The Mechanism of Corporate Social Responsibility on Financial Performance in Indonesia in The Basic Materials and Chemical Industry in Indonesia

Abstract

This study aims to analyze the mechanism of corporate responsibility for financial performance in the basic and chemical industries in Indonesia from 2016 to 2020. Independent variable of corporate social responsibility; the dependent variable is financial performance with 3 variables namely net profit margin, return on assets and return on equity. for this study the authors also add mediating variables and control variables, there are 2 mediating variables namely economic development and industrial competition, regarding control variables namely Sales Sales, Earnings Per Share and the last is Earnings Before Interest and Taxes. This study took data on basic and chemical industry companies that had carried out corporate social responsibility on the Indonesia Stock Exchange from 2016 to 2020. The selection of research samples was based on a purposive sampling method. The population used in this study is all sectors of basic industry and chemicals listed on the Indonesia Stock Exchange (Indonesia Stock Exchange or IDX), with a total of 75 companies. Through empirical analysis, we can understand that Corporate Social Responsibility can have a positive impact on financial performance, and we can also understand that GDP and market share have a significant role in driving Corporate Social Responsibility on financial performance. The effect of Corporate Social Responsibility mediation on financial performance is more significant. Finally, Operating Income, Earnings Per Share, and Sales Revenue are not significant enough as control variables for financial performance.