Adopting management control systems through CSR strategic integration and investigating its impact on company performance: evidence from Indonesia

Abstract

Purpose This paper aims to investigate the extent to which the management control systems (MCS) adoption in corporate social responsibility (CSR) integration into business strategy has an impact on companies’ performance. Design/methodology/approach Using a sample of 435 Indonesian manufacturing companies, partial least squares structural equation modelling was used to investigate the impact of CSR strategic integration on companies’ performance based on the contingency and stakeholder theories. Findings The findings reveal CSR strategic integration has a positive and significant impact on companies’ performance, including employee, operating and financial performance and the company size can positively moderate the impact of this integration on both its operating and financial performance. Practical implications The findings can encourage managers to adopt MCS by undertaking CSR at the strategic level, resulting in superior performance, both socially and financially. Social implications Employee performance and operating performance can significantly mediate the effect of strategic integration on financial performance. Originality/value The paper suggests that adopting MCS through CSR strategic integration could improve company performance socially and financially. This is the very first study on this issue from an Indonesian perspective.

The effects of CSR disclosure on asymmetric information and RoI of publicly listed companies in SRI-Kehati index in Indonesia

“…When observing the CSR index of sustainable firms slated in the SRI-Kehati index, there has been a major improvement with a more heightened mean of the CSR disclosure rating over time (Table 3). As seen from previous studies, the pressure of external stakeholders in Indonesia has fuelled more transparent and comprehensive CSR disclosure (Bhinekawati, 2016;Rinawiyanti et al, 2021). Moreover, the demoted standard deviation of CSR disclosure among firms has affirmed the more converging adjustment of the CSR disclosure within the firms listed in the SRI-Kehati index.…”

“…CSR disclosure is devised as complementary information to financial performance to disseminate that corporate social conduct (Rinawiyanti et al, 2021). A debate has evolved about whether corporate disclosure can reduce asymmetric information of whole corporate value in the eyes of investors and their external counterparts.…”

“…Regarding those regulatory malfunctions, external market pressures are required to enhance firms' social and business accountability (Daryaei and Fattahi, 2020;Jamali and Neville, 2011). In Indonesia, some literature underlines the intensifying market pressure to promote more transparent CSR disclosure (Bhinekawati, 2016;Rinawiyanti et al, 2021). Yet, the influence of CSR disclosure on asymmetric information remains unexplored in Indonesian case studies.…”

“…For instance, Indonesian nongovernment organizations (NGOs) have alleged the poor social and environmental business practices of some private extractive firms even though they have disclosed their CSR reports (Greenpeace, 2017;Pesqueira and Glasbergen, 2013). Responding to the criticisms from NGOs, Rinawiyanti et al (2021) underscored opportunities for firms to solidify more of their social accountability in their CSR programs. Sustaining a stronger firm commitment to disclose more comprehensive CSR reports can result in a positive market evaluation of the corporate business performance (Rinawiyanti et al, 2021).…”

“…Responding to the criticisms from NGOs, Rinawiyanti et al (2021) underscored opportunities for firms to solidify more of their social accountability in their CSR programs. Sustaining a stronger firm commitment to disclose more comprehensive CSR reports can result in a positive market evaluation of the corporate business performance (Rinawiyanti et al, 2021).…”