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American Interdisciplinary Journal of Business 

and Economics 
ISSN: 2837-1909| Impact Factor : 4.6 

Volume. 9, Number 3; July-Sept, 2022; 

Published By: Scientific and Academic Development Institute (SADI) 

8933 Willis Ave Los Angeles, California 

https://sadipub.com/Journals/index.php/aijbe 

 

 

26 
American Interdisciplinary Journal of Business and Economics | 

https://sadipub.com/Journals/index.php/aijbe 
 

SUSTAINABLE SUCCESS: THE CRUCIAL ROLE OF SOCIAL AND 

ENVIRONMENTAL RESPONSIBILITY IN BUSINESS PERFORMANCE 

 

 

 

Grace Wayan 

Faculty of Economics and Business, Udayana University, Bali, Indonesia, 80113 

Abstract: The increasing population in Indonesia leads to a rise in energy consumption, which has a severe 

impact on the environment. To fulfill their social responsibility, companies in the industrial sector need to 

allocate a part of their profit to Corporate Social Responsibility (CSR) activities. This study aims to examine 

the moderating effect of the company's life cycle on the relationship between CSR cost allocation and market 

performance. A quantitative research method was adopted, and the data was collected from 90 companies in 

the industrial energy sector listed on the Indonesia Stock Exchange for the period 2017-2021. The moderated 

regression analysis was employed to analyze the data using E Views software. The findings indicate a positive 

impact of CSR cost allocation on market performance, whereas the company's life cycle did not affect this 

relationship. This research adds to the literature on the effect of CSR cost allocation on market performance 

and provides insights and information for companies and investors. Companies can enhance their market 

performance by paying attention to the allocation of CSR costs, and investors can use this information to make 

informed investment decisions. Companies that allocate funds to CSR activities can improve their market 

performance. 

Keywords: Corporate social responsibility, market performance, life cycle, cost allocation, industrial energy 

sector, Indonesia. 

 

Introduction 

This study uses quantitative data in the form of annual financial reports for energy industry sector companies 

listed on the Indonesia Stock Exchange for the 2017-2021 period obtained on the Indonesia Stock Exchange's 

website, namely www.idx.co.id. Based on the criteria in this study, the number of companies selected as 

research samples was 18 companies with 90 observed data. The financial report data used are the value of 

total assets, total equity, outstanding shares and related company cash flows. Regarding the share price data 

for each company, it was obtained from the website www.finance.yahoo.com. This research technique is 

Moderated Regression Analysis (MRA) using E Views.  

The dependent variable in this study is market performance. Market Value Added (MVA) as a measure of 

market-based company financial performance. The MVA calculation is done by calculating the market value 

or company value minus the invested capital (Aggerholm & Trapp, 2014), written mathematically as follows: 

MVA= (Number of shares x market price) – Total Equity  



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27 Interdisciplinary Journal of Educational Practice | https://sadipub.com/Journals/index.php/ijep 
 

The independent variable in this study is CSR cost allocation. The allocation of CSR costs is the total funds 

spent to carry out corporate social responsibility. CSR is the result achieved by the company as seen from 

the reciprocal activities that have been carried out by the company towards society and the environment. In 

this study, the proxy used to measure CSR cost allocation is the CSR cost ratio. Mathematically, the CSR 

cost ratio can be calculated using the following formula (Pyo and Lee, 2013):  

𝑇𝑜𝑡𝑎𝑙 𝐶𝑆𝑅 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 

𝐶𝑆𝑅 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 𝑅𝑎𝑡𝑖𝑜 =   

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑒𝑡 

The moderating variable in this study is the corporate life cycle. The researcher uses a corporate life cycle 

proxy based on Dickinson (2011) which captures different corporate life cycle stages. Classification of 

sample companies into different corporate life cycle stages based on cash flow patterns using the following 

code:  

(1) Introduction: if OANCF < 0, IVNCF < 0 and FINCF > 0 then given code 1  

(2) Growth: if OANCF > 0, IVNCF < 0 and FINCF > 0 then given code 2  

(3) Mature: if OANCF > 0, IVNCF < 0 and FINCF < 0 then given code 3  

(4) Decline: if OANCF < 0, IVNCF > 0 and FINCF - or 0 then given code 4  

(5) Shake-out: if it is not included in the other four stages then it is classified in the shake-out stage by 

giving code 5  

The MRA model used to test the research hypothesis is.  

Y = α + β1X1 + β2X2 + β3X1X2 + e………(1)  

RESULTS  

Descriptive analysis is used to show the condition of the data in this study. The following is a summary of 

the results of the descriptive analysis of the dependent variable, namely market performance and the 

independent variable, namely CSR cost allocation, the moderating variable, namely the corporate life cycle.  

Table 1. Descriptive Statistics  

  
N  Minimum  Maximum  Mean  

Std. 

Deviation  

Market Performance  90  49,025  63,401  56,421  3,297  

CSR Cost Allocation  90  -12,618  -2,396  -7,736  2,393  

Corporate Life Cycle  90  1,000  5,000  3,144  1,223  

Source: Data processed, (2022)  

The standard deviation of the CSR cost allocation variable shows a value of 2.393. The standard deviation 

value which is higher than the mean value indicates that the distribution of information quality data is 

uneven. As for market performance and corporate life cycle variables, both have a standard deviation value 

that is lower than the average value, which means that the two variables have a normal distribution of data. 

The model significance test in this study was carried out through 3 stages. The first stage is the Chow Test, 

followed by the Hausman Test and the Lagrange Multiplier Test. The results of the model significance test 

in this study are as follows:  

Table 2. Model Significance Test  

Test    Rule of Thumb  Results  Decision  

Chow Test  FEM vs CEM  Cross-section Chi-square Prob  

(α<0.05 = Fixed effect model, 

α>0.05= Common effect model)  

0,005  FEM  



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28 Interdisciplinary Journal of Educational Practice | https://sadipub.com/Journals/index.php/ijep 
 

Hausman  

Test  

FEM vs REM  Cross-section random Prob.  

(α<0.05 = Fixed effect model, 

α>0.05= Random effect model)  

0,028  FEM  

Source: Data processed, (2022)  

The results of the Chow test in this study show a probability value greater than 0.05, so the exact model used 

is the Fixed Effect Model (FEM). The results of the Hausman test in this study indicate that the probability 

value is greater than 0.05, so the model used is the Fixed Effect Model (FEM). Based on the results of the 

Chow test and Hausman test, researchers can conclude that the panel data regression model used is the Fixed 

Effect Model (FEM) to analyze the data in this study.  

The following table shows the results of the Fixed Effect Model (FEM) panel data regression analysis with 

the Moderated Regression Analysis test used to analyze the t test, F test and Coefficient of Determination 

Test (R2).  

Table 3. Hypothesis Test  

Variables  Coefficient  t-Statistics  Prob.  

C  61,205  21,090  0,000  

CSR Cost Allocation  0,790  2,127  0,037  

Corporate Life Cycle  0,479  2,029  0,046  

CSR Cost Allocation_ Corporate Life Cycle  -21,053  -0,992  0,325  

Adjusted R-squared    0,500   

F-statistics    5,466   

Prob(F-statistics)    0,000   

Source: Data processed, (2022)  

Based on the calculations in Table 3, it shows that this research model has a calculated F value of 5.466 and 

a probability value that is smaller than 0.05, namely 0.000. So it can be concluded that the CSR cost 

allocation variable, the corporate life cycle, and the interaction variable between the CSR cost allocation and 

the corporate life cycle simultaneously are significant explanations for the dependent variable, namely 

market performance.  

The independent variable CSR cost allocation has a coefficient value of 0.790 with a t-count of 2.127 which 

is greater than the t-table of 1.663 and a probability value of 0.037 <0.05. This means that the CSR cost 

allocation has a significant positive effect on market performance, which means that an increase in CSR cost 

allocation will improve market performance. The results of this study are in line with research conducted by 

Mardiandari and Rustiyaningsih (2013); and Yudharma et al., (2017).  

Signaling theory or signaling theory was first put forward by Spence (1973) which explained that the sender 

(owner of the information) gives a signal or signal in the form of information that reflects the condition of a 

company that is beneficial to the recipient (investor). According to Brigham and Houston (2011) signal 

theory explains management's perception of company growth in the future, which will affect the response of 

potential investors to the company. The signal is in the form of information that explains management's 

efforts to realize the owner's wishes. This information is considered as an important indicator for investors 

and business people in making investment decisions.  

Based on signaling theory, CSR disclosure contains information that makes it easy for investors to make 

decisions and can provide certainty and security for investors to invest in the capital market (Dewi et al., 

2014). Companies that disclose social responsibility will be more attractive to investors because these 

companies do not only focus on earning profits, but also pay attention to environmental and social issues 

(Almilia & Wijayanto, 2007). Companies that carry out CSR activities also have a good image in the 

community and can increase trust so that people are more loyal to the company. CSR activities can also have 



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29 Interdisciplinary Journal of Educational Practice | https://sadipub.com/Journals/index.php/ijep 
 

an impact on employees, whereby spending on welfare will make employees more loyal to the company so 

that employees will be more productive because they feel cared for by the company and increased company 

productivity will cause sales of the company's products to increase and will affect profits (Yudharma , et al., 

2016) and its market performance.  

The results of this study indicate that the interaction variable CSR cost allocation and corporate life cycle 

has a coefficient of -21.053 with a t-count of -0.992 which is smaller than the t-table of 1.663 and a 

probability value of 0.325 > 0.05. These results indicate that the corporate life cycle variable cannot moderate 

the effect of CSR cost allocation on market performance. The company life cycle or corporate life cycle is a 

process of company development through several linear and sequential stages (Bhaird, 2010). A company 

has four cycle stages, namely start-up, growth, maturity, and decline.  

The corporate life cycle is unable to moderate the effect of CSR fund allocation on market performance. It 

is possible that CSR activities can provide direction for companies in using company resources to meet 

stakeholder needs. CSR also does not only focus on maximizing shareholder value, but can balance the 

interests of all different stakeholders. Companies that carry out CSR activities are considered to have a 

responsibility towards the surrounding environment and have a good image and reputation in the community. 

This can provide protection for the company when the company has poor performance and reduce the 

negative assessment of shareholders. Based on this, CSR activities need to be carried out by companies 

throughout the company's life cycle, so that it can be said that the company's life cycle does not moderate 

the effect of CSR fund allocation on market performance. The direction of negative results indicates that the 

corporate life cycle does not significantly weaken the effect of CSR fund allocation on market performance. 

These results contradict the slack resource theory which states that companies will only use funds for 

sustainable activities when they have good financial conditions (Waddock & Graves, 1997).  

CONCLUSION  

This study aims to obtain empirical evidence regarding the effect of CSR cost allocation on market 

performance which is moderated by the corporate life cycle. Based on the results of empirical testing and 

discussion, several conclusions are obtained, namely the allocation of CSR costs has a positive effect on 

market performance. This shows that the higher the cost of CSR owned by a company, the higher its market 

performance. Meanwhile, the corporate life cycle does not moderate the effect of CSR cost allocation on 

market performance.  

The results of this study are expected to be able to provide empirical evidence regarding signaling theory. 

The results of this study indicate that the allocation of CSR funds can increase market performance while 

the corporate life cycle is not a moderating variable because it cannot significantly strengthen the effect of 

CSR fund allocation on market performance. Companies that carry out CSR activities can also reduce 

negative ratings from investors when the company has poor performance. Therefore, companies must pay 

attention to the allocation of CSR funds and disclose CSR activities carried out in order to provide a positive 

signal to investors.  

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