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Saturday September 21st 2019

The Impact of Good Corporate Governance on The Corporate Social Responsibility Disclosure

Salis Musta Ani
salismusta@yahoo.co.id

Dwi Martani
dwimartani@yahoo.com

Luluk Widyawati
widyawati.luluk@gmail.com

Abstract

The study examines the effect of corporate governance on the disclosure of Corporate Social Responsibility. This study uses Corporate Social Disclosure Index (CSDI) with reference to the Global Report Initiative (GRI) Index and the index based on disclosures made by ASTRA which is considered as a benchmark for CSR disclosure in Indonesia. Control variables used in this study are the size of the company, leverage, and profitability to represent the political hypothesis, debt covenants, and bonuses. The sample is 108 non-financial companies listed on the Jakarta Stock Exchange (JSE) in 2004 to 2005. Data is collected from company annual reports obtained from the JSE website, Indonesia capital market directory, and JSE reference center. The analysis is done using regression testing with panel data analysis.

The result shows that the Corporate Governance Index (CGI) has a significant positive correlation to both the CSDI GRI and CSDI ASTRA. This result verifies that the paradigm which emerged in a variety of discourses about the correlation of Corporate Governance and CSR Disclosure is proven in empirical research. It also provides broad opportunities for GRI to develop and become a useful guide in Indonesia. The result is supported by a significant increase in CSDI GRI between 2004 and 2005. However, the small average of CSDI ASTRA suggests that CSR disclosures have not received priority in corporate disclosure by companies in Indonesia so that transparency regulations did not be well implemented.

The result of this study supports the research by Khomsiyah (2003) who found relationship between corporate governance and disclosure. Moreover, this study supports research by Haniffa and Cooke (2005), Sembiring (2005), Chapple and Ucbasaran (Working Paper, University of Nottingham), and Sayekti (2006) who found a significant positive relationship between some governance proxy with CSR disclosures. The only significant control variable is company size, while profitability and leverage are not significant.

Keyword: Corporate Social Responsibility, CSR, Corporate Governance, GRI

Dipresentasikan pada 23rd Asian-Pacific Conference on International Accounting Issues, Di Beijing – China, 16 – 19 Oktober 2011, Penyelenggara: Craig School of Business. The Impact of Good Corporate…

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