Abstract
This research aims to explore the long-term benefit of the consistent implementation of CSR activities in creating sustainable value for shareholders, based on the argumentation of a sustainability approach. The measurement of sustainable shareholder value uses an accounting-based and market-based approach. Since the benefit of CSR cannot be expected in the short-term but in the longer-term, this study requires that the companies should have implemented CSR for at least five years to be included in this research sample. These results support the argumentation of sustainability in which CSR has a positive association with the sustainable shareholder value using both accounting-based and market-based measurement. In addition, this research also uncovers that there is a difference association model of CSR and sustainable shareholder value between firms that have high social and environmental risk (high-profile companies) and firms that have low social and environmental risk (low-profile companies).
Highlights
In the past three decades, studies and concerns on Corporate Social Responsibility (CSR) have grown noticeably
Data Collection Using panel data on 214 public companies listed on the Indonesian Stock Exchange (IDX) over the period 2007-2012, this study aims to examine the introduction of mandatory CSR on Indonesia companies
The results show that CSRI at large and small companies are significantly different at a significance level of 0.1
Summary
In the past three decades, studies and concerns on Corporate Social Responsibility (CSR) have grown noticeably. Despite the increasing attention from various parties, it is still contested whether corporations should take social responsibility beyond wealth generating functions and serving shareholder interest. According to Shareholder Value Theory, the primary function of the company is to maximize shareholder value (Friedman, 1970; Griffin and Mahon, 1997). Bansal, 2005; Griffin and Mahon, 1997; Carroll and Shabana, 2010; Slater, 2000) argue that corporate social responsibility will diminish shareholder value since CSR activities increase cost and provide benefit to the shareholders. Stakeholder Theory, on the other hand, suggests that the purpose of a business is to create value for different stakeholders, including customers, suppliers, employees, communities and shareholders (Donaldson and Preston, 1995; Pirsch et al, 2007; Whelan and Pink, 2016). Companies that keep the interests of the stakeholders aligned are more likely to create value and be sustainable over time (Pirsch et al, 2007; Roberts, 1992; Steurer et al, 2005)
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