THE EFFECT OF POLITICAL VISIBILITY, COMPANY CHARACTERISTICS AND GENDER DIVERSITY TO SUSTAINABILITY REPORT DISCLOSURE

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1 International Journal of Civil Engineering and Technology (IJCIET) Volume 8, Issue 9, September 2017, pp , Article ID: IJCIET_08_09_113 Available online at ISSN Print: and ISSN Online: IAEME Publication Scopus Indexed THE EFFECT OF POLITICAL VISIBILITY, COMPANY CHARACTERISTICS AND GENDER DIVERSITY TO SUSTAINABILITY REPORT DISCLOSURE (Study of Company Listed in Indonesia Sustainability Reporting Award) Nurlaela Mapparessa Faculty of Economic, Tadulako University, indonesia Mohammad Iqbal Bakry Faculty of Economic, Tadulako University, indonesia Chalarce Totanan Faculty of Economic, Tadulako University, indonesia Yuldi Mile Faculty of Economic, Tadulako University, indonesia Ayudya Arumsari Faculty of Economic, Tadulako University, indonesia ABSTRACT This research aims to determine and analyze partially the effect of political visibility which is company size, company characteristic which is type of company and gender diversity toward sustainability report disclosure of company listed in Indonesia Sustainability Reporting Award. The population of this research is company participated in Indonesia Sustainability Reporting Award (ISRA) at the year of From 72 companies the population, only 22 companies contribute to the criteria of research sample which has been set. Data analysis used multiple linear regression. The result of this research shown that political visibility which is measured by company size has a negative and significant effect to sustainability report disclosure. Whereas company characteristic measured by type of company and gender diversity have no effect to sustainability report disclosure. Keywords: Political visibility, company characteristic, gender diversity, sustainability report disclosure editor@iaeme.com

2 Nurlaela Mapparessa, Mohammad Iqbal Bakry, Chalarce Totanan, Yuldi Mile and Ayudya Arumsari Cite this Article: Nurlaela Mapparessa, Mohammad Iqbal Bakry, Chalarce Totanan, Yuldi Mile and Ayudya Arumsari, The Effect of Political Visibility, Company Characteristics and Gender Diversity to Sustainability Report Disclosure, International Journal of Civil Engineering and Technology, 8(9), 2017, pp INTRODUCTION Basically, the main purpose of worldwide company is on how company could gain the maximal profit. Company target in running a business is still focusing on economical profit which reflecting that companies are well-based on profit-oriented principle. Companies with that principle tend to override the social and environment impact which emerge from company activity. Indonesia is one of the few countries that has several cases of companies that override environmental and social impacts emerge from corporate activities. As an example of a case that occurred in Maluku during the year of 2016 in North Seram where conducted a forest destruction and illegal logging by Bintang Bima Lestari company, as well as the case of society s right deprivation undertaken by PT. Kobi Mukti by constructing 1022 hectares of irrigation in the Kabauhari District that robbing the ancestor forests and excludes Environmental Impact Assessment (AMDAL) as well as socialization to society. That is why in the last 2 to 3 decades, from government, shareholders, even society began to realize the importance of maintaining the environment. This is in line with the concept of sustainable development. Sustainability development is defined as development that seeks to meet the needs of present without compromising the ability of future generations to meet their needs. Sustainability development also requires companies to focus not only on the achievement of profit, but also on people and the planet or what is commonly called Triple Bottom Line (TBL). Along with environmental issues, companies need to accept the idea that stakeholders at this time demanding more than financial report, but a more comprehensive report includes information related to environmental management compliance, environmental operational performance and environmental management initiatives. Companies in support of the concept of sustainability development requires a global framework with a consistent and measurable language to be more clear and easy to understand. This framework is then called sustainability report. Sustainability reports in Indonesia are still voluntary meaning that companies voluntarily publish sustainability reports and there is no regulation requiring them such as financial statements. This led to the disclosure of sustainability report, although increasing each year, which in 2016 has reached a total of 120 companies and an increase from the previous year which only a number of 73 companies(national Centre for Sustainability Reporting); Still considered disproportionate when compared to the number of companies that did not disclose. A series of research results that show the benefits of sustainability report influence on company performance has become a benchmark for companies to immediately disclose sustainability report, under any circumstances of company. Each company has different characteristics. Differences can be viewed from various aspects, including political visibility, corporate characteristics, corporate governance, corporate financial performance levels, and so on. But the difference does not undermine the urgency of companies to make sustainability report disclosure. Therefore, research on sustainability report disclosure still needs to be done. Based on the phenomenon and urgency, the researcher is interested to conduct a research entitled, "The Influence of Political Visibility, Corporate Characteristics and Gender Diversity editor@iaeme.com

3 The Effect of Political Visibility, Company Characteristics and Gender Diversity to Sustainability Report Disclosure on Sustainability Report Disclosure (Study on Companies Listed in Indonesia Sustainability Reporting Award)". 2. LITERATURE REVIEW 2.1. Stakeholder Theory Stakeholder theory is a theory that explains responsibility and how the firm creates value for its organization and environment. Stakeholder theory emphasizes the principle that entities doing an activity not only for the interests of the entity itself but also more for its stakeholders including shareholders, creditors, consumers, suppliers, governments, communities, analysts and others. The decision-making process includes the role of stakeholders who need the information disclosed by the company regarding the activities that have been done. The Company will endeavor to disclose information of integrity with the aim that stakeholders remain trust in the company. Sustainability report is one of the media for companies to disclose such information Political Visibility The higher the political visibility that the company faces, the more it will cost to disclose social information; so that the reported earnings become lower (Watt and Zimmerman, 1990). In this study, political visibility is measured by firm size. Company size is a variable that classifies the firm size. Firm size can be assessed based on total assets (fixed assets, current assets, and intangible assets), total employment, stock value, total sales, and market capitalization. Large companies, have large resources so the company needs and able to finance the information for internal interest as a whole. Conversely, a small company that does not have as much information as a big company, requires a larger additional cost if the company wants to disclose information comprehensively. It can then be assumed that large firms can face greater political pressure than small firms, namely the pressure to engage in social responsibility that arises as a public demand for higher information than smaller firms Company Characteristic Several studies have been conducted to examine social disclosures and the environment of companies that have different characteristics. One of them is the type of industry or company. Company types classify companies based on the scope of operations, corporate risk, and ability of the company in facing business challenges (Suhendah and Haryanto, 2014). The classification is divided into two types namely high-profile companies and low-profile companies. Robert (1992) describes high-profile companies as companies which have high-sensitivity costumers, high levels of political risk and tight competition. These characteristics boost the spotlight and image of company from the community about the company's activities. While low-profile companies have costumer visibility, political risk, and low competition so the companies will not get much spotlight from the community, although in practice there are also company s errors and failures. Based on the above classification, the high-profile companies in this study include oil and gas, forestry, agriculture, mining, fishery, chemical, automotive, tobacco and cigarette companies, transportation, telecommunication, consumer goods, food and beverages, paper, and construction companies. Low profile companies include companies engaged in building, finance and banking, medical equipment suppliers, property, retailers textiles and textile products, personal products, and household products (Indrawati, 2009) editor@iaeme.com

4 Nurlaela Mapparessa, Mohammad Iqbal Bakry, Chalarce Totanan, Yuldi Mile and Ayudya Arumsari 2.4. Gender Diversity Diversity according to Big Indonesian Dictionary is diversity. Organizational diversity is important to be owned by the company to create value the company itself. Diversity is considered able to create a series of perspectives and quality of solutions that will impact on the high performance and value of the company (Rover, 2010). The greater the board's diversity, the greater potential for understanding and resolving issues that enable managers to effectively deal with the business environment and encourage a positive rating from CSR (Bear, 2010). This is because each board will provide a unique and diverse set of experiences, attachments, and views. If the perceptions, views and background of the board are relatively homogeneous, then there will be the possibility of creating decision-making strategies that are single-minded, predictable and inflexible (Sudiartana, 2011). Margaretha and Isnaini (2014) argue that the presence of women in the board of directors can have a positive impact on corporate social responsibility, increase charity, stimulate the atmosphere of work and encourage focus on the environment. William (2003) in Margaretha and Isnaini (2014) states that the greater the number of women in the board of directors, the more funding is projected for corporate charities. Feijoo et al (2012) found that the involvement of women in boards of commissioners and directors influences corporate social responsibility reporting patterns Sustainability Report Sustainability Report is a type of report that is voluntary, and made as a complement of financial statements. The sustainability report includes reporting on three performance related to economic, social and environmental performance. The latest version of the GRI reporting guidelines is called G4 (fourth generation), which was launched in May G4 puts the concept of materiality as the center of sustainability reporting. It is intended to encourage the reporting organization to provide only information on matters of great importance in order to achieve the organization's objectives for sustainability and to manage its impact on the environment and society thereby creating a strategic and focused report. Some developing countries, including Indonesia, the sustainability reports are still voluntary, in contrast to developed countries such as countries in continental Europe that have made sustainability reports mandatory. Finland, Sweden, Belgium, the Netherlands and Germany are countries that require sustainability reports for certain category companies, depending on the size and sector of corporate activity (Dilling, 2010). Related to this, some countries implement a series of programs to stimulate the reporting of company s sustainability report. Indonesia is one of them, who did the stimulus by holding the event of Indonesia Sustainability Reporting Award (ISRA). ISRA is a program facilitated by the National Center for Sustainability Reporting (NCSR) dedicated to giving appreciation in the form of annual awards for companies or organizations that have developed and published sustainability reports Critical Framework Based on the above explanation, this research is made to know whether the disclosure of sustainability report of company can be influenced by several factors such as political visibility analyzed from company size, company characteristic measured by type of company, and gender diversity. Here is a framework scheme in this study: editor@iaeme.com

5 The Effect of Political Visibility, Company Characteristics and Gender Diversity to Sustainability Report Disclosure Figure 1 Research Critical Framework 2.7. Hypothesis H1 : Political Visibility Affects Disclosure of Sustainability Report H2 : Company Characteristics Affects Disclosure of Sustainability Report H3 : Gender Diversity Affects Disclosure of Sustainability Report 3. RESEARCH METHOD This type of research is quantitative research. The type of data used in this study is secondary data. According Sugiyono (2014), secondary data is a type of data that does not directly provide data to the data collector, but through others or through documents. The populations in this study are companies that join the Indonesian Sustainability Reporting Award (ISRA) in the year as many as 72 companies. The sampling technique used in this study is purposive sampling technique, which is a sample selection technique that is selected specifically based on the objectives and research needs. Table 1 Sample Selection Procedure NO Kriteria Sampel Jumlah 1 Companies join in Indonesian Sustainability Reporting Award (ISRA) year of Companies which not continuously join in Indonesian Sustainability Reporting Award year of (45) 3 Companies which do not publish the sustainability report and/or annual report in year of (5) Companies sample selected by criteria 22 Companies sample for the observed years (x2) 44 Source: Processed by the researchers (2017) The sample criteria were tested and the samples were collected for 22 companies with a total of 44 sustainability reports for the period of The observations were conducted in based on the consideration that the application of GRI G4 guidelines was running effectively in the year of GRI G4 guideline was launched in May Variable Operational The variables in this study are political visibility, corporate characteristics, gender diversity and sustainability report can be explained in the operational matrix of the following variables: editor@iaeme.com

6 Nurlaela Mapparessa, Mohammad Iqbal Bakry, Chalarce Totanan, Yuldi Mile and Ayudya Arumsari Table 2 Variable Operationalization Matrix Variable Variable Proxy Variable Measurement Scale Company Size Political Visibility (Source: Respati and P.B. Hadiprajitno, 2015) Company Type Company Characteristic (Source: Respati and P.B. Hadiprajitno, 2015) Gender Diversity (Source: Rahindayati, et al 2015) Sustainability Report Disclosure(Source: Marwati and Yulianti, 2015) Source: Processed by researchers (2017) 4. RESULT AND DISCUSSION Ln total aset Score 1 for high profile company; score 0 for low profile company Woman in Board of Director and Board of Commisary Total of Board of Director and Board of Commisary Total items disclosed Ideal number of disclosure Ratio Nominal Ratio Ratio 4.1. Descriptive Statistic Analysis The results of descriptive statistical analysis showed that the respondents (N) research was 44. The average value of the firm size variables of and the standard deviation of 4.64 Table 3 Statistic Descriptive Descriptive Statistics N Minimum Maximum Mean Std. Deviation SIZE 44 20,89 34,41 28,6420 4,64572 TYPE 44,00 1,00,7273,45051 GENDER 44,00,38,0786,09856 SRD 44,15 1,00,4641,25122 Valid N (listwise) 44 Source: Processed by Researcher (2017) Descriptive statistic data indicate that mean value is greater than standard deviation, so the assessed mean data of variable have been able to represent entire data of company size. The descriptive statistics of company characteristic variables shown that the mean value is greater than the standard deviation (0.72> 0.45), so it is judged that the average data variable has been able to represent the overall data of the company type. The data in descriptive statistics shows that the mean is greater than the standard deviation (0.08 <0.09), so it is judged that the average data variable has not been able to represent the overall data of gender diversity. Regression model used in this research has passed the classical assumption test that is normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test Multiple Linear Regression Analysis The results of multiple regression analysis in this study by using a significance level of 5% are: editor@iaeme.com

7 The Effect of Political Visibility, Company Characteristics and Gender Diversity to Sustainability Report Disclosure Model Table 4 Multiple Regression Analysis Coefficients a Unstandardized Coefficients B Std. Error Beta Standardized Coefficients t Sig. (Constant) 1,055,284 3,719,001 SIZE -,022,008 -,403-2,689,010 1 TYPE,085,095,152,894,377 GENDER -,360,418 -,141 -,860,395 a. Dependent Variable: SRD Source: Processed by Researcher (2017) Based on the results of multiple regression analysis using a significance level of 5%, then obtained the following equation: SRD = 1, SIZE TYPE - 0,360 GENDER + ɛ 4.3. Hypothesis Testing and Discussion Political Visibility Affects Disclosure of Sustainability Report Based on the tests that have been done, the results show that political visibility variables determined by firm size have a negative and significant influence on the disclosure of sustainability report, so that the first hypothesis of this research is accepted. These results indicate the larger the size of the company the smaller the level of disclosure sustainability report, and vice versa the smaller the size of the company the greater the level of disclosure sustainability report. The relationship can occur because large companies have high credibility in the eyes of the public, so the company is considered to have legitimacy from the public. The legitimacy of the public for large companies will not always be obtained by disclosing more sustainability reports to have an influence on internal and external parties who have an interest in the company. This is because the disclosure of sustainability report has not become a voluntary activity, but it is obligatory for every company that is useful to maintain the company's survival (Rohmah, 2015). While for small companies that have low total assets and public sensitivity, the stakeholder's level of doubt tends to be high, and it has a tendency to disclose wider sustainability reports. Disclosure of CSR or sustainability report is important considering that disclosure can be a company's marketing strategy to gain trust from stakeholders (Ibrahim, et al, 2015) Company Characteristics Affects Disclosure of Sustainability Report The second hypothesis in this study states that the variable characteristics of the company have a positive effect on the disclosure of sustainability report. Based on the t test conducted, the results showed that the company characteristic variable measured by the type of company does not affect the disclosure sustainability report, so the second hypothesis is rejected. The results showed that the type of company both high profile and low profile does not affect the disclosure of sustainability report. The result is also caused by the Law of IncorporatedNumber 40 of 2007 which requires companies to disclose social responsibility disclosure. The law makes high profile companies and low profile companies to be able to disclose corporate social responsibility as long as the editor@iaeme.com

8 Nurlaela Mapparessa, Mohammad Iqbal Bakry, Chalarce Totanan, Yuldi Mile and Ayudya Arumsari legal entity ofcorporate is a Limited Liability Company or Incorporation. It is also supported by Law Number 32 of 2009 on Environmental Management article 68. According to stakeholder theory a company must be able to provide benefits to stakeholders because the existence of a company is influenced by the support of stakeholders. These benefits can be realized by conducting a Corporate Social Responsibility (CSR) program which will be reported in the sustainability report disclosure. So that both high profile and low profile companies willbe urge to perform and disclose CSR activities as required by stakeholders including the public and investors Gender Diversity Affects Disclosure of Sustainability Report The result of the test on the third hypothesis shows that gender diversity variables do not affect the disclosure of sustainability report, so the third hypothesis of this study which states that gender diversity affect the disclosure of sustainability report is rejected. These results indicate that the presence or absence of women in the proportion of the board of directors and the board of commissioners of the company has no effect on the extent of CSR disclosure or sustainability report. According to Wardhani and Cahyonowati (2011), the existence of women in top management positions of companies still tend to be small in Indonesia. This is because Indonesia is still holding a patrilineal kinship system (father lineage) where men control all family members, ownership of goods, sources of income and key decision makers. So the existence of such culture causes the presence of women in the top ranks of the company's management is not dominant. According to Hofstede (1991) in Sudiartana (2011) related to gender diversity, there are four dimensions that affect social values in society. One of them is power distance. Power Distance Index (PDI) is defined as the extent to which people can accept inequality. In Asian countries, Indonesia ranks second after Malaysia in PDI scores. This rating indicates that the Indonesian people are judged to be able to accept inequality and consider it to be commonplace or normal, in other words Indonesia is still not so concerned about the issue of gender inequality. So in corporate governance also have an impact, namely the lack of existence of women in top management of company. According to stakeholder theory a company must be able to provide benefits to stakeholders because the existence of a company is influenced by the support of stakeholders, both primary and secondary stakeholders, and one of them is the employee. Stakeholder theory provides a justification for employees to have equal opportunity regardless of race, religion or gender in a career as long as the employee is competent and qualified in quality. 5. CONCLUSION Based on the results of the analysis described in the previous chapter, the following conclusions that can be drawn: 1. Political visibility determined by firm size has a negative and significant effect on sustainability report disclosure on ISRA listed companies in Characteristics of companies measured by the type of company does not affect the disclosure sustainability report on companies listed ISRA in Gender diversity does not affect the disclosure of sustainability report in ISRAregistered companies in editor@iaeme.com

9 The Effect of Political Visibility, Company Characteristics and Gender Diversity to Sustainability Report Disclosure 6. SUGGESTION Based on the results of research, the suggestions that can be given are: 1. Further research is expected to expand the observation period in order to obtain more variation of data and can predict the results of research in the long run. 2. Further research is expected to expand the number of samples to be studied; Because in this study the sample focuses only on listed companies ISRA in 2014 and 2015, further research is strongly suggested to conduct research on all companies that publish sustainability report in hope of obtaining wider data coverage. 3. Operationally based on the results in the research discussion, this research is expected to be input for interested parties. The Company is expected to be able to pay attention and conduct a wider disclosure on aspects of the human rights sub-category as assessed by indicators HR1, HR9, HR11, HR12. As well as the aspects of the sub categories of society assessed by the SO9 and SO10 indicators on supplier assessment of the impact on the community. REFERENCES [1] Bear, S. Rahman, N. dan Post, C. (2010). The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation. Journal of Business Ethics. Vol. 97 No.2: [2] Dilling, P.F. (2010). Sustainability Reporting in A Global Context. International Business and Economics Research Journal. Vol. 9 No.1; [3] Hackston D dan Milne N.J. (1996). Some Determinants of Social and Environmental Disclosure in New Zealand Companies. Accounting, Auditing, and Accountability Journal. Vol. 9 No.1: [4] Ibrahim, Melinda. Eka Zahra Solikahan and Arif Widyatama. (2015). Karakteristik Perusahaan, Luas Pengungkapan Corporate Social Responsibility, dan Nilai Perusahaan. Jurnal Akuntansi Multiparadigma JAMAL. Vol. 6 No. 1: [5] Kholis Roisah, Joko Setiyono, Paramita Prananingtyas and Elfia Farida, Trends of Global Values In Legal Political Formation of Intellectual Property Law In Indonesia, International Journal of Civil Engineering and Technology, 8(9), 2017, pp [6] R. Lakshminarayanan, S. N. Tiwary and S.M. Jadhav. Does Gender Influence Stress Level In A Police Job? International Journal of Management, 6(8), 2015, pp [7] Dr. A. Selvarani and M. Chandra, Examining the Impact on Industry Background and Gender on Job Satisfaction, Organizational Commitment and Turnover Intent, International Journal of Management (IJM), Volume 6, Issue 1, January (2015), pp [8] Manasi Devendra Parikh, Analysis of Emotional Intelligence as a Strategic Tool for Human Resource Professional Based At Ahmedabad A Perspective With Reference To Gender, International Journal Of Management (IJM), Volume 6, Issue 1, January (2015), pp [9] Indrawati, Novita. (2009). Pengungkapan Corporate Social Responsibility (CSR) dalam Annual Report serta Pengaruh Political Visibility dan Economin Performance. Pekbis Jurnal. Vol. 1 No.1: [10] Kurnianingsih, Heni Triastuti. (2013). Pengaruh Profitabilitas dan Size Perusahaan terhadap Corporate Social Responsibility. Jurnal Riset Akuntansi dan Bisnis. Vol. 13 No.1: [11] Kusumastuti, S. Supatmi and Sastra P. (2007). Pengaruh Board Diversity terhadap Perusahaan dalam Perspektif Corporate Governance. Jurnal Akuntansi dan Keuangan. Vol. 9 No.2: editor@iaeme.com

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