CORPORATE SOCIAL RESPONSIBILITY AND FIRM VALUE – EVIDENCE FROM LQ45 FIRMS
DOI:
https://doi.org/10.30998/e8q1y275Keywords:
Corporate Social Responsibility, Financial Performance, Firm Value, LQ45 Index, Panel Data Path AnalysisAbstract
Corporate Social Responsibility (CSR) has emerged as a cornerstone of sustainable corporate strategy; however, empirical consensus regarding its impact on firm value remains elusive. Extant literature often relies on subjective CSR ratings or content analysis, which may fail to capture the economic reality of corporate commitments. This study addresses this research gap by utilizing actual annual CSR expenditure as a more precise, objective proxy for corporate engagement. Employing a quantitative research design with Panel Data Path Analysis, we examined 95 firm-year observations from companies listed in the LQ45 Index on the Indonesia Stock Exchange between 2019 and 2023. Our results reveal that CSR expenditure exerts a significant positive effect on Return on Equity (ROE), underscoring its efficacy as a strategic driver for operational competitiveness and stakeholder relationship management. Furthermore, while ROE positively impacts stock prices—consistent with the Efficient Market Hypothesis—we find no evidence of a direct or indirect link between CSR expenditure and stock market valuation. These findings suggest that while CSR serves as a robust internal mechanism for enhancing financial performance, it may not yet be perceived by investors as a primary signal for short-term capital market valuation.
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