Investigating the determinants of partnership and community development programs: Indonesia perspectives

Abstract

The purpose of this study is to provide evidence on the relationship between firm visibility and partnership and community development programs. The Partnership and Community Development (PCD) program was designed by government to enhance the capabilities of small businesses and improve social conditions in Indonesia. Through the PCD program, companies can optimize and create a synergy between their activities and stakeholders to achieve community welfare. A sample was selected from the Ministry of State-Owned Enterprises’ website in 2017. The annual and sustainability reports of all State-owned Enteprises were examined to measure the performance of PCD programs. The financial data were sourced from the Bloomberg database. Firm visibility was measured by profitability, firm size and capital intensity. This study provides evidence on the relationship between profitability, firm size, capital intensity and the level of engagement in the PCD program. This finding suggests that the visibility of SOEs is a significant driving force for participation in social responsibility activities through the PCD program. This study augments accounting and business literature by exploring the role of government as the primary stakeholder in encouraging the uptake of PCD. This finding suggests that the stakeholder pressure on SOEs in improving PCD programs seems can be explained by stakeholder theory This study is one of a few studies to investigate the impact of firm visibility on partnership and community development programs in a developing country.

Keywords:

• Sustainability
• partnership
• community development
• stakeholder
• state-owned enterprises
• Indonesia

PUBLIC INTEREST STATEMENT

This study examines the relationship between profitability, firm size, capital intensity and the level of engagement in the PCD program. The results show that profitability, firm size, and capital intensity are determinants of PCD. This finding indicates that the stakeholder pressure on SOEs in improving PCD programs seems can be explained by stakeholder theory. The theoretical implication of this study suggests that SOEs in Indonesia are motivated to engage in PCD programs mainly as a form of legal accountability to the government. PCD practices in SOEs are influenced by political aspects rather than the economic aspects. This is because SOEs are responsible for providing various social functions. Thus, the findings of this study will provide a new insight into what factors influencing PCD practice in SOEs.

Notes

1. The term “partnership and community development” is used throughout the paper. This term is defined in accordance with the Ministry for State-Owned Enterprises’ Ministerial Regulation Number PER-02/MBU/7/2017. This term is used interchangeably with corporate social responsibility and corporate community involvement.

Additional information

Funding

This work was supporte by the Universitas Diponegoro [329-109/UN7.P4.3/PP/2019].

Notes on contributors

Indira Januarti

Indira Januarti is an Associate Professor of Accounting at the Department of Accounting, Universitas Diponegoro, Semarang, Indonesia. She has published some articles in Journal of Asia Business Studies, International Journal of Energy Economics and Policy, Journal for Global Business and European Research Studies Journal.

Faisal Faisal

Faisal Faisal is a Professor of Accounting at the Department of Accounting, Universitas Diponegoro, Semarang, Indonesia. His main research is in financial reporting, sustainability reporting and enterprise risk management area. He has published some articles in Corporate Social Responsibility and Environmental Management, International Journal Business Governance and Ethics, Cogent Business & Management, Australasian Accounting Business and Finance Journal, Journal of Human Resource Costing and Accounting, International Journal of Managerial and Financial Accounting, Journal of Applied Business Research.

Resi Juliati Situmorang

Resi Juliati Situmorang is a graduate student from the Department of Accounting, Universitas Diponegoro, Semarang, Indonesia.