Corporate Social Responsibility Performance and Ownership Structures adding Value to Indonesia’s Banking Sector

: This research examines the link between corporate social responsibility (CSR) and ownership structure on firm value to encourage sustainability of the banking industry in Indonesia. The study uses the Kinder, Lydenberg, and Domini’s (KLD) assessment to evaluate CSR in the banking sector in Indonesia, and further, it uses economic value added to assess a firm’s value. This research studied 37 banks in Indonesia from 2013 to 2018. The research model employed weighted least square panel tests. Results reveal that the CSR influence is significantly positive for firm value. However, other ownership structures that have a similar effect on firm value are government ownership and foreign institutional ownership. The results further indicate that CSR can be a means of communication and can form a part of a bank’s strategy to enhance value, especially the elements of diversity, environment, and products. Moreover, this research finding provides decision-makers with in-depth knowledge regarding the beneficial effects of ownership structure on company value. The study develops the results from previous studies by discussing each component of CSR performance in the KLD and determines that each component has a varying effect on firm value. and


INTRODUCTION
CSR, the stakeholder implementation theory and the extent of corporate governance, is a process to link social care, environment, ethics, human rights, and consumers into business activities and to optimize shared value with the owner and shareholders (Theodoulidis et al., 2017). In the past few years, corporate social responsibility (CSR) has become a developed global concept (Carroll, 2015). CSR symbolizes many world wellknown perspectives and has significantly developed. By implementing CSR, the company will be able to meet stakeholders' desires. Moreover, CSR can reduce the legitimacy gap between the firm and the public; thus, it encourages the firm to be transparent (Semuel et al., 2019). In other words, legitimacy theory implies that the organization's top management is responsible for figuring out the legitimacy gap, administering social practice, and disclosing it to stakeholders to ensure accountability (Khan et al., 2013). CSR is an essential factor for the company to enhance financial performance, create a company positive value, and increase company internal ability, such as becoming a pioneer in the industry to compete (Maqbool & Zameer, 2018). In addition to it, CSR reduces risk and enriches company reputation (Izzo, 2014;Agyemang & Ansong, 2017;Bhuiyan & Nguyen, 2019) so that company has a minimum chance to go bankrupt compared to a company with non-CSR (Maqbool & Zameer, 2018). The CSR concept is the triple bottom line, which comprises people, planet, and profit (Farooq et al., 2021). These three are essential values to determine company success (Devie et al., 2018). CSR activities transform public perspective towards the company, in a sense, that they now can feel their interest get attention. It then makes the company's reputation be formed and enhances financial performance (Agyemang & Ansong, 2017). Feng et al. (2017) state that CSR's devastating impact besides reputation is to elevate ethics, workers, and loyalty towards the company (Kabir & Thai, 2017). Thus, workers can be more productive in working and can improve company performance. CSR implementation makes stakeholders willing to purchase company products and assume that the company's little profit is donated (Semuel et al., 2019). Therefore, CSR activities automatically improve economic value added as good reputation increases value over anything either done or stated by the company (Eberl & Schwaiger, 2005;Agyemang & Ansong, 2017). Verbeeten et al. (2016) also confirm that CSR disclosure improves financial performance and access to finance, reduces financial risk, raises the accuracy of analysis prediction, lowers the cost of capital, and enhances firm value.
Corporate Social Responsibility (CSR) is a company's obligation to contribute to society's welfare in which it operates. In line with its inherent purpose, the CSR implementation needs to create benefits for society. Sun (2012) divides CSR into five dimensions: vision, community relations, workplace, accountability, and marketplace. Sun & Rakhman (2013) further explain that CSR is for social welfare and other parties, such as workers and the company's environment. Sun & Rakhman (2013); Nguyen & Nguyen (2015) assess CSR using Kinder, Lydenberg, and Domini's (KLD), which consists of two main big groups: strength and concern. Strengths are to evaluate positive things done by a company, whereas concerns are related to negative things. KLD assesses seven qualitative areas: community, corporate governance, diversity, employee relations, environment, human rights, and products. These seven areas complete the study of Sun (2012), which divides CSR into five dimensions. Community is related to voluntary company activities as evidence of its contribution and concern towards society in the forms of charity, building house and worship support, and elsewhere. Corporate Governance sees how a company discloses information related to corporate governance by upholding transparency and accountability values. Diversity is concerned with women or minority gender. The company is charged not to discriminate against any gender, including the minority gender, so that all parties will receive equal opportunities. Employee Relations are how a company maintains good relations with its workers, which can be done by providing them facilities and pension funds. The environment is a form of company responsibility to be more cautious, so its activities do not damage nature. Human Rights is how the company fulfills the rights of its workers or the people around it. Lastly, products are how the company gives customers safe, reliable, and qualified products.
Besides CSR, this research is also to examine the relationship between ownership structure and firm value. One of the determining factors of bank performance is ownership structure (Beck et al., 2013). Ownership structure refers to ownership by any shareholder groups (Lappalainen & Niskanen, 2012), government, domestic institution, foreign institution, and management ownerships. The ownership structure is one of the mechanisms of good corporate governance, which is strongly believed to be able to give influence over firm performance as it reduces agency cost (Altaf & Shah, 2018) and to determine its ability to monitor managers (Mamatzakis et al., 2017). Ownership is varied, and each ownership group impacts financial performance (Shawtari, 2018). State or government ownership positively impacts firm value (Ghazali, 2007), domestic institution ownership enhances firm performance (Panda & Leepsa, 2019). Management ownership raises firm performance as it reduces agency problems between owner and manager (Lappalainen & Niskanen, Indonesian Journal of Sustainability Accounting and Management, 2021, 5(1), 91-102 2012). Also, it is believed that foreign institutional ownership positively impacts bank performance (Kabir & Thai, 2017). Referring to Wahba & Elsayed (2015), the possibility of enhancing a firm competitive advantage by investing in CSR is more prominent because the change of investor attitude towards society in the past few years has increased. Accordingly, the CSR concept, even more, becomes a business agenda for business people. However, many good and bad opinions connected to the relation between CSR and institutional investors exist. Support to the positive side is stated by Suto & Takehara (2017) that the institutional investor will encourage the firm to conduct CSR, even foreign investors. Conducting CSR leads to enhance financial performance (Maqbool & Zameer, 2018). State ownership or government ownership is positively connected to CSR implementation, which can raise the firm value. Ghazali (2007) declares that government ownership indirectly means that the firm is owned by society; thus, the firm will be more involved in holding social responsibility programs and will disclose more to legitimate its existence. Furthermore, Haque & Shahid (2016) believe that government ownership in the financial sector benefits the country with less developed institutions.
This research investigates the influence of CSR performance and ownership structures on the firm value of Indonesia's banks. This research also involves capital adequacy, asset quality, management adequacy, and earning power as the control variables to estimate the bank's value. This research assesses firm value by economic value-added, which is relatively rare in previous studies. Economic value added does not only measure profitability but also considers the cost of equity. Therefore, this assessment is believed to be more robust to assess firm value. Moreover, CSR assessment in this research employs KLD, which consists of seven qualitative areas more than prior research.

METHODS
The selected sector is the banking industry since it has a significant role in the sense that banks dominate the state's economy as credit providers for business, particularly in developing countries (Abadi et al., 2016). Sample companies are 37 conventional banks that run their business in Indonesia. Secondary data to support this research are gained from financial reports, annual reports of each bank, and any news from online media in 2013-2018. The total observation is displayed in Table 1. Table 2 shows a summary of the variables' operational definitions, formulas used, and source of data.
CSR as an independent variable is measured using KLD, which scores seven components: community, corporate governance, diversity, employee relations, environment, human rights, and products (Nguyen & Nguyen, 2015). If the firm takes a positive action over the seven components, its assessment goes to the strength category and is given a score of 1, but if not, it is scored 0. Contrary to strengths, score one is given to concerns if the firm does negative things, and score 0 if it does not. For each component, add the strengths and concerns, then the total strengths will be subtracted from the total concerns. The independent variable's influence over the dependents variable (EVA) is not influenced by outside factors that are not investigated. This research uses bank performance as a control variable. Referring to Erol et al. (2014), analysis applying bank performance with capital adequacy, asset quality, management adequacy, and earning power elements is a general approach. Capital adequacy is gained from the ratio of bank capital over its asset. Asset quality is determined mainly by loan quality. The asset represents the majority of the whole bank balance sheet. The ratio used to determine asset quality uses the division result of loans under follow-up (net) and total loans receivable. As an additional assessment, the ratio of fixed assets and total assets are also considered. The assessment to determine management adequacy is the operating expense ratio over the total assets. Bank performance earning power is assessed using total income relative to total expense. Firm's voluntary actions to integrate environmental and social problems into business and towards stakeholders to gain sustainability. Total CSR = difference between the total score of strengths and concerns  problem if the p-value of the chi-square is less than 0.05. The model is free from multicollinearity problems when the variance inflation factor (VIF) is less than 10. firm-year of the banking sector. The result shows that the dispersion of each variable's data is not bias, which can be seen on the table that the standard deviation of each variable is less than 3.00. Of the seven CSR qualitative areas measured, the two most disclosed banking parts are related to community (mean = 5.144144) and corporate governance (mean = 5.382883).

RESULTS AND DISCUSSION
Meanwhile, the least disclosed is human rights (mean = 2.175676). It implies that, on average, the bank samples do less disclosure concerning human rights and employment. For example, some banks in this research, Bank Harda International and Bank Pembangunan Daerah Banten got weak assessment that banks are less concerned about diversity in the firm (the concerns are bigger than strengths); the result shows -1, minimum value, on variable diversity. Some banks have ever been owned by both government and domestic institutions totally for ownership, and the value is maximum 1. Bank IBK Indonesia has once been owned by the domestic institution, whereas Bank Pembangunan Daerah Jawa Timur has once been owned totally by the government. Table 4 shows that all models are suitable for the fixed-effect model since the Hausman test results give p-values less than 0.05. The models also have a heteroscedasticity problem, as the p-values are less than 0.05. Therefore, the models are examined using the Weighted Least Square panel (WLS Panel). Table 5 shows the results of multicollinearity test as well as the WLS panel test for each model. The VIF results confirm that the residuals are free from the multicollinearity.  According to Tables 5 and 6, this research discovers that CSR positively influences economic value added. It answers and confirms hypothesis 1. Described in detail, of the seven qualitative areas of CSR, four of them, diversity, environment, human rights, and products, give significant influences over economic value added. The CSR disclosure can provide signs by giving additional relevant information to stakeholders (Matuszak & Różańska, 2019), and a specific information regarding company's constraint even can enhance firm value (Verbeeten et al., 2016;Ronald, Ng, & Daromes, 2019). CSR performance becomes a communication medium that can resonate with stakeholders (Watts et al., 2019). Enclosing CSR in an annual report can determine firm actions to meet public hope (Matuszak & Różańska, 2019). The CSR activities can lead to increase of employees' commitment and ethics in the firm, which subsequently enhance firm performance and value (Feng et al., 2017), create goodwill (Verbeeten et al., 2016), firm reputation (Agyemang & Ansong, 2017;Bhuiyan & Nguyen, 2019) and customer retention (Eberl & Schwaiger, 2005).
Investors give positive respond when banks disclose diversity, environment, and products. Two diversity components that can motor investors, are things related to work-life benefits and board of directors. Diverse boards recommended by both internal and external stakeholders will trigger both role and performance to be effective (Goyal et al., 2019). This good performance will enhance profitability to create EVA. When banks concern the environment, it means that banks take some significant steps to preserve the environment. In 2015, Bank Rakyat Indonesia made an environmentally-friendly innovation by developing 50 units of solar power automatic teller machine (ATM). It is a form of product innovation by still preserving the environment. Thus, investors will see the firm's positive side, which makes their trust over the firm increase. On the contrary, Indonesian Journal of Sustainability Accounting and Management, 2021, 5(1), 91-102 the component of human rights reveals a negative relation towards economic value added; It implies that the more banks disclose matters related to human rights, the more they will lower the banks' value. 4.41E-20 1.34E-23 *p-values < α = 10%; **p-values < α = 5%; ***p-values < α = 1% Concerning the relation between ownership structure and economic value added, the results show that government ownership and foreign institutional give significant influence. The test result of government ownership is consistently showing that this ownership is the most dominant in the banking industry. Government ownership provides a positive impact over economic value added so that hypothesis 2 is confirmed. This result is in line with Ghazali (2007), which states that government ownership makes the firm more involved with CSR program and do more disclosures of which the intention is to raise the firm's value (Agyemang & Ansong, 2017 In Indonesia, many big banks belong to state ownership. Often, direct state ownership is associated with pursuing political goals by sacrificing other firm shareholders (Khan et al., 2013). Before the financial crisis in 1997, the ownership concentration was high. A single shareholder could have more than 50% of bank equity. However, government intervention significantly changed ownership concentration. The government provided a bank recapitalization program in which the government injected new capital. The majority of bank shareholders provided up to 80% of funding need and the rest of the need funds.
Nevertheless, if the majority of shareholders failed to do so, the bank would be taken over by the government. This program results in bigger ownership concentration as the government always becomes the temporary majority shareholder up to the investment (Agusman et al., 2014). Furthermore, the banking sector of Indonesia has been open to foreign investment. The changing regulation and banking policy in Indonesia has widened access for foreign penetration into the local market. At present, foreign banks have been permitted to acquire local banks and establish joint ventures and foreign bank branches called bank foreign de novo. Foreign companies are obliged to maintain their reputation in the host country because they are expected to pay higher dividends (Setiawan et al., 2016).
The favorable effect of foreign institutional ownership is in line with the study of Kabir & Thai (2017). Some underlying matters are that foreign shareholders love to negotiate and monitor the firm (Huang & Zhu, 2015). They bring new technology, the current technique, practical managerial skill, and relevant knowledge to set a benchmark that fits firm performance (Mamatzakis et al., 2017). There will be many advantages gained by a bank when there is foreign ownership. Even if they are capable of sharing knowledge on how to choose the most sophisticated and the fittest strategy; to increase operational efficiency (Mamatzakis et al., 2017); to be more productive and to have good capital adequacy (Panda & Leepsa, 2019); and also highly committed (Kabir & Thai, 2017). To represent the foreign investor interest, the companies have foreign directors' representative in the firm who are equipped with some skills; they are likely more excellent than other members and therefore can enhance performance and create value for the firm (Mamatzakis et al., 2017).
Meanwhile, domestic institution ownership does not affect firm value. The result is matched with what is denoted by Musallam et al. (2019) that there is a possibility that domestic institution role is not efficient on monitoring manager so that it leads to firm performance decrease. Table 3 shows that the proportion of domestic institutional ownership in Indonesia's Bank is lower than that of foreign institutions. Besides, it is expected that the domestic institutions may come from several institutions, which affects the low control to the banks. Lins (2003) adds that domestic investor has neither significant investment nor political freedom so that foreign investors are more capable of monitoring. It is consequently failed to accept hypothesis 3a.
Lastly, management ownership reveals an insignificant influence on firm value. It means the result cannot accept hypothesis 4. Mandacı & Gumus (2010); Lappalainen & Niskanen (2012) present that both positive and negative effects of managerial ownership depend on how big the management ownership is. According to those two previous studies, positive relation is found if the ownership is low, from 0% to 5%, whereas negative relation is if the ownership is high, 5% to 25%. The higher management ownership will make managers worry about their interest, which decreases firm value (Mandacı & Gumus, 2010). Bokpin (2013) denotes that management ownership in a firm makes cost and profit inefficient, even though management ownership makes loan management better. Table 3 shows that this study's average management ownership is 0.012933 or 1.29%, which is low. The small percentage of management ownership on the ownership structure implies that the internal funding is low; thus, management's power is not strong enough to create value. The relation between ownership concentration and firm value is U-shaped (Lozano et al., 2016). Accordingly, the right ownership proportion can add plus value to the firm. The finding shows that capital adequacy has a negative impact on economic value added. The statistical result shows that asset quality negatively affects Indonesian Journal of Sustainability Accounting and Management, 2021, 5(1), 91-102 economic value added. Garcia & Guerreiro (2016) discover the same finding. Similarly, earning power also appears to have negative relations.

CONCLUSION
The primary purpose of this research is to determine and to evaluate the CSR relation with the seven qualitative areas, namely: community, corporate governance, diversity, employee relations, environment, human rights, and products, which are assessed using KLD over firm value. Besides CSR, this research also intends to determine the relationship between ownership structure: government, domestic institution, foreign institution, and management ownership over firm value. This research enriches the results of previous studies related to CSR in the banking industry by analyzing how CSR performance and ownership structure simultaneously affect firm value. This research develops a discussion of CSR performance into each of CSR component in KLD and finds that each component has a varying effect on firm value. Firm value in this context is measured by economic value-added, which is still rarely used but is more accurate to assess firm value. The models are examined in Indonesia's conventional banks. This research discovers that CSR performance is favorable in enhancing firm value. The seven components of CSR performance give different impacts. For this reason, banks, on the one hand, need to do more disclosures on diversity, environment, and products while reducing the disclosures related to human rights to raise the firm value. This research also finds that government ownership and foreign institution ownership have significant impacts on firm value. Government ownership positively impacts EVA. The presence of government investors in the company can push the company to run more CSR programs to legitimate its existence. Foreign institution shows a positive relation with EVA. Foreign stakeholders are strongly believed to do more negotiation and monitoring in the firm, to share knowledge on how to choose the most sophisticated and fittest strategy to enhance operational efficiency, to be more productive, to have good capital adequacy, and to be highly committed. On the contrary, domestic institutions and management ownerships reveal an insignificant relation, which is understandably possible as there is a potentially inefficient role of the domestic institution and management shareholders in controlling managers, leading to firm performance decrease. In addition, this research contributes some thinking to decision-makers; for instance, the manager can determine the right strategy and policy to communicate and implement CSR activities. For investors, this research fulfills their information need as a reference to make an investment decision. Investors will appreciate that the firm transparently discloses strengths and concerns and will value such action as a gentle one. On the other hand, concern disclosures let investors see how capable the firm fixes itself to be a better one. Besides being beneficial for investors, this research benefits the government in terms of providing CSR information in the banking sector and in line with government's intention to raise society's welfare. One limitation of this research is that it does not determine how big each ownership proportion is to enhance firm value. The following research can consider discovering the right proportion related to ownership. Although CSR empirical measurements are varied while the business keeps developing, it is highly probable that the CSR measurement method also develops. It is undoubtedly expected that future researchers can apply the up-to-date CSR measurement method.