CORPORATE SOCIAL RESPONSIBILITY EFFECT ON STOCK RETURN DURING CORONAVIRUS-19 PANDEMIC: AN EVIDENCE FROM KOMPAS100

• Main Author: Loy, Dylan
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/57692
• Institution: Institut Teknologi Bandung

The Covid-19 Pandemic has impacted the world, especially for the world economy. This includes the stock market in Indonesia, where it experienced another downfall of more than 35 per cent since the crisis in 2008. Companies face a lot of challenges and following with panic market, which makes the market even worse, because of the Covid-19. Moreover, there have been studies where it found a relationship with stakeholders where it could preserve shareholder wealth, including during the Covid- 19 Pandemic. While some found that CSR does not matter in the time of pandemic or crisis. Thus, this research will examine the impact of Corporate Social Responsibility (CSR) on a stock return during the Covid-19 Pandemic in public traded firm in Indonesia. Using 100 companies in KOMPAS100 and ESG Score, including overall scores, social scores, environmental scores, and governance score, from Refinitiv, the researchers try to find the relationship with the stock return, including the raw return and abnormal return, during the crisis period and post-crisis period. The selection of these sample is since KOMPAS100 includes 100 companies with high market capitalisation and high liquidity. In addition, this index includes several sector industries that is needed in the research. This research is interesting to be examined as the concern of CSR is arguable until today as there is no clear result. The hypothesis for this study is that there is a relationship between CSR and Stock Return during the Covid-19. In line with the previous studies, this research reveals a relationship of CSR with the stock return in the Covid- 19 in the Indonesia Stock Exchange. It is found that there is a negative relationship in alternative sample in the crisis period, while in the post-crisis period, it is found a positive relationship of those variables in the post-crisis period. This finding in the post-crisis period can be explained by stakeholder value maximation where in this period, the spending of company in CSR makes stakeholders help company in facing the aftershock effect from the pandemic. Thus, the trust from investors is slowly recovering due to the help of the stakeholders. While in the crisis period, it follows the shareholder’s view where firms’ objective is to increase shareholders’ wealth. If companies spend on CSR, it considered as another tax for the shareholders. With the CSR, since Covid-19 is health related, the investors might be afraid that companies will spend more on helping as part of ethical which decreasing the return of the company. With these findings, it is recommended for firms to invest more on CSR, not only it can act as part of ethical but also helping the performance of the firms. While for the investors, ESG investing is still in the beginning stage, especially in the Indonesia market. It is suggested to invest on high CSR firms as these firms are having better performance than the others based on this research.