Corporate Social Responsibility Disclosure and Market Reaction : An Indonesian Study

This paper examines how the market reacts to the disclosure of corporate social responsibility (CSR) of Indonesian listed corporations. Instead of merely looking into the aggregate disclosure of CSR, we also consider the disaggregate measures of disclosure within the CSR context, spanning four dimensions (community involvement, products, employee relations, and the environment). Based on information disclosed in the 2008 and 2009 annual reports, this study employs a data set of “high-profile industry” firms listed on the Indonesia Stock Exchange (IDX). While the aggregate CSR disclosure is not significantly responded by the market, we find different reactions to each dimension. Our empirical results indicate that investors tend to react positively to the community-related and environmental disclosures, whereas a negative investors' reaction is found for the disclosure of employee relations. Since larger firms are generally subject to greater visibility in the market, we also investigate whether firm size is significant in explaining market reaction to CSR disclosure. We find that firm size matters to a particular extent