Corporate Social Responsibility and Financial Performance in the Indonesian Consumer Goods Industry Through Market Share and Idiosyncratic Risk

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Josua Tarigan
Natasha Monica
Tristan Nguyen

Abstract

This paper explains the correlation between corporate social responsibility (CSR), market share, idiosyncratic risk, and corporate financial performance (CFP). The role of market share (MS) and idiosyncratic risk (IR), which cause an indirect effect, are also examined. Fifty-seven Indonesian-listed consumer goods companies were studied using partial least squares analysis. The findings suggest that CSR could act as a mitigating risk tool and improve the market’s competitiveness. Investing in CSR eventually leads to a long-term increase in financial performance. This paper makes a valuable contribution, offering new and fresh insights into the long debates regarding the CSR-CFP relationship, which has been previously found to be inconsistent from prior studies, through the role of MS and IR as mediating variables that link CSR and CFP. CSR has been proven to build stakeholders’ trust and thus increase MS and lower IR.

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