."
-
-
=
,:
-ne Law of Capital Market, which is used as a reference for CSR obligation in
--:-,',' of Limited Liability Company, in the explanation of Article 15 letter b, CSR is
,-:l
as:
?esponsibility attached io every company to keep creating relations which are
--:monious, equal,and consistent with the environment, values, norns, and culture of
-;al communities."
Article 74 of Law of Limited Liability C-ompany, CSR isn't defined.
':r'er, in the work document of the FormulatingTeam, there is a definition. "Social
-r. ihe text of
-
: xvirorunental responsibilities and Limited Liability Companies'commitrnent to
-::ipate in economic srrstainable development to improve the quality of life and
' ::crunent which is beneficial, for the Limited Liability Cornpanies themselves and
-:rs. PKBlprogram(Partnership Programof SOEs with Smali Enterprises and
. ,:nmunity Development Program) consists of two activities, which are small
, :erprise empowerment program by lending revolving fund and providing assistance
-=iled Partnership Program) and empowernent program for the social condition of
.-al communities (called Community Development Program). Recently, Bapepam
-r,. releases Decision No. 134/BL /2006 on Obligation to Submit Annual Reports for
. >rers and Public Companies. Clompared with the previous reguJation (Decision Letter
Sapepam No. 3BIPM /199b), the amount of information which must be revealed,
-
Azizul Kholis, Ade Fatma, Azhar Maksum and Rr,-:
-::-trnitwnts of
especially related to Corporate Govemance practice, is higher. In2A07, the
Representatives also authorized Law No. 40 of 20A7 on Limited Liability C
Article 74 of the law requires companies to describe their activities and expen-ce:
related to corporate social responsibility to the society and environment. Trlead to more information of a company's activities which must be revealec
company's annual report, including revealing CSR.
Deterr
2012
satisfa
Sispro
equipr
structL
_1. Compi
Another regulation on CSR is Law No. 25 of 2007 on hrvestment. Article ,:
states that "Every investrnent must perforrn corporate social responsibili!,/'.
this law has regulated in detail sanctions for business entities or limited
companies which ignore CSR (Article 34), the law is only able to regulate :::=.
investors and hasn't dearly regulated CSR for national companies. Generally, tI-.=
of CSR activities are shown in Tabie 2. below :
Charity
Philanthropy
Solving temporary/
current
Management
Internalization
Organizaiion
Helping others
Short term and partial
l.
solvin6
Comm
improv
Cioic
happer
:.
lIass lv
'Jre puL
d
Finding and solving rod
newsp;
pb
enviror
;onditir
Professional:involvemertd
runctior
Organized, programed
Foundation/Trustfund
Rakhrr
experts
Benefit
The poor
General public
General public and ccrr
Social grant
Development grant
Social or development
r:
-
-
Custom
Recipient
Contribution
-Jre
social involvement
td
Several determinants of CSPare
':ndi{fe:
:igger t
-ompan
:ifer.
2.
:
Govemment Regulation, Regulation can come in many forms, such
barl
nf-luen<
2.4. CSP Determinants
1.
sign
as
1n
Committee
Emplo
emplor
process
Spirit/Principle Religion, Traditioru Norm, ethic and universal law: Self enlighienment anc
wealth redistribution
liation with social orde:
custom
Mission
suppor
r.
Table 2
The Scope of CSR Activities
Description
which
a- 0.6. Soall questions werereliable:
Table
3.
5
CP = Companypc
environment
The result of confirmatory factor analysis
No.
CR = Company
Cronbachalpha Variableindicator Confirmatory
Variable
factor
1.
2.
3.
4.
5.
5.
7.
8.
9.
Corporate Social Performance (CSP)
Corporate Social Responsibility (CSR)
Company Policy (CP)
Company Reputation (CR)
Employee Engagement (EE)
Govemment Regulation (GR)
Community Empowerment (CE)
Customer (CT)
Mass media Pressure (MP)
3.3. Research
0.78
0.86
0.66
0.87
0.77
0.73
0.83
0.73
0.75
Q1_Q5
0.0M
Q6.Q
0.005
0.001
0.000
0.006
0.009
8
Qe-Q11
Q12-Q14
Q15-Q17
Q18-Q20
Q21-Q23
Q24-Q26
q27 -Q29
0.002
0.004
5.
EE
6.
GR = Govemment
= Empioyee En
-
CE = Community
communities
0.003
R,
E
Population and Sample
Thepopulation of thisstudywas 4T9ForeignlnvestrnentCompanies (PMA) operating
in North Sumatera Provinces based on the data of Lrvestrnent and Promotion Agencv
of North Sumatera Province in 2013. Referring to PMA license application in North
Sumatera Province, 2.057 companies have been listed since 1952,but many companies
don't continue their operationand some don't operate at all. Therefore, the research
population was companies which operate normally and actively report to of North
Sumatera Provinceuntil 2013, whichwas4T9 companies. This study didn'tusesample
method but census method, which is using all members of the populafion as samples
to increase response rate.
:
CT = Customer
;
MM = Media Massa
of Corporate socinl Performnnce (CSP) Through Corporate socinl Responslbility... zo17
-iable Operationalization
--:,e operationalization in this study adopted and was adapted from Lichtenstein
. i.2A04), and Peterson (2009 and Smidts et al, (2007). Details on variable
scale are shown in Table 6 below :
Table 6
Variable Measurement Scale
:':sble
Score
Indicator
1. Compliance to regulations
2. Environmental awareness
3. Social contribution to communitlr
4. Reporting of corporate activities
1. Company commitment to CSR
-SR = Colporate Social
::sponsibility
2. CSR budget allocation
3. Activify continuity
4. Types of activity
1. CSR-oriented business strategy
-P = Company Policy
:rvironment
2. CSR policy on external environment
3. CSR policy on internal
CR = Company Reputation 1. CSR program continuation
2. CSR campaign by company
:E = Employee Engagement
1, Employee commitment to support
-i? = Corporate Social
- ::al Performance
CSR program
2.
:
r."
l-:,
-
l'
5
Same as above
1 to
5
Same as above
1 to
5
Same as above
1 to
5
Same as above
1 to
5
Same as above
CSR program
Regulation 1. Urgency of govemment involvement
1to5
2.
Ei
1 to
Treatment to employees
CE = Communitv Empowermer-rt 1.
-::'lmunities
krterval with
lickert scale
score model
2. Government shareholding
3. Government regulations on CSR
L-
5
of the company
). Employee engagement in
GR = Govemment
1 to
Scale
Sponsorship for iocal
Same as above
Community involvement in CSR
activities of the company
CT = Customer
3. Contribution to communities
L. Environmentally friendly products
2. Company's readiness for customer
5
Same as above
MM = Media Massa
3. Customer involvement in CSR program
1. CSR reporting
1 to 5
2. Adveriisements of CSR
3. Institutional cooperation betlveen
Same as above
-
-:-
:
!: a-- :-'
1 to
service
company and mass media association
Azizul Kholis, Ade Fatmn, Azhar Maksum and Rina Bukit
2018
3.5.
Determinants of Cr
Modeling Test by SEM
L4.CICICI.000
The hypotheses of this study r-rsed SEM analysis technique with the following model:
1_2.0so.000
Lo.000-oo0,
8.08s-s00.
6.O08.D00,
4.00s.*o0,r
2.000.000.r
Source:
BpMp) 2013
(r, l-
\::,/-
From 33 reg€r
ities. It's due to in
Figure 3r Modeling by SEM
Overall, Best fit Model criteria in SEM are shown in Table Tbelow
;
Distribr-
Table 7
Criteria of Best Fit Model Test
'"",,,''-',,.",.,.'.-.'.,,.J47',
Description of Goodness of fit index
Cut-0ff'-;.-.
12-Chi-Squarey
x2"
Significance Probability
> 0,05
< 0,08
>_0,90
RMSEA
GFI
AGFI
TLI
>0,90
>0,95
CFI
> 0,95
4.
RESEARCHRESULT
4.1.
Description of PMA Data
The growth of PMA investment in North Sumatera fluctuates in the past five ve.=
both in terms of total projects or total realized fund. However, in 2012 there rvL<
=
increase of values of approved and realized investments. Further details are shor':'. :
figure 4 below
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= o,o5
..
_l
;
Ir
i;ll I
,"t.r:r-"
"I
Figure
i,
*_:
5
origin countr)
5umatera is as
-in"ants
of Corporate Socinl Paformance (CSP) Through Corporate Social Responsibility... 201,9
14.000.oo0,00
12.008.SSS,00
10.0CIo.0f 0,00
8.900-s00,0s
..{-Persetujuan
5.O00.sflB,os
n&*Realistssi
4.000.*go,os
2.0CI9. fis,0s
2CIOB 20CI9
20LO 201L ?0L2
Figure 4: PMA realization in North Sumatera in 2OO8-2O12
. -. , :
:
BPMP) 2013
:rom 33 regencies/cities in North Sumatera, PMA only operate in 21 regencies/
It's due to investment potential in each region.
-.
Di
of PMA in Regencies/Cities in North Sumatera
I
i
I
"*,-':-.-",'l
5 12 7 _2 1. ,j ;
-r::rlflr
I
I
I
,, o o o 11 11 z o 3 t
" rr
:
Figure 5: Distribution of PMA in North Sumatera Regencies/Cities
By origin country, foreign investors who invest in North Sumatera are seen in the
,
::ih Sumatera is as follows:
Azizul Klto,lis, Ade Fatma, Azhar Maksum and Rina Bukit
202A
'l'
Determirnnts of Cot
The table abc
Graph of Origin Countries of PMA Across North Sumatera
'---r*",'
, { --'ro-,
; I I I i ii ; : i :-i l' :
or 52,76o/" resp
50 years old anc
concluded that tt
67
productive age br
respondents hac
undergraduate e
concluded that m
4t4.Lt4
.I
".-.-.-.1...
a..-.,