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1 Global Journal of Business and Social Science Review journal homepage: GJBSSR, Vol. 4(1), October-December 2015: ISSN The Effect of Environmental Performance, Foreign Ownership and Leverage to Disclosure of Corporate Social Responsibility * (Study on Manufacturing Companies in Indonesia Stock Exchange) Musfialdy * 1, Enni Savitri 2 1 Department of Communication, State Islamic University of Sultan Syarif Kasim Riau, Indonesia 2 Department of Accounting, Faculty of Economics, University of Riau, Indonesia ABSTRACT Objective: The purpose of this study is to examine the effect of environmental performance, foreign ownership and leverage to disclosure of corporate social responsibility (CSR). Methodology/Technique: CSR of disclosure in this study using performance indicators based GRI (Global Reporting Initiatives). Data collection using purposive sampling method for manufacturing companies in Indonesia stock exchange in 2011 through 2013, there were 85 companies in the sample. Data were analyzed by multiple linear regression method. Findings: The result shows that the environmental performance and leverage effect on disclosure of corporate social responsibility, while foreign ownership doesn t affect on disclosure of corporate social responsibility. Novelty: this study adds to the variable debt and foreign ownership Type of Paper: Empirical Keywords: Corporate Social Responsibility, Environmental Performance, Foreign Ownership and leverage 1. Introduction Disclosure of corporate social responsibility (CSR disclosure) is an information disclosed by management, as a signal to the stakeholders about the activities related to corporate responsibility towards society and the environment. The emergence of public awareness of the role of companies in society led to criticism because it creates social problems, pollution, resources, waste, product quality, product safety level, and the rights and status of workers. Pressure from various parties to force the company to accept responsibility for the impact of business activities on society. Based on the Global Reporting Initiative (GRI), disclosure of CSR can be divided into three groups, such as economic dimensions, the environmental dimensions and social dimensions. It has an impact, especially for the economy, the environment and social life. CSR in Indonesia, it's set in the law no. 40 of 2007 about the * Paper Info : Revised : September, 2015 Accepted : December, 2015 * Corresponding author: musfaildy@uin-suska.ac.id Affiliation: Department of Communication, State Islamic University of Sultan ISSN GATR Enterprise. All rights reserved.

2 corporate; The companies whose business field and/or natural resources required to implement social and environmental responsibility. Suratno et.al., (2006) argues that good environmental performance is green. Ministry of the environmental issuing program the company s environmental Performance Rating Program Company (PROPER), which is a program on the implementation of corporate environmental responsibility. PROPER measurement of environmental performance through indicators of colors ranging from green, gold, blue, red and black. Research conducted by Tia Rahma, et.al., (2013), Rakhiemah (2009), argues that environmental performance affect on disclosure of CSR in the annual report. Leverage reflecting the company s leverage rise because it can illustrate the company s capital structure and determine the risk of non-collection of a debt. The financial risk the company because it can describe the structure the company's capital and do not know the risk of a debt-collection. Belkaoui and Karpik (1989) argue that the higher the leverage the more likely the company will violate the credit agreement so that the company will report higher earnings now. The companies with high leverage have high agency costs that the company will reduce the costs of CSR (Haniffa, 2005). 2. Literature Review and Hypothesis 2.1 Agency Theory Agency theory is a theory that reveals the relationship between the owner (principal) and management (agent). Agency theory explains that the agency relationship arises when one person or more (principal) employs another person (the agent) to provide a service and then delegate decision-making authority to the agent (Jensen and Meckling, 1976). 2.2 Stakeholder Theory (Stakeholder Theory) Chariri and Ghazali (2007) argue that the company is not an entity that only operates for its own sake, but must provide benefits to its stakeholders (shareholders, creditors, customers, suppliers, government, the public, analysts and other parties) and the company's survival depends on the support stakeholder 2.3 Corporate Social Responsibility (CSR) Corporate Social Responsibility (CSR) is a transparent business practices based on ethical values, by paying attention to employees, society and the environment, and is designed to preserve the general public and also the shareholders (Inawesnia, 2008). In carrying out its activities, the company is not only focused on the production process within the company, but also have to pay attention to corporate social responsibility outside the company. European Commission defines CSR as: "A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with Reviews their stakeholders on a voluntary basis. CSR is the effort made by the company to take into account the social and environmental impact of its operations through proactive measures of prevention pollution and social impact assessment, so that negative impacts can be anticipated and avoided while positive impact can be optimized. Corporate Social Responsibility is essentially the responsibility of the company as a result of a business decision that can provide benefits to society and the environment 2.4 Environmental Performance Environmental performance is a business enterprise to create a good environment to carry out the activities and the use of materials that do not damage the environment (Tia Rahma, P, 2013). Environmental responsibility also called environmental performance which should be done by the company in its development is still on the basis of public pressure that companies are responsible to the community through environmental awareness social ranking system performance proper include the rating company in five colors to be scored in a row -turut with 35 P a g e

3 the highest score for the 5 gold, 4 for green, 3 for blue, 2 for red, and the lowest value 1 for the black color. 2.5 Foreign Ownership Ownership of foreign capital can be defined as a shareholding company by parties who are not registered as citizens and legally recognized the right to strive in that country (Sari, Grace, 2010). Foreign ownership is a proportion of the company's common stock owned by individuals, legal entities, government and the status of its parts abroad. 2.6 Leverage Leverage ratio is the ratio used to measure the extent of corporate assets financed with debt (Kashmir 2013) leverage policy is an important decision in the company where policy leverage is one of the parts of the funding policy of the company. H1: Environmental performance affect on disclosure of CSR H2: Foreign ownership affect on the disclosure of CSR. H3: Leverage affect on the disclosure of CSR 3. Methods 3.1 Population and sample Population is manufacturing companies listed on the Stock Exchange Indonesia in Sample selection criteria are corporate companies, which didn t delisting and joined in Proper and have foreign equity in the company. The company publishes the annual report the period and companies provide information on the implementation CSR and making the sign of the disclosure list CSR based GRI 3.2 Measurement of variables Disclosure of CSR Disclosure of CSR as the dependent variable is measured as follows (Gray et al, 2001): CSDI j = ΣX ij n j CSDI : Corporate Social Responsibility Disclosure Index companies j: nj : the number of items for company j, nj 78 Xij : 1 = if the item i disclosed; 0 = if the item i is not disclosed. Thus, 0 <CSDIt <1 (1) Environmental Performance Environmental performance as an independent variable (X1) is measured by PROPER, as follows: Gold = 5, Green = 4, Blue = 3, Red = 2, Black = 1. Environmental performance in this study was measured by the company's participation in the PROPER using dummy variables. Give points 1 if the company follows PROPER, and given points 0 if the company does not follow the PROPER program Foreign Ownership Foreign ownership as an independent variable (X2) (Kasmir, 2013): 36 P a g e

4 Foreign ownership = Foreign Ownership Number of shares issued x100% (2) Leverage One measurement is to use the leverage of the Debt to Equity Ratio (X3), (Kasmir, 2013) If the result is 100%, meaning that the amount of debt is still smaller than the amount of the company's capital. If the result is 100%, meaning that is the amount of debt is greater than the amount of the company's capital Validity and Reliability Test Validity test used to measure whether or not a valid questionnaire. If the corrected item-total correlation> r table means the data is valid (Ghozali, 2011). Reliability test is used to determine the measurement result REMAIN consistent if it is done twice or more of the symptoms are the same as using the same measuring instrument. Constructs or variables are said to be reliable if it gives the value of Cronbach Alpha> 0.60 (Ghozali, 2011) Normality test and Classical assumption test The normal distribution test in this study using normal probability plots. Classical assumption test for linear regression models is made to Ensure that the models are free from multicollinearity, autocorrelation and heteroscedasticity Multiple Linear Regression Analysis Y = α + β1x1 + β2x2 + β3x3 + e (3) Where, Y1 X1 X2 X3 β 1, β2, β3 ε = CSR disclosure = Environmental Performance = Foreign Shareholding = Leverage = Regression Coefficients = Error Following that, using 5% of the hypothesis will be tested statistically, the t and F tests using multiple regression. 4. Result and Discussion 4.1 Descriptive Analysis The result of descriptive statistical analysis shows that the average value of respondents greater than the standard deviation means that the data has low variability. 4.2 Normality and Classical assumption test results Using normal probability plots shows the distribution pattern and classical assumption test results free of multicollinearity, and heteroscedasticity antocorrelation. 37 P a g e

5 4.3 Hypothesis Testing Environmental performance has a positive influence on the disclosure of CSR. Companies registered in the Proper given in accordance with the company s performance indicators for environment sustainability expressed in the report on the annual report disclosure of CSR so that more and more companies conduct environmental responsibility more extensive disclosure statements CSR company. Foreign ownership has no effect on the disclosure of CSR. Whether or not ownership by foreigners in the company don t effect the company s report on the annual report CSR. Leverage has a positive influence on the disclosure of CSR.. This proves that agency theory predicts that firms with higher leverage ratios will reveal more information because the cost of agency companies with capital structure as it is higher. Additional information is needed to dispel doubts bondholders towards the fulfillment of their rights as creditors. 5. Conclusion and Implication This paper presents the results of this study that investigates the effect of environmental performance, foreign ownership and leverage to disclosure of corporate social responsibility. The findings conclude that the environmental performance and leverage have an effect on corporate social responsibility, while foreign ownership has no effect on corporate social responsibility Companies that follow will reveal CSR proper higher because the company will be care for environment and discuss in the financial statements.companies that have a high leverage is necessary to provide disclosure statements of social responsibility so as to give a good performance. References Adnantara, Komang Fridagustin. (2013). Effect of Shareholding Structure and Corporate Social Responsibility in Corporate Value. Journal of Economic Bulletin Vol.2.Bali. Aditya Permana, Vigiwan. Prog. (2012). Effect of Corporate Environmental Performance And Characteristics Of Corporate Social Responsibility (CSR) Disclosure (Empirical Study On Manufacturing Companies Listed on the Stock Exchange). Journal. Volume 1, Number 2, Year 2012, pages Diponeoro University. Semarang Al-Tuwajiri, S., Christensen, T., and Hughes, KE. (2004). The Relations Among Environmental Disclosure, Environmental Performance and Economic Performance: A Simultaneous Equations Approach, Accounting, Organizations and Society, 29, Anugrah, Ageng Widhy. Yuyetta, Etna Nur Afri. (2010). Analysis of Effect of Environmental Performance, Structure Corporate Governance, Disclosure and Earnings Management Of Corporate Social Responsibility. Journal. Faculty of Economics, University of Diponegoro. Semarang. Ballabanis, Phillip and Lyall. (1998). Corporate Social Responsibility and Economic Performance in the Top British Companies: Are they Linked. Europan Business Review. Vol. 98, No.1, 1998, pp Barkemeyer, Ralf. (2007). Legitimacy as a Key Driver and Determinant of CSR in Developing Countries. Paper for the 2007 Marie Curie Summer School on Earth System Governance, 28 May - 06 June 2007, Amsterdam. 38 P a g e

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