THE EFFECT OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON FINANCIAL PERFORMANCE

Abstract

Abstract – This study discusses the effect of Corporate Social Responsibility (CSR) on the company’s financial performance. There are three studies conducted on pharmaceutical, telecommunications, and coal mining companies. The result of the study show differences in influence of CSR on financial performance. Research on pharmaceutical companies shows that CSR has no significant effect on Return on Assets (ROA) and Return on Equity (ROE). Meanwhile, research on telecommunications companies show that CSR has a positive effect on financial performance. However, research on coal mining companies shows that CSR has no significant effect on ROA. In this study, CSR is explained as a company’s effort to account for its business activities ethically to meet the needs of internal and external shareholders and surrounding environment so as not to cause harm to society. Nonetheless, the implementation of CSR can provide benefits for companies, such as improved corporate image, access to financial resources, risk management, innovation, and operational efficiency.

 Keywords: Corporate Social Responsibility, Return on Assets, Return on Equity