Corporate Social Responsibility in Moderating The Influence of Profitability and Firm Size on Firm Value in The Banking Sector

Abstract

The value of a firm is crucial for both investors and companies. investors consider that a rise in the firm's value can offer a favorable signal for their investment choices. Based on data from IDX Statistics in recent years, the value of companies in the banking sector, as seen from the PER indicator, shows a downward trend. This situation may occur due to the influence of several factors that impact the decline in the firm’s value. This research seeks to elucidate how firm size and profitability influence firm value, using corporate social responsibility (CSR) as a moderating factor. The firm's value is indicated by the price-earnings ratio (PER), profitability is assessed using the return on assets (ROA) ratio, and firm size in this research is evaluated based on the growth of the company's assets. CSR disclosure is one of the company's efforts to legitimize itself and demonstrate its responsibility towards people, communities, and the environment. This study focused on banking sector companies listed on the Indonesia Stock Exchange from 2015 to 2022. A sample of 39 companies was selected through the saturated sampling method. This analysis was performed using dynamic panel data with the System GMM approach. The study's findings indicate that both profitability and firm size positively and significantly impact firm value. Additionally, CSR as a moderating variable strengthen the effect of firm size on firm value. CSR as a moderating variable weakens the relationship between profitability and firm value. Companies, especially bank management, are expected to pay attention to planning CSR strategies that align with their capabilities and implement targeted strategies.

KEYWORDS: Firm Value, Profitability, Firm SIze, Corporate Social Responsibility

DOI: 10.7176/EJBM/16-6-02

Publication date: July 30th 2024