Social and Environmental Disclosure and Earning Persistence: Evidence Mining Sector in Indonesia
Meliyanti, Nora Sri Hendriyeni, Ph.D., CA
PPM School of Management, Indonesia
meliy.thd[at]gmail.com
PPM School of Management, Indonesia
nora.hendriyeni[at]gmail.com
Abstract
Introduction Earnings persistence occurs by several factors such as innate factors (company age, company size, competition) and discretionary factors (risk aversion, auditor quality) (Francis et al., 2004; Mahjoub & Khamoussi, 2012). Other factors that can influence earnings persistence are non-financial aspects such as social and environmental. Companies executes good social and environmental activities, have a tendency to provide higher quality earnings information to attract investors (Mahjoub & Khamoussi, 2012). On the other side, two of the financial factors are the level of sales volatility and debt levels. Volatility sales illustrates the quality of profits (Mahjoub & Khamoussi, 2012) because it has an effect on the level of profits that will cause a lot of changes (noise) (Fanani, 2010). On the other hand, if the companys profits are unable to pay the interest expense (due to debt) and its principal, then it will lead to failure and is believed to be unable to obtain a stable profit (Fanani, 2010). In previous studies explained that the quality of information available on CSR (Corporate Social Responsibility) can improve company performance, especially profitability (Bidhari, Salim, & Aisjah, 2013). Other studies explain that social and environmental policies have a positive relationship with earnings quality (Mahjoub & Khamoussi, 2012). According to Laksmana & Yang (2009), companies that disclose social and environmental information on the financial statements, have stable earnings that affect earnings persistence compared to other companies. This research is focused on social and environmental disclosure on CSR reports on earnings quality which is used as a proxy for earnings persistence with sales volatility and debt level as moderation variables. The research also focused on sectors that have direct social and environmental effects, evidence from the mining sector in Indonesia. This research was conducted in Indonesia from 2014 to 2018. Methodology This study uses simple and multiple linear regression with interaction term for determining moderating variables. We also do classic assumption test beforehand such as normality test, heterocedasticity test and multicollonierity test. This study uses 3 Models to determine its hypotheses. We use 210 data from mining sector in Indonesia which are processed with purposive sampling. Then we obtained 41 sample data. This study uses social and environmental disclosures with the GRI-G4 index (and only concern about social and environmental category), earnings persistence using a proxy earnings quality (this proxy is a negative coefficient value from the annual earnings regression model (AR1 model) with the following calculation (Fanani, 2010; Francis et al., 2004; Mahjoub & Khamoussi, 2012)), sales volatility with sales variation and debt levels with DTA (Debt to Asset Ratio). This study also uses control variables such as company size variables (log to total ass
Keywords: Corporate Social Responsibility, Earning Persistence, Social and Environmental Disclosure
Topic: Cost Management and Accounting Management