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Globalization and the Digital Divide Essay

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The globalization era has been developing in recent years. The use of technology has an important role in running the business. Any information about companies can be known in a second. This condition pushes the people in business to provide the accurate, detail and trusted information which is related to the company. It also makes the company compete to improve the performance of their operational activities.

To help understand how modern business development, every company definitely has an orientation to make a high profit, therefore the company tries to build a good image in public. Companies will compete to increase their success both in industry and trade field. At first, the company will be profit-oriented, but as it progresses, it is not only focused on profit-making but also focused on social responsibility to keep the company alive. Companies must think about the impact on their environment.

Rapid business development drives industry growth, especially in Indonesia. An industrial activity must be related to the utilization of resources and produce valuable products. This will have a direct and indirect impact on the environment. The natural resource management industry, especially the management of non-renewable resources (petroleum, natural gas, coal industries, etc.) is a short-term industry, but it has a long-term impact on the environment.

Despite having a positive impact on the economy of a country, an industrial activity also has a negative impact on the surrounding environment. Negative impacts due to activities that cause environmental damage, should be minimized first for the good of the company and the community. At the same time, governments, stock exchanges, markets, investors and the public require companies to be transparent about the goals, performance, and impacts of their sustainability. Then came the practice of CSR (Corporate Social Responsibility) in the business world.

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CSR is the company’s contribution to the stakeholders towards sustainable development by minimizing the negative impact of operational activities. Now CSR is widely known and in Indonesia has many companies that apply it. In addition, the policy has been made regarding the disclosure of CSR as stipulated in Law of the Republic of Indonesia Number 40 of 2007 and mentioned that a company that carries out its business activities in relation to natural resources, is obliged to carry out social and environmental responsibility.

CSR is expressed in a report called Sustainability Report. As reported in www.globalreporting.org (2017), Sustainability Report is a report published by the company about the economic, environmental, and social impacts caused by daily operational activities of the company. One of the guidelines that can be used by companies in carrying out CSR activities is the GRI (Global Reporting Initiative). GRI is an international non-profit organization with network-based structure. GRI encourages the implementation of reporting with Sustainability Report as a way for companies and organizations to become more sustainable and contribute to a sustainable global economy. Companies report their activities based on principles and disclosures of standards in accordance with GRI Generation 4 (G4 Guidelines). In that way, the companies will feel the importance of CSR reporting that can improve their image, bring profit and ensure the survival of the company. However, if a company does not report CSR, it will create a conflict with stakeholders.

Manufacturing is an industry whose main activity is processing or converting raw materials into finished or semi-finished goods so that goods have added value. Each processing of raw materials from manufacturers would produce waste, causes the environment to feel its impact. The large number of manufacturing companies operating in Java Island, making Java is the largest contributor of waste in Indonesia (National Geographic Indonesia, 2011). That is why covering the issue of environmental damage must be with a high skepticism. Because, besides a large number of output produced by the manufacturing company for its operational activities, it is still more output to be spent to repair environmental damage.

Cases of thousands of liters of oil owned by PT Central Georgette Nusantara Printing (CGNP) that spill out pollutes Cibingbin River in Bandung, West Java makes people uneasy because the waste has been polluting the river that empties into the Sanguling Reservoir. The company’s operational activities in this area cause environmental damage and harm the people around. It also causes two hectares of paddy fields managed by local people, threatened crops failing. This condition makes people consider the environmental issues are the main ones. After getting pressure from both the government and the people around the factory, the company is ultimately responsible for the environmental pollution issue. The case above pushes the role of CSR as a business-enhancing success for a company.

This research is using firm size, profitability, leverage, public ownership and industry sensitivity as independent variables and CSR disclosure which uses G4 guidelines as the dependent variable. Firm size is an indicator that can indicate a condition or characteristic (large or small) of a company. Large companies are more in demand by analysts and brokers because they tend to be easy to publish financial reports and tend to be in stable performance positions (Astuti & Nugrahanti, 2015). Profitability measures the overall effectiveness of management in generating profits with its assets (Smart & Graham, 2010, p. 66). It means to measure the activity of the company in earned net profit. Leverage provides a description of the company’s capital structure, thus it can use to see the level of risk of uncollectible debt (Fahrizqi, 2010). Public ownership is the proportion of share ownership owned by the public of the company’s shares (Arthana, 2012). Industry sensitivity can be interpreted as how big the influence of industrial activity that is directly related to the environment (Winarsih, 2015).

The research about the determinant of CSR has been done by some researchers such as Arthana (2012) showed that public ownership and firm size have no significant effect on CSR disclosure. Meanwhile, leverage and profitability have a significant effect on CSR disclosure. However, it was a different research by Kusuma (2012). It showed that that firm size and public ownership have a significant effect on CSR disclosure and leverage does not affect the CSR disclosure. The research by Kusuma (2012) was support by Wijaya (2012), Zanirah (2012) and M. Nur & D. Priantinah (2012) showed that firm size significantly influences, but to leverage and profitability does not affect the disclosure of social responsibility.

Zanirah (2012) showed that the firm size has a positive significant effect and leverage has a negative effect, while profitability has no significant effect on CSR disclosure. M. Nur & D. Priantinah (2012) showed that profitability and public ownership have no significant effect on CSR disclosure. Firm size has a positive significant effect and leverage has a negative significant effect. C. Putra (2012) has a different result compared with M. Nur & D. Priantinah (2012) and Zanirah (2012). It showed that firm size has a significant effect on CSR disclosure in manufacture companies while leverage, profitability, and public ownership have no significant effect.

From earlier studies that show the different effects on CSR disclosure exhibit the research gap with different variable and different object push the researcher to retest research by C. Putra (2012) by adding a variable to improve the results about “THE EFFECT OF FIRM SIZE, PROFITABILITY, LEVERAGE, PUBLIC OWNERSHIP AND INDUSTRY SENSITIVITY ON CSR DISCLOSURE (A CASE STUDY OF MANUFACTURING COMPANIES LISTED IN INDONESIA STOCK EXCHANGE YEAR 2013-2017)”

Research Questions
Based on the background, the research questions that are discussed in this research are:
Does firm size have a partial effect to CSR disclosure on manufacturing companies listed in Indonesia Stock Exchange at 2013-2017?
Does profitability have a partial effect to CSR disclosure on manufacturing companies listed in Indonesia Stock Exchange at 2013-2017?
Does leverage have a partial effect to CSR disclosure on manufacturing companies listed in Indonesia Stock Exchange at 2013-2017?
Does public ownership have a partial effect to CSR disclosure on manufacturing companies listed in Indonesia Stock Exchange at 2013-2017?
Does industry sensitivity have a partial effect to CSR disclosure on manufacturing companies listed in Indonesia Stock Exchange at 2013-2017?
Do firm size, profitability, leverage, public ownership and industry sensitivity have a simultaneous effect to CSR disclosure on manufacturing companies listed in Indonesia Stock Exchange at 2013-2017?
Research Limitation
The discussion of the problem is limited to affecting some variable to CSR disclosure, which consists of firm size, profitability, leverage, public ownership and industry sensitivity. The company which is observed is manufacturing companies listed on Indonesia Stock Exchange at 2013-2017.
Research Purpose
To analyze whether firm size has a partial effect to CSR disclosure to manufacturing companies listed in Indonesia Stock Exchange at 2013-2017.
To analyze whether profitability has a partial effect to CSR disclosure to manufacturing companies listed in Indonesia Stock Exchange at 2013-2017.
To analyze whether leverage has a partial effect to CSR disclosure to manufacturing companies listed in Indonesia Stock Exchange at 2013-2017.
To analyze whether public ownership has a partial effect to CSR disclosure to manufacturing companies listed in Indonesia Stock Exchange at 2013-2017.
To analyze whether industry sensitivity has a partial effect to CSR disclosure to manufacturing companies listed in Indonesia Stock Exchange at 2013-2017.
To analyze whether firm size, profitability, leverage, public ownership and industry sensitivity have a simultaneous effect to CSR disclosure to manufacturing companies listed in Indonesia Stock Exchange at 2013-2017.
Benefit
For Company
This study is expected to give information for manufacturing companies in preparing meaningful sustainability reports and making steady sustainability reporting and directed to standard practice.
It contributes to the understanding of determinants of CSR disclosure to improve the implementation of disclosure guidelines.
This study is expected to be an input for companies in doing consideration and decision making which will be useful in providing an additional value of the company.
For investor
As an overview of CSR disclosure that serves as a reference for investment decision making.
For accounting department
As a meaningful contribution to the accounting department to develop a study of financial management especially for CSR disclosure.
For student
This study helps extends the scope of previous studies by introducing independent and dependent variables engage with CSR.
The results of this study are expected to be a reference and comparison for further research, which is a concern with the CSR disclosure.
Glossary
Firm Size
Firm size is the number of assets owned by the company. Thus, the large and small of a company can be seen by its assets ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “DOI” : “10.1017/CBO9781107415324.004”, “ISBN” : “9788578110796”, “ISSN” : “1098-6596”, “PMID” : “25246403”, “author” : [ { “dropping-particle” : “”, “family” : “Rahman”, “given” : “Arif”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Widyasari”, “given” : “Kurnia Nur”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Jurnal Akuntansi & Auditing Indonesia”, “id” : “ITEM-1”, “issue” : “1”, “issued” : { “date-parts” : [ [ “2008” ] ] }, “page” : “25-35”, “title” : “The analysis of company characteristic influence towards CSR disclosure: Empirical evidence of manufacturing companies listed in JSX”, “type” : “article-journal”, “volume” : “12” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=ad81e84f-e72e-4aeb-998f-b3df3f96da8f” ] } ], “mendeley” : { “formattedCitation” : “(Rahman & Widyasari, 2008)”, “plainTextFormattedCitation” : “(Rahman & Widyasari, 2008)”, “previouslyFormattedCitation” : “(Rahman & Widyasari, 2008)” }, “properties” : { “noteIndex” : 9 }, “schema” : “http://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Rahman & Widyasari, 2008).
Profitability
Profitability measure the focus on company profits ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “author” : [ { “dropping-particle” : “”, “family” : “Marcus”, “given” : “Brealey Myers”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “edition” : “Lima”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2006” ] ] }, “number-of-pages” : “372”, “publisher” : “Erlangga”, “title” : “Dasar-Dasar Manajemen Keuangan Perusahaan Jilid 2”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=eaa4ed05-0031-4fc6-9f14-1d31d7503a15” ] } ], “mendeley” : { “formattedCitation” : “(Marcus, 2006)”, “manualFormatting” : “(Marcus, 2006, p. 80)”, “plainTextFormattedCitation” : “(Marcus, 2006)”, “previouslyFormattedCitation” : “(Marcus, 2006)” }, “properties” : { “noteIndex” : 9 }, “schema” : “http://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Marcus, 2006, p. 80). Big companies are expected to earn more profit than small companies. It also measures the using of the efficiency of company assets ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “author” : [ { “dropping-particle” : “”, “family” : “Husnan”, “given” : “Suad”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Enny Pudjiastuti”, “given” : “”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “edition” : “Pertama”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “1996” ] ] }, “publisher” : “Unit Penerbit dan Percetakan (UPP) – AMP YKPN”, “publisher-place” : “Yogyakarta”, “title” : “Dasar-Dasar Manajemen Keuangan”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=561254b1-8c37-4dae-9f07-9552249e0f60” ] } ], “mendeley” : { “formattedCitation” : “(Husnan & Enny Pudjiastuti, 1996)”, “manualFormatting” : “(Husnan & Enny Pudjiastuti, 1996, p. 73)”, “plainTextFormattedCitation” : “(Husnan & Enny Pudjiastuti, 1996)”, “previouslyFormattedCitation” : “(Husnan & Enny Pudjiastuti, 1996)” }, “properties” : { “noteIndex” : 9 }, “schema” : “http://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Husnan & Enny Pudjiastuti, 1996, p. 73).
Leverage
Leverage means measuring the company’s ability to fulfill its financial obligations. It can be that leverage is measure how far the company uses debt ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “author” : [ { “dropping-particle” : “”, “family” : “Husnan”, “given” : “Suad”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Enny Pudjiastuti”, “given” : “”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “edition” : “Pertama”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “1996” ] ] }, “publisher” : “Unit Penerbit dan Percetakan (UPP) – AMP YKPN”, “publisher-place” : “Yogyakarta”, “title” : “Dasar-Dasar Manajemen Keuangan”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=561254b1-8c37-4dae-9f07-9552249e0f60” ] } ], “mendeley” : { “formattedCitation” : “(Husnan & Enny Pudjiastuti, 1996)”, “manualFormatting” : “(Husnan & Enny Pudjiastuti, 1996, p. 70)”, “plainTextFormattedCitation” : “(Husnan & Enny Pudjiastuti, 1996)”, “previouslyFormattedCitation” : “(Husnan & Enny Pudjiastuti, 1996)” }, “properties” : { “noteIndex” : 9 }, “schema” : “http://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Husnan & Enny Pudjiastuti, 1996, p. 70).
Public Ownership
Public ownership is the proportion of share ownership owned by the public of the company’s shares ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “author” : [ { “dropping-particle” : “”, “family” : “Arthana”, “given” : “Ronny”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Jurnal Ilmiah Mahasiswa FEB UB”, “id” : “ITEM-1”, “issue” : “2”, “issued” : { “date-parts” : [ [ “2012” ] ] }, “page” : “1-14”, “title” : “Pengaruh Karakteristik Perusahaan Terhadap Pengungkapan Tanggung Jawab Sosial Perusahaan (CSR) Pada Perusahaan Yang Terdaftar Di Indeks LQ45 Bursa Saham Indonesia (BEI)”, “type” : “article-journal”, “volume” : “1” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=848daaaf-51e9-409e-b044-80ae139493e6” ] } ], “mendeley” : { “formattedCitation” : “(Arthana, 2012)”, “plainTextFormattedCitation” : “(Arthana, 2012)”, “previouslyFormattedCitation” : “(Arthana, 2012)” }, “properties” : { “noteIndex” : 9 }, “schema” : “http://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Arthana, 2012). The bigger the share which is owned by the public, the more information will be explained, the investors want to get more information about its investment and make sure that it is safely managing then the obligation will be fulfilled.
Industry Sensitivity
Industry sensitivity can be interpreted as how big the influence of industrial activity that is directly related to the environment ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “author” : [ { “dropping-particle” : “”, “family” : “Winarsih”, “given” : “Arga Mustika”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2015” ] ] }, “title” : “Pengaruh Media Online , Sensitivitas Industri Dan Struktur Corporate Governance Terhadap Kualitas Environmental Disclosure Governance (Studi Pada Perusahaan High Profile di BEI)”, “type” : “report” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=d495d810-1aa1-41f2-8dc4-6690588eae85” ] } ], “mendeley” : { “formattedCitation” : “(Winarsih, 2015)”, “plainTextFormattedCitation” : “(Winarsih, 2015)”, “previouslyFormattedCitation” : “(Winarsih, 2015)” }, “properties” : { “noteIndex” : 10 }, “schema” : “http://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Winarsih, 2015).

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