Companies should prioritize social performance

Oct 13, 2025 by vinooalluri.com 56 views

Introduction

In recent years, the importance of Corporate Social Performance (CSP) has gained significant attention from various stakeholders, including investors, governments, and the general public. This study aims to analyze the differences in social performance between state-owned companies (BUMN) and private companies (BUMS) listed on the Indonesia Stock Exchange. Additionally, this study seeks to examine the relationship between corporate social performance and company financial performance, considering company size and institutional ownership as control variables.

Background

The increasing focus on CSP is driven by the recognition that companies have a significant impact on society and the environment. As a result, companies are expected to not only generate profits but also contribute to the well-being of their stakeholders and the community at large. In Indonesia, the government has been promoting the development of state-owned companies (BUMN) to play a more significant role in the country's economic growth and development.

Methodology

This study included BUMN and BUMS companies listed on the Indonesia Stock Exchange during the period 2006 to 2008. Using the Purposive Sampling Method, 273 companies were sampled, consisting of 33 state-owned companies and 240 private companies. Corporate social performance was measured through an annual report content analysis using seven indicators developed by Michael Research Jantzi Research Associate, Inc. The data collected was then tested using an independent T test to determine the difference in the average social performance between the two types of companies, and partial correlation tests to assess the relationship between social performance and financial performance.

Results

The results showed a significant difference in the average social performance between state-owned companies and private companies in Indonesia. This indicates that BUMN companies tend to have better social performance compared to private companies. However, although there are significant differences in social performance, the results of the correlation test show that there is no significant relationship between social performance and financial performance both in state-owned companies and private companies.

Discussion

The significant difference in social performance between BUMN and BUMS can be influenced by various factors. One of them is ownership that is oriented to social mission. BUMN often has a broader goal, including social responsibility, determined by the government. Meanwhile, BUMS usually focuses more on profitability, which may reduce their attention to social aspects.

In addition, an insignificant relationship between social performance and financial performance shows that investment in social activities does not always have a direct impact on the company's financial benefits. This can be a challenge for stakeholders, including investors and managers, to understand that good social performance is not always balanced with positive financial performance. Often, positive results from new social initiatives will be seen in the long run, not short term.

Conclusion

A deeper understanding of the dynamics between social performance and financial performance is very important for companies in formulating more comprehensive strategies. By optimizing social performance, the company not only has a positive impact on the community but can also create added value for shareholders in the long run.

Implications

This study provides a valuable view for decision makers, academics, and practitioners to better understand the social performance of corporates in Indonesia and its impact on financial performance. Furthermore, it is essential for companies to consider social aspects in decision making, because this not only supports the sustainability of their business but also contributes to social and economic development as a whole.

Recommendations

Based on the findings of this study, the following recommendations are made:

Companies should prioritize social performance: Companies should recognize the importance of social performance and prioritize it in their decision-making processes.
Investors should consider social performance: Investors should consider social performance as a key factor in their investment decisions, as it can have a positive impact on the company's long-term financial performance.
Governments should promote social responsibility: Governments should promote social responsibility among companies, particularly state-owned companies, to ensure that they contribute to the well-being of their stakeholders and the community at large.

Limitations

This study has several limitations that should be acknowledged. Firstly, the study only included BUMN and BUMS companies listed on the Indonesia Stock Exchange, which may not be representative of all companies in Indonesia. Secondly, the study only examined the relationship between social performance and financial performance, and did not consider other factors that may influence this relationship. Finally, the study only analyzed data from 2006 to 2008, which may not be representative of the current situation.

Future Research Directions

Based on the findings of this study, the following future research directions are suggested:

Examine the relationship between social performance and financial performance in other countries: This study only examined the relationship between social performance and financial performance in Indonesia. Future research should examine this relationship in other countries to determine if the findings are generalizable.
Consider other factors that influence the relationship between social performance and financial performance: This study only examined the relationship between social performance and financial performance, and did not consider other factors that may influence this relationship. Future research should examine the impact of other factors, such as company size and institutional ownership, on this relationship.
Analyze data from a more recent period: This study only analyzed data from 2006 to 2008, which may not be representative of the current situation. Future research should analyze data from a more recent period to determine if the findings are still relevant.
Frequently Asked Questions (FAQs) about BUMN and BUMS Corporate Social Performance Listed on the Indonesia Stock Exchange =============================================================================================

Q: What is Corporate Social Performance (CSP)?

A: Corporate Social Performance (CSP) refers to a company's ability to create value for its stakeholders, including shareholders, employees, customers, and the community at large. CSP is measured by a company's social responsibility, sustainability, and governance practices.

Q: What is the difference between BUMN and BUMS?

A: BUMN stands for Badan Usaha Milik Negara, which is a state-owned company in Indonesia. BUMS stands for Badan Usaha Milik Swasta, which is a private company in Indonesia.

Q: What is the significance of this study?

A: This study aims to analyze the differences in social performance between BUMN and BUMS companies listed on the Indonesia Stock Exchange. It also examines the relationship between corporate social performance and company financial performance, considering company size and institutional ownership as control variables.

Q: What are the key findings of this study?

A: The study found that there is a significant difference in social performance between BUMN and BUMS companies in Indonesia. BUMN companies tend to have better social performance compared to private companies. However, there is no significant relationship between social performance and financial performance both in state-owned companies and private companies.

Q: What are the implications of this study?

A: The study has several implications for companies, investors, and governments. Companies should prioritize social performance and consider social aspects in their decision-making processes. Investors should consider social performance as a key factor in their investment decisions. Governments should promote social responsibility among companies, particularly state-owned companies.

Q: What are the limitations of this study?

A: This study has several limitations that should be acknowledged. The study only included BUMN and BUMS companies listed on the Indonesia Stock Exchange, which may not be representative of all companies in Indonesia. The study only examined the relationship between social performance and financial performance, and did not consider other factors that may influence this relationship. The study only analyzed data from 2006 to 2008, which may not be representative of the current situation.

Q: What are the future research directions?

A: Based on the findings of this study, several future research directions are suggested. Future research should examine the relationship between social performance and financial performance in other countries. Future research should consider other factors that may influence the relationship between social performance and financial performance. Future research should analyze data from a more recent period to determine if the findings are still relevant.

Q: What are the practical implications of this study?

A: The study has several practical implications for companies, investors, and governments. Companies should prioritize social performance and consider social aspects in their decision-making processes. Investors should consider social performance as a key factor in their investment decisions. Governments should promote social responsibility among companies, particularly state-owned companies.

Q: What are the policy implications of this study?

A: The study has several policy implications for governments. Governments should promote social responsibility among companies, particularly state-owned companies. Governments should consider social performance as a key factor in their policy decisions. Governments should provide incentives for companies that prioritize social performance.

Q: What are the future directions for companies?

A: Based on the findings of this study, several future directions are suggested for companies. Companies should prioritize social performance and consider social aspects in their decision-making processes. Companies should invest in social initiatives that create value for their stakeholders. Companies should report their social performance regularly to ensure transparency and accountability.

Q: What are the future directions for investors?

A: Based on the findings of this study, several future directions are suggested for investors. Investors should consider social performance as a key factor in their investment decisions. Investors should prioritize companies that prioritize social performance. Investors should engage with companies to promote social responsibility and sustainability practices.

Q: What are the future directions for governments?

A: Based on the findings of this study, several future directions are suggested for governments. Governments should promote social responsibility among companies, particularly state-owned companies. Governments should consider social performance as a key factor in their policy decisions. Governments should provide incentives for companies that prioritize social performance.