Strengthening transparency and performance: The role of independent commissioners in enhancing CSR disclosure's impact on firm performance

Summary

This research paper, titled "Strengthening transparency and performance: The role of independent commissioners in enhancing CSR disclosure's impact on firm performance," explores the intricate relationship between Corporate Social Responsibility (CSR) disclosure and a firm's financial performance, specifically Return on Equity (ROE). The core purpose of the study is to determine the direct effects of CSR disclosure on firm performance and to examine the moderating role of independent commissioners in strengthening this relationship. The authors aim to provide insights into how robust governance mechanisms, through independent oversight, can amplify the positive outcomes of CSR transparency. For its methodology, the study utilized data from publicly listed companies on the Indonesia Stock Exchange. The sample comprised 514 firm-year observations collected over a five-year period, from 2018 to 2022. To analyze the proposed relationships, the researchers employed a moderated regression analysis model. This approach allowed them to evaluate both the direct impact of CSR disclosure on ROE and the conditional effect of independent commissioners on that relationship. A more detailed CSR disclosure measure based on the GRI 2021 framework was used, offering a new perspective in the Indonesian context. The findings reveal a significant and positive correlation between CSR disclosure and firm performance. Furthermore, a crucial discovery is the moderating role played by independent commissioners, who are shown to strengthen this positive relationship. The study suggests that more independent and objective supervision by these commissioners enhances the effectiveness of CSR initiatives and subsequently attracts greater investor confidence. The practical implications of this research are substantial, offering guidance to company management on improving CSR strategies through enhanced oversight and encouraging policymakers and professional institutions to focus on strengthening the competence and accountability of board members through evaluation frameworks and training programs. This is intended to ensure effective governance in CSR practices and promote long-term firm performance.