Abstract:

The emergence of corporate social responsibility (CSR) initiatives currently suggests that CSR policies has changed from what seen before as an unnecessary and even a burden to business function into an unprecedented ways to increase corporate value and indirectly contribute to the increase in sales. Using a reliable source of data on corporate social performance (CSP), this study would explore and tests the relationship between corporate social performance and corporate financial performance and the impact it has on sales and gross margin with the expectation of providing insight into sales strategies that may be utilized to reach the optimum impact to the relationship. The sample selected from listed companies of Indonesia Exchange (IDX), and the data set includes from Financial and Annual Reports of listed companies in IDX. The relationships are tested using time-series regressions. Results indicate that CSP and CFP have a positive relationship in both directions, supporting the perspective that CSR programs have fundamentally positive impact. Results also indicated the increased CSP leads to increases in gross margin, indicating that customers are willing to pay a premium price for the products and/or services of a company with CSR initiatives. It is argued in this paper that firms may increase their sales by investing in CSR assuming increases in CSR investments leads to a higher CFP as long as the programs could transform from socially responsible, philanthropic endeavor, into something that increased the value of the company.