The Effect of Corporate Governance, Political Connection, and Executive Power on Corporate Social Responsibility Performance

Richo Diana Aviyanti; Nik Amah; Dwi Nila Andriani; Pramesti Widiastuti

doi:10.32486/aksi.v7i2.308

Authors

Richo Diana Aviyanti Universitas PGRI Madiun
Nik Amah
Dwi Nila Andriani
Pramesti Wahyu Widiastuti Universitas PGRI Madiun

DOI:

https://doi.org/10.32486/aksi.v7i2.308

Keywords:

Accounting Peformance, Company existence, company power, and Corporate Social Responsibility.

Abstract

CSR is a form of sustainability activity that must be a concern for the company because it poses a risk to existence. This study aims to determine the effect of governance, political connections, and executive power on CSR performance. The research uses a quantitative approach with a positivism paradigm. The research population is all issuers of the manufacturing sector listed on the Indonesia Stock Exchange during the 2017-2021 period. The research sample was 89 companies with 445 observations. Data were analyzed using multiple regression. The results show that corporate governance has a positive effect on CSR performance, whereas executive power has a negative effect on CSR performance. The political connection does not affect CSR performance. This research confirms stakeholder theory, legitimacy theory, and agency theory. The study results are also useful for investors/creditors in making investment decisions in companies, and top management can adopt CSR strategies that affect sustainability. This study uses a more comprehensive measurement variable.

References

Armour, J., Hansmann, H., & Kraakman, R. (2009). Agency Problems, Legal Strategies, and Enforcement.

Castillo-Merino, D., & Rodríguez-Pérez, G. (2021). The Effects of Legal Origin and Corporate Governance on Financial Firms’ Sustainability Performance. Sustainability, 13, 1–20.

Deegan, C. (2014). Financial Accounting Theory (4th editio). McGraw-Hill Education Pty Ltd.

Fajriyanti, N., Sukoharsono, E. G., & Adib, N. (2021). Examining the effect of diversification, corporate governance and intellectual capital on sustainability performance. International Journal of Research in Business and Social Science, 10(2), 12–20.

Giannarakis, G., Andronikidis, A., & Sariannidis, N. (2020). Determinants of environmental disclosure: investigating new and conventional corporate governance characteristics. Annals of Operations Research, 294, 87–105.

Gomes, R. C. (2006). Stakeholder Management in the Local Government Decision-Making Area: Evidences from a Triangulation Study with the English Local Government. Brazilian Administration Review, 3(1), 46–63.

Habib, A., Muhammadi, A. H., & Jiang, H. (2017). Political Connections and Related Party Transactions: Evidence from Indonesia. The International Journal of Accounting, 52(1), 45–63.

Hu, M., & Loh, L. (2018). Board Governance and Sustainability Disclosure: A Cross-Sectional Study of Singapore-Listed Companies. Sustainability, 10(2578), 1–14.

Hung, M., Kim, Y., & Li, S. (2018). Political connections and voluntary disclosure: Evidence from around the world. Journal of International Business Studies, 49(3), 272–302.

Ikhsan, A., Nurlaila, Suprasto, H. B., & Batubara, F. (2021). Determinant of The Corporate Social Responsibility Disclosure: Evidence of Indonesian Manufacturing Companies. Jurnal Ilmiah Akuntansi Dan Bisnis, 16(1), 71‐83.

Intakhiya, D. M., Santoso, U. P., & Mutiarin, D. (2021). Strategi Dalam Penanganan Kasus Lumpur Lapindo Pada Masyarakat Terdampak Lumpur Lapindo Porong-Sidoarjo Jawa Timur. Jurnal MODERAT, 7(3), 565–585.

Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305–360. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=12243301&site=ehost-live

Jo, H., & Harjoto, M. A. (2011). Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility. Journal of Business Ethics, 103, 351–383.

Kim, I. J., Eppler-Kim, J., Kim, W. S., & Byun, S. J. (2010). Foreign investors and corporate governance in Korea. Pacific-Basin Finance Journal, 18(4), 390–402.

Kontan.co.id. (2018). Indo Tambangraya pastikan aktivitas anak usahanya tak terganggu. Kontan.Co.Id. https://industri.kontan.co.id/news/indo-tambangraya-pastikan-aktivitas-anak-usahanya-tak-terganggu

Liana, S. (2019). Pengaruh Profitabilitas, Leverage, Ukuran Perusahaan , dan Dewan Komisaris Independen terhadap Pengungkapan Sustainability Report. Jurnal Ekonomi & Ekonomi Syariah, 2(2), 199–208.

Maharani, W. P., & Utami, E. R. (2019). Pengaruh Kepemilikan Institusional Terhadap Kompensasi Eksekutif yang Dimediasi oleh Kinerja Perusahaan. Jurnal Reviu Akuntansi Dan Keuangan, 9(1), 85–96.

Martínez, M. C. P., & Gallego-Álvarez, I. (2021). The Role of CEO Power on CSR Reporting: The Moderating Effect of Linking CEO Compensation to Shareholder Return. Sustainability, 13(3197), 1–21.

Merkusiwati, N. K. L. A., & Damayanthi, I. G. A. E. (2019). Pengaruh Pengungkapan CSR, Karakter Eksekutif, Profitabilitas, Dan Investasi Aktiva Tetap Terhadap Penghindaran Pajak. E-Jurnal Akuntansi, 29(2), 833–853.

Muliwati, A. R., & Hariyati. (2021). Pengaruh Koneksi Politik dan Media Exposure Terhadap Pengungkapan Tanggung Jawab Sosial. Jurnal Akuntansi & Ekonomika, 11(2), 72–81.

Muttakin, M. B., & Khan, A. (2014). Determinants of corporate social disclosure: Empirical evidence from Bangladesh. Advances in Accounting, 30(1), 168–175.

Muttakin, M. B., Khan, A., & Mihret, D. G. (2018). The Effect of Board Capital and CEO Power on Corporate Social Responsibility Disclosures. Journal of Business Ethics, 150, 41–56.

Nguyen, A. H., & Nguyen, L. H. (2020). Determinants of Sustainability Disclosure: Empirical Evidence from Vietnam. Journal of Asian Finance, Economics and Business, 7(6), 73–84.

OECD. (2015). Glosarry of Statistical Terms: Corporate Governance. https://ec.europa.eu/eurostat/ramon/coded_files/OECD_glossary_stat_terms.pdf

Ong, T., & Djajadikerta, H. G. (2018). Corporate governance and sustainability reporting in the Australian resources industry: an empirical analysis. Social Responsibility Journal, 16(1), 1–14.

Porter, M. E., & Kramer, M. R. (2006). Strategy & society. Harvard Business Review, 84(12), 78–92.

Rachmawati, A., Roekhudin, & Prastiwi, A. (2021). Effect Of Ownership Structures And Ceo Power To Csr Performance Moderated By Profitability. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(2), 519–533.

Rahman, I. M. A., & Ismail, K. N. I. K. (2016). The effects of political connection on corporate social responsibility disclosure – evidence from listed companies in Malaysia. International Journal of Business and Management Invention, 5(2), 16–21.

Rashid, A., Shams, S., Bose, S., & Khan, H. (2020). CEO power and corporate social responsibility (CSR) disclosure: does stakeholder influence matter? Managerial Auditing Journal, 35(9), 1279–1312.

Sahut, J.-M., Peris-Ortiz, M., & Teulon, F. (2019). Corporate social responsibility and governance. Journal of Management and Governance, 23(4), 901–912.

Saraswati, E., Sagitaputri, A., & Rahadian, Y. (2020). Political Connections and CSR Disclosures in Indonesia. Journal of Asian Finance, Economics and Business, 17(11), 1097–1104.

Scott, W. R. (2015). Financial accounting theory. Prentice Hall Canada. https://doi.org/10.1016/j.jbiomech.2013.09.028

Setiani, M. A., & Sinaga, I. (2021). Penentuan Pengungkapan Sustainability Report dengan GRI Standar pada Sektor Non-Keuangan. Jurnal Gentiaras Manajemen Dan Akuntasi, 13(1), 23–35.

Setyastrini, N. L. P., Subekti, I., & Prastiwi, A. (2021). Corporate Governance and Political Connection towards the Tax Aggressiveness of Manufacturing Companies in Indonesia. International Research Journal of Management, IT & Social Sciences, 8(1), 102–109.

Sulistyawati, A. I., & Qadriatin, A. (2018). Pengungkapan Sustainability Report dan Faktor-Faktor yang Mempengaruhinya. Majalah Ilmiah Solusi, 16(4), 1–22.

Sulistyowati, N., & Prabowo, T. J. W. (2020). Pengaruh Koneksi Politik Terhadap Kinerja Lingkungan dan Profitabilitas. Diponegoro Journal Of Accounting, 9(3), 1–15.

Supatmi, Sutrisno, T., Saraswati, E., & Purnomosidhi, B. (2019). he Effect of Related Party Transactions on Firm Performance: The Moderating Role of Political Connection in Indonesian Banking. Usiness: Theory and Practice, 20, 81–92.

Suprobo, F. P., & Setiadarma, E. (2017). Sustainability Report dan Tata Kelola: Influencers dalam Kinerja Perusahaan Property & Konstruksi. Seminar Nasional Ilmu Terapan (SNITER), 1(1).

Sutrisno, T., Saraswati, E., & Purnomosidhi, B. (2019). The effect of related party transactions on firm performance: The moderating role of political connection in indonesian banking. Business: Theory and Practice, 20, 81–92.

Taghian, M., Polonsky, M., & D’Souza, C. (2015). A stakeholder approach to corporate social responsibility, reputation and business performance. Social Responsibility Journal, 11(2), 340–363.

Tao, Q., Sun, Y., Zhu, Y., & Yang, X. (2017). Political Connections and Government Subsidies: Evidence from Financially Distressed Firms in China. Emerging Markets Finance and Trade, 53(8), 1854–1868.

Triyani, A., Setyahuni, S. W., & Kiryanto. (2020). The Effect Of Environmental, Social and Governance (ESG) Disclosure on Firm Performance: The Role of Ceo Tenure. Jurnal Reviu Akuntansi Dan Keuangan, 10(2), 261–270.

Wardah, A. M., & Nugrahaningsih, P. (2020). Analisis Pengaruh Koneksi Politik dan Corporate Governance Terhadap Pengungkapan Corporate Social Responsibility (CSR) Industri Perbankan Indonesia. Jurnal Akuntansi Dan Manajemen Mutiara Madani, 8(2), 134–156.

Yip, E., Staden, C. Van, & Cahan, S. (2011). Corporate Social Responsibility Reporting and Earnings Management: The Role of Political Costs. Australasian Accounting Business and Finance Journal, 5(3), 17–34.