Company performance and corporate social responsibility: Assessing the role of corporate governance

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Abstract

This study explores the relationship between firm performance (FP), corporate governance (CG), and corporate social responsibility (CSR) among Indonesian firms. It investigates whether strong FP leads to enhanced CSR activities and examines the mediating role of CG in this dynamic. Using data from 96 publicly listed companies on the Indonesia Stock Exchange (IDX) that published sustainability reports between 2019 and 2022, the study analyzes 384 firm-year observations. The findings indicate that firms with superior financial performance are more likely to engage in substantial CSR initiatives. Moreover, the results highlight the critical role of CG in mediating this relationship, suggesting that effective governance practices ensure that financial success translates into socially responsible actions. This research contributes to the understanding of sustainable business practices in emerging markets by emphasizing the importance of governance in aligning profitability with social responsibility. The insights are valuable for policymakers and corporate leaders aiming to promote sustainability through strong governance frameworks.

Keywords: Firm Performance, Corporate Governance, Corporate Social Responsibility, Big Capitalization Companies, Small Capitalization Companies

Authors’ individual contribution: Conceptualization — I.I. and R.C.; Investigation — I.I. and H.F.; Resources — I.I. and S.S.; Writing — Original Draft — I.I. and H.F.; Writing — Review & Editing — I.I. and S.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, G34, M14, L25, O16

Received: 19.08.2024
Revised: 11.12.2024; 20.01.2025; 19.05.2025
Accepted: 11.06.2025
Published online: 13.06.2025

How to cite this paper: Itan, I., Febriana, H., Chen, R., & Septiany, S. (2025). Company performance and corporate social responsibility: Assessing the role of corporate governance [Special issue]. Journal of Governance & Regulation, 14(2), 371–381. https://doi.org/10.22495/jgrv14i2siart16