Doktoralina, Anggraini, Safira, Melzatia, Yahaya: The Importance of Sustainability…

The Importance of Sustainability Reports In Non-Financial

Companies

Caturida Meiwanto Doktoralina1, Dewi Anggraini2, Safira3, Shinta Melzatia4

Faculty of Economics and Business,2,3
Universitas Mercu Buana, Jakarta, Indonesia1,2,3

Salimah Yahaya5
Centre For Islamic Development Studies (ISDEV)
Universiti Sains Malaysia, Pulau Pinang, Malaysia

[email protected]
[email protected]; [email protected];
[email protected]; [email protected]

Abstract: The sustainability report (SR) has become a necessity for companies. Its role is
crucial for the development of a company because it includes both social and
environmental aspects. However, there are still companies that have not properly
conducted sustainability report disclosures (SRDs). Therefore, this study aims to examine
the effects of profitability, leverage and liquidity on SRDs. In particular, we explore the
implications of regulations that require the disclosure of environmental and social
information in non-financial companies listed on the Indonesia Stock Exchange (IDX) in
2013-2017. The sample in this study was 65 from 13 companies that met the criteria, and
the study utilised the purposive sampling method. The study results found that first,
profitability proxied by return on assets (ROA) did not significantly influence SRDs.
Second, leverage proxied by debt to assets ratio (DAR) has a significant negative effect on
SRDs, and third, the liquidity proxied by the current ratio (CR) has a significant negative
effect on SRDs. The results of this study are expected to increase knowledge for readers,
especially investors, so they can pay better attention to a company's social and
environmental activities when investing.
Keywords: return on assets, debt assets to ratio, current ratio, sustainability report

BACKGROUND
Growth in the business and industrial sectors can be seen in the increasing number of
companies (Means, 2017). That increase means that the business being conducted is
generating profits (Gunawan and Wahyuni, 2013). A company's profit is optimised
through the implementation of strategic financial management functions, namely by
making policies that influence financial decisions positively affecting the company's social
value (Saeidi, Sofian, Saeidi, Saeidi, and Saaeidi, 2015). Positive social economic value is
obligatory for sustainability, which is then disclosed by the company in a report
(Kitzmueller and Shimshack, 2010). Consequently, the company learns to not only keep
an eye on its internal interests, but to also cultivate an awareness of other factors besides
the interests of investors and creditors, namely the interests of stakeholders (such as
employees, society and government). This can inject the positives of transparent value and

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responsibility into business operations (Frias-Aceituno, Rodríguez-Ariza, and Garcia-

Sánchez, 2014). Moreover, increasing business competition requires management to
employ strategic thinking to obtain additional capital from sources other than investors
(Grant, 2016).
Generally, investors are interested in the additional information included in annual
reports, information on environmental, social and political responsibilities that is disclosed
separately (Saeidi et al., 2015). Stakeholder theory states that a company is responsible for
expanding organisational responsibilities beyond investors/owners to parties outside the
company (Donaldson and Preston, 1995). Therefore, to ensure a commitment to building a
sustainable economy and to improving the quality of life and the environment, Indonesia
regulates such activities in Law Number 40 Article 1 of 2007. Additionally, the
government requires that companies which utilise geothermal energy must fulfil their
social responsibilities through the development of the surrounding community, per Law
No. 21 of 2014, Article 65 paragraph 2.
However, in reality, not all companies in Indonesia abide by the established
regulations. This is seen in the case of environmental damage in 2017 that allegedly
damaged a mangrove forest covering an area of 1,232 ha and oil spills that harmed coral
reefs in the province of Nusa Tenggara Timur (http://www.liputan6.com). For those
reasons, Du, (2015); Liu, Pan, and Tian (2018) report that sustainable performance is
mandatory for balancing the aspects of people, planet and profit (the triple bottom line–
social, environmental and financial), as well as global issues in society. Accordingly, the
summation of social activities in sustainability reports (SRs) possesses essential values for
long-term success, survival and organisational growth (Lozano & Huisingh, 2011; Peloza,
Loock, Cerruti, & Muyot, 2012).
The Global Reporting Initiative (GRI) conveys the importance of SR publications in
European countries, but in Indonesia, they are still voluntary. Therefore, the government
of Indonesia encourages the publication of SRs by giving awards to the companies
implementing them, thus far resulting in 120 companies doing so (Simbolon, J. and Sueb,
2016). This shows that companies in Indonesia hold concerns related to their impact in the
economic, environmental and social fields. The relationship of a company in meeting the
interests of stakeholders characterises stakeholder theory. But as for the explanation of
norms in its operational environment, the application of legitimacy theory results in better
tendencies.
The better tendency is generally that high profitability can become public
information communicating the advantages of one company in comparison to other
companies. Moreover, a company's liquidity level illustrates its ability to pay short-term
obligations on time (Antonio Dias, 2017). Therefore, with an increasing number of
companies disclosing sustainability reports, a company's marketing strategy for improving
financial performance (profitability, liquidity, solvency and earnings per share) is expected
to fare better.
Research on SR disclosure (SRD) is still a study trend in various countries, including
Indonesia, because such studies show that SRs influence a company’s liquidity,
profitability, and social and environmental dimensions (Adhipradana & Daljono, 2014;
António Dias, Rodrigues, & Craig, 2017; Lesmana, 2014; Muallifin & Priyadi, 2016;
Sejati & Prastiwi, 2015). After taking into account what previous research on the topic
discovered, the researcher is interested in conducting a study on SRs by entering the debt
to asset (DAR) variable with the current ratio (CR) variable to answer the following

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questions. First, does the level of profitability of a company affect SRD in public
companies listed on the Indonesia Stock Exchange (IDX)? Second, does the level of
corporate leverage affect SRD for public companies listed on the IDX? Third, does the
level of corporate liquidity affect SRD?

THEORETICAL REVIEW
Stakeholder Theory. Stakeholder theory aims to help management understand the
stakeholder environment for managing a more effective company (Ulum, 2015). This
theory asserts that companies must direct the fulfilment of stakeholder expectations. The
possibility of not implementing stakeholder management will reap protests that can
eliminate stakeholder legitimacy (Hadi, 2011). Therefore, this theory is widely used in the
underlying research on SRs (Epstein, 2018; Hill, Jones, & Schilling, 2014). The basis of
this theory also refers to signalling theory, about which Brealey, Leland, and Pyle, (1977);
Ross, (1977) stated: Information on corporate value conveyed by managers to potential
investors or external parties could increase the value of the company through annual report
signals.

Legitimacy Theory. Legitimacy theory states that organisations continually seek ways to
guarantee operations and to analyse the behaviour of their organisations within the limits
of the norms prevailing in society (Dowling and Pfeffer, 1975). Society can provide
companies with benefits that are potential resources necessary for them to maintain a
going concern (Deegan, 2014; Hummel & Schlick, 2016; O’Donovan, 2002). Therefore,
this social disclosure practice is seen as a form of influential public accountability in
explaining social and environmental impacts. This supports Brown and Deegan, (1998);
Deegan and Rankin, (1996), which state that a company must strive to ensure the
existence of the community and the local environment.

Regulatory Theory. This theory is used because regulation occurs as a reaction to a crisis
that cannot be identified (Robles Jr, 2016). It requires rules or provisions in accounting
that are considered necessary. The aim is that such regulations create a brotherhood
between the political forces of executive-led interest groups and the legislature (Stigler,
1971). Thus, the role of the government as a regulator must maintain and deliver an
informational balance. The government can pressure companies to run their businesses
without damaging the environment by setting regulations that force them to live up to their
social responsibilities. All the theories above are used since they encompass every study
and linkages in decision making aimed at the interests of this study.

Effect of Profitability on Sustainability Report Disclosures. Companies generating

profits must set aside funds for social and environmental activities (Adhipradana and
Daljono, 2014). This is because the amount of information disclosed in an SR can affect
their level of profitability On the other hand, in general, the tendency of high corporate
earnings reports provides stakeholders with the confidence to issue loans to companies.
Generally, companies want to obtain debt for increasing capital, even though they
understand that the greater debt, the greater the risk faced by investors (Ioannou and
Serafeim, 2017).

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In addition, with a high level of leverage (a large proportion of debt compared to

assets), companies will, in general, reduce costs, including the cost of social activities
disclosed in SRs (Admati, Demarzo, Hellwig, and Pfleiderer, 2018; Haningsih, Zulkifli,
and Doktoralina, 2014). Furthermore, high leverage and costs can cause a company to
delay publishing SRs and voluntarily reporting disclosures (Martínez-Ferrero, Garcia-
Sanchez, and Cuadrado-Ballesteros, 2013).
We next consider an understanding of the liquidity ratio as a measure of the
company's ability to pay and meet short-term obligations (Fazzini, 2018). Fundamentally,
a company understands that a high level of liquidity means that management has
succeeded in building a positive impression in the company. Therefore, it enables them to
gain the trust of stakeholders, who will then have a tendency to always support
management decisions (Adhipradana & Daljono, 2014). The positive impression that was
built means that, in general, management would disclose information on activities that
fulfil social responsibilities in the SR (Adhipradana & Daljono, 2014; Brigham &
Houston, 2012; Candri & Puspita, 2015; Marwati & Yulianti, 2015; Muallifin & Priyadi,
2016). Based on the above, the hypotheses in this study are as follows:
H1: Profitability affects SRD.
H2: Leverage affects SRD.
H3: Liquidity affects SRD.

Return On Asset (ROA)

X1
H1

Leverage (DAR) H2 Disclosure of

X2 Sustainability Report
H3 Y

Liquidity (CR)
X3

Figure 1. The Theoretical Model

METHOD
Research design. This research was conducted in 2018. The type of data used is
secondary data obtained from the annual reports of non-financial companies listed on the
IDX from 2013 to 2017 and company data sources that reveal the SR from each
company's website. The study employs causal methods. The aim is to test the hypotheses
for the effects of one or more independent variables on the dependent variable (Creswell
& Creswell, 2017). The independent variables referred to are return on assets (ROA),
leverage as measured by debt to assets ratio (DAR), and liquidity as measured by current
ratio (CR) of SRD.

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Data and research samples. The sample of this study is derived from companies that
consistently published annual and sustainability reports from 2013 to 2017, as shown in
Table 1.

Table 1. Research Sample

Criteria Amount
Non-financial companies listed on the stock exchange from 2013 to 2017 269
Companies that inconsistently published sustainability report from 2013 to
(100)
2017
Companies that inconsistently participated in the Indonesia Sustainability
(150)
Report Awards at least three times during the period 2013 to 2017
Companies that recognized losses during 2013 to 2017 (6)
Number of sample companies 13
Research Year 5
Number of Samples 65

Sample selection is based on a purposive sampling method with the aim of obtaining a
representative sample under the specified criteria, namely, (1) non-financial companies
listed on the IDX from 2013 until 2017, (2) companies that publish separate SRs which
can be accessed on the company's official website and that received Indonesia
Sustainability Report Awards three times during the 2013-2017 period and (3) the
company had no losses during the study period, as shown in Table 2.

Table 2. The Companies Sampled and Tabulation

Company
Nr. Years SR (Y) ROA (X1) DAR (X2) CR (X3)
Code
1 2013 ADHI 0.4065934 0.0422191 0.8498085 1.3275114
2 2014 ADHI 0.1978022 0.0317109 0.8431208 1.3018592
3 2015 ADHI 0.2417582 0.0524283 0.6920164 1.5604877
4 2016 ADHI 0.1978022 0.0201948 0.7283729 1.2930442
5 2017 ADHI 0.2747253 0.0185148 0.7928236 1.4074329
6 2013 ASII 0.2857143 0.1107882 0.5037805 1.2419629
7 2014 ASII 0.2527473 0.0938749 0.4907913 1.3098019
8 2015 ASII 0.2527473 0.0670402 0.4844541 1.3793054
9 2016 ASII 0.2857143 0.0756296 0.4657119 1.239383
10 2017 ASII 0.3186813 0.0765645 0.4712291 1.2286319
11 2013 ASRI 0.3296703 0.0616559 0.6304578 0.7529929
12 2014 ASRI 0.2747253 0.069542 0.6223673 1.1373406
13 2015 ASRI 0.2527473 0.0366911 0.6471162 0.7192381
14 2016 ASRI 0.2307692 0.0257924 0.6439216 0.8975276
15 2017 ASRI 0.3076923 0.0664763 0.5864283 0.7373862
16 2013 GGRM 0.2967033 0.0852613 0.4206002 1.7220793

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17 2014 GGRM 0.3076923 0.0928274 0.4310155 1.6201649

18 2015 GGRM 0.3406593 0.1013402 0.4015013 1.7703589
19 2016 GGRM 0.3186813 0.1060669 0.3715139 1.9378907
20 2017 GGRM 0.2967033 0.1161422 0.3680691 1.9355362
21 2013 HMSP 0.3076923 0.3947455 0.4834884 1.7525569
22 2014 HMSP 0.2967033 0.3587259 0.5244001 1.5277941
23 2015 HMSP 0.2857143 0.2726316 0.1577175 6.5668649
24 2016 HMSP 0.2747253 0.3002258 0.1960337 5.2344431
25 2017 HMSP 0.3296703 0.2937113 0.2092673 5.2722505
26 2013 ICBP 0.3296703 0.1030065 0.4026707 2.4106162
27 2014 ICBP 0.3846154 0.1016161 0.4173156 2.194214
28 2015 ICBP 0.3626374 0.1138943 0.3830373 2.326025
29 2016 ICBP 0.2527473 0.1257772 0.3598795 2.4067823
30 2017 ICBP 0.3956044 0.1116779 0.3572226 2.4282764
31 2013 JSMR 0.3406593 0.0330743 0.623708 0.7614702
32 2014 JSMR 0.2967033 0.037037 0.6540804 0.8244074
33 2015 JSMR 0.2747253 0.0354527 0.6631995 0.4815533
34 2016 JSMR 0.2307692 0.0314766 0.6945981 0.6960322
35 2017 JSMR 0.3296703 0.0237521 0.7681613 0.7595452
36 2013 SIMP 0.3186813 0.0366806 0.4406526 0.8285885
37 2014 SIMP 0.3076923 0.0363351 0.4705091 0.8712354
38 2015 SIMP 0.2967033 0.0166958 0.4563737 0.9357801
39 2016 SIMP 0.2857143 0.0174632 0.4585251 1.246773
40 2017 SIMP 0.2307692 0.016689 0.4556289 1.0164562
41 2013 SMGR 0.3956044 0.1897968 0.2945413 1.8823854
42 2014 SMGR 0.5274725 0.1643473 0.2716659 2.2095409
43 2015 SMGR 0.5274725 0.1221961 0.2807718 1.5969693
44 2016 SMGR 0.3076923 0.0987712 0.3086923 1.272519
45 2017 SMGR 0.2857143 0.0348748 0.3783318 1.5677513
46 2013 TLKM 0.3846154 0.1578313 0.4032049 1.1630974
47 2014 TLKM 0.3736264 0.1500049 0.3936625 1.0611424
48 2015 TLKM 0.2967033 0.1403176 0.4377667 1.3529495
49 2016 TLKM 0.4175824 0.1624177 0.4123745 1.199663
50 2017 TLKM 0.4395604 0.1647538 0.4350678 1.0481532
51 2013 UNTR 0.3516484 0.0836574 0.3785303 1.7018323
52 2014 UNTR 0.4065934 0.0801245 0.3611059 1.6516789
53 2015 UNTR 0.3736264 0.045247 0.3640108 1.5481137
54 2016 UNTR 0.3516484 0.0797684 0.3339409 1.5987116
55 2017 UNTR 0.3846154 0.093279 0.4221163 1.3552636

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56 2013 UNVR 0.3076923 0.4213634 0.6797859 0.6709528

57 2014 UNVR 0.3736264 0.415027 0.6676003 0.7149143
58 2015 UNVR 0.1868132 0.3719644 0.6931341 0.6539297
59 2016 UNVR 0.1868132 0.3816434 0.7190971 0.605626
60 2017 UNVR 0.2307692 0.3705173 0.7263832 0.6337376
61 2013 WIKA 0.2417582 0.0495731 0.7507258 1.1396731
62 2014 WIKA 0.2747253 0.0489746 0.6920539 1.1966364
63 2015 WIKA 0.3516484 0.0363782 0.7209281 1.2313265
64 2016 WIKA 0.1098901 0.0386229 0.593752 1.5864115
65 2017 WIKA 0.1648352 0.0296848 0.6797151 1.3439568
Source: Data was processed by SPSS 23.

Operational Variable. Operational variables and the measurement scale of this study use
two types of variables, as shown in Table 3.

Table 3. Operational Variables and Measurement Scale

Variable Definitions Measurement

Dependent variable

The dependent variable in this study is

SRD based on the Global Reporting
Initiative (GRI-G4), shown in Table 4.1-
There were 91 total items of disclosure: 9
4.3
items disclosing economic aspects, 34
items disclosing environmental aspects, 12
items disclosing aspects of human rights,
16 items disclosing aspects of employment
practices and work comfort, 9 items
disclosing aspects of product responsibility,
and 11 items disclosing the aspect of
society.
Independent Variables
The independent variables used are
profitability, leverage and liquidity.

Return On Assets (X1)

The justification for using profitability is

that this ratio can provide a measure of a
company management’s effectiveness, as
well as in measuring the level of a
company’s profitability. Moreover, ROA is
the ratio that assesses a company's ability

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to seek profits (Roy and Das, 2017).

Debt to Asset Ratio (X2)

Leverage justification is employed because

leverage is equivalent to DAR, one of the
ratios used by companies in assessing how
much of a company's assets are financed
with debt or by outsiders (Roy and Das,
2017).

Current Ratio (X3)

The use of liquidity justification equals CR

because CR is used by companies in
measuring the level of company liquidity,
as well as for measuring a company's
ability to pay and meet its short-term
obligations (Roy and Das, 2017).

An explanation for GRI-G4 is given in Table 4-6:

Table 4. Categories and Aspects of GRI-G4 For Economic & Environmental

Category Economic Environmental

Aspects Economic Performance Materials
Market Presence Energy
Indirect Economic Impacts Water
Procurement Practices Biodiversity
Emissions
Effluents and Waste
Products and Services
Compliance
Transport
Overall
Supplier Environmental
Assessment
Environmental Grievance
Mechanisms
Source: G4 Sustainability Reporting Guidelines, (2013)

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Table 5. Categories and Aspects on GRI-G4 for Social

(Sub-categories: Labour Practices and fecent Work and Human Right)
Category Social
Sub-categories Labour Practices and Work Conditions Human Rights
Aspects Employment Investment
Labour/Management Relations Non-discrimination
Occupational Health and Safety Marketing Freedom of Association
Training and Education and Collective Bargaining
Diversity and Equal Opportunity Child Labour
Equal Remuneration for Women and Men Forced or Compulsory
Supplier Assessment for Labour Practices Labour
Labour Practices Grievance Mechanisms Security Practices
Indigenous Rights
Assessment
Supplier Human Rights
Assessment
Human Rights Grievance
Mechanisms

Source: G4 Sustainability Reporting Guidelines, (2013)

Table 6. Categories and Aspects of GRI-G4 For Social

(Sub-categories: Society and Product Responsibility)
Category Social
Sub-categories Society Product Responsibility
Aspects Local Communities Customer Health and Safety
Anti-corruption Product and Service
Public Policy Labelling
Anti-competitive Behaviour Marketing Communication
Compliance Customer Privacy
Supplier Assessment for Impacts on Compliance
Society
Grievance Mechanisms for Impacts
on Society
Source: G4 Sustainability Reporting Guidelines, (2013)

Data Analysis Methods. The methods of analysis data used include descriptive analysis, a
classical assumption test and hypothesis testing using multiple linear regression equations
(Brooks, 2014; Gujarati, 2011). Regression analysis is mostly about dependent variables
with one or more independent variables, with the purpose of estimating and/or predicting
the average population or the mean value of the dependent variable based on the known
independent value. Multiple linear regression equations in this research utilise the
following model:
SDRs = α + β₁ ROAβX1 + β2 DAR βX2 + β3 CR βX3 + e.

The Results of Statistical Tests

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Descriptive Test. Based on the results, the descriptive statistics shown in Table 5
were obtained.

Table 7. Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

SR 65 .1191 .53 .3085 .07614
ROA 65 .0166 .42 .1191 .11272
DAR 65 .1577 .85 .5080 .16784
CR 65 .4815 6.57 1.5238 1.05123
Source: Data was processed by SPSS 23.

1. The SRDs summarised in 91 indicators set by the Global Reporting Initiative have an
average value of 0.3085, a minimum value of 0.1098 reported by PT. Wijaya Karya in
2016 and a maximum value of 0.5274 obtained by PT. Semen Indonesia in 2015, as
well as a standard deviation of 0.0761.
2. Profitability has an average value of 0.1191, a minimum value of 0.0166 reported by
PT. Salim Ivomas Pratama in 2017, a maximum value of 0.4213 obtained by PT.
Unilever in 2013, and a standard deviation of 0.1127.
3. Leverage (DAR) has an average value of 0.5080, a minimum value of 0.1577 reported
by PT. HM Sampoerna in 2015, a maximum value of 0.8498 disclosed by PT. Adhi
Karya in 2013, and a standard deviation of 0.1678.
4. Liquidity (CR) has an average value of 1.5238, a minimum value of 0.4815 reported
by PT. Jasa Marga in 2015 and a maximum value of 6,566 disclosed by PT. HM.
Sampoerna in 2015, and a standard deviation of 1.0512.

Classic assumption test. The classic assumption test (Kolmogorov-Smirnov test

shown in Table 6) results showed asymptotic values, a significance of 0.200 or
>0.05. This proves that the research data is normally distributed and can be used to
conduct regression analysis.

Table 8. One-Sample Kolmogorov-Smirnov Test

Unstandardized Residual
N 65
Normal Parametersa,b
Mean .0000000
Std. Deviation .06445649
Most Extreme Differences Absolute .093
Positive 093
Negative -.068
Test Statistic .093
Asymp. Sig. (2-tailed) .200c,d
Source: Data summary was processed by SPSS 23.
The second-step test is a multicollinearity test (Table 7) that demonstrates that
all variables have a tolerance value above 0.10 with VIF <10, which means there is

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no multicollinearity between the variables in this regression model.

Table 9. Results of the Multicollinearity Test

Unstandardized Standardized
t Sig. Collinearity Statistics
Coefficients Coefficients
Model
Std.
B Beta Tolerance VIF
Error
(Constant) .492 .044 11.142 .000
ROA .030 .076 .045 .402 .689 .934 1.071
DAR -.301 .063 -.664 -4.791 .000 .611 1.636
CR -.023 .010 -.312 -2.198 .032 .583 1.716
Source: Data summary was processed by SPSS 23.

The third-step test is an autocorrelation test (Table 10). Its results show that the
value of Durbin-Watson (d) is 1.524, where the value (du) is 1.50349 and the value
(dl) is 1.69602. The results of the DW value are located between 1.50349 <1.524
<1.69602, meaning there is no positive or negative autocorrelation.

Table 10. Results of the Autocorrelation Test

R Adjusted R Std. Error of the Durbin-
Model R
Square Square Estimate Watson
1 .532a .283 .248 .0660225 1.524
Source: Data summary was processed by SPSS 23.

The fourth step is the heteroscedasticity test (Table 9), the results of which
show that the significance value of the three independent variables is more than 0.05.
It can thus be concluded that there is no heteroscedasticity in the regression model.

Table 11. Heteroscedasticity Test

Unstandardized Standardized
Model Coefficients Coefficients t Sig.
B Std. Error Beta
(Constant) .039 .029 1.374 .174
ROA .003 .049 .008 .059 .953
DAR .020 .041 .081 .500 .619
CR -.001 .007 -.026 -.153 .879
Source: Data summary was processed by SPSS 23.

Hypotheses testing. The hypotheses testing was done in three stages. The first test
takes into account the results of the value of the coefficient of determination (R 2) in Table
10, adjusted R square (R2) that is equal to 0.248 (24.8%). The test results mean that the
24.8% variation in SRD is influenced by the variables of profitability, leverage and
liquidity, while the remaining 75.2% is influenced by factors outside the model.

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Table 12. Summary of Hypotheses Tests

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .532 .283 .248 .0660225
Source: Data summary was processed by SPSS 23.

The second test conducted was a simultaneous significance test (the F-test shown in
Table 11). The F-test determined that the F-value was 8.041 with a significance value of
0.000, which is smaller than 0.05. It can thus be concluded that the variables of
profitability, leverage and liquidity simultaneously or jointly influence SRD.

Table 13. Simultaneous Significance Test (F- Test)

Sum of Mean
Model df F Sig.
Squares Square
Regression .105 3 .035 8.041 .000b
Residual .266 61 .004
Total .371 64
Source: Data summary was processed by SPSS 23.

The third test was a partial significance test (the t-test shown in Table 12). The
results of the t-test indicate that profitability (ROA) has a count value of 0.402 with a
significance level of 0.689, which is greater than 0.05. This shows that profitability does
not have an insignificant effect on SRD, so Hypothesis 1 (H1) is rejected. Furthermore,
leverage (DAR) has a t-value of -4.779 with a significance level of 0.000, which is less
than 0.05. This shows that leverage has a negative and significant effect on SRD, so
Hypothesis 2 (H2) is accepted. The liquidity (CR) has a t-count value of -2.198 with a
significance level of 0.032, which means smaller than 0.05. This shows that liquidity has a
negative and significant influence on SRD, so Hypothesis 3 (H3) is accepted.

Table 14. Result of T-test

Unstandardized Standardized
Model Coefficients Coefficients t Sig.
B Std. Error Beta
(Constant) .492 .044 11.142 .000
ROA .030 .076 .045 .402 .689
DAR -.301 .063 -.664 -4.791 .000
CR -.023 .010 -.312 -2.198 .032
Source: Data summary was processed by SPSS 23.

Multiple Linear Regression Analysis. The results of the regression test determined that
a value of 0.492 is considered constant and will increase SRD by 0.492. Furthermore,
profitability (ROA) of 0.03 means that if other independent variables are fixed and ROA

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has a 1% increase, then SRDs will increase by 0.03. In connection with leverage (DAR),
which is equal to -0.301, if other independent variables have a fixed value and DAR has a
1% increase, then SRDs will decrease by 0.301. As for the liquidity regression coefficient
(CR) of -0.023, it shows that if another independent variable is fixed in value and CR has a
1% increase, SRDs will decrease by 0.023. For this reason, the regression equation for
testing the statistical research is as follows: SRDs = 0.492α + 0.03ROAβX1 -0.301DAR
βX2 -0.023CR βX3.

Information: SRDs : Sustainability Report Disclosure; ROA (X1) : Profitability

(Return on Assets); DAR (X2): Leverage (Debt to Assets Ratio); CR (X3) : Liquidity
(Current Ratio); α : Constants; β : Coefficient; ε : Error

DISCUSSION
Profitability proxied by ROA does not affect SRD. This shows that the level of company
profitability does not directly affect the SRD at that time. This is also possible whether
the ROA is large or small; it is affected by the profit after tax that comes from sales. SRD
does not always have an impact on increasing sales. This may occur because SRD does
not affect stakeholder decisions (for example, consumers’ sales activities).
When profitability is high, companies tend not to report SDR because of increasing
company costs. In reaction to a decrease in profits, companies will reduce social activity
and focus on increasing profits, thus causing less social and environmental information to
be disclosed. This does not support stakeholder theory, which states that all stakeholders
have the right to be given information about how organizational activities affect them
because the company’s survival is strongly influenced by the support provided by
stakeholders.
SRD is carried out in the context of accountability to stakeholders to maintain their
support and to fulfil their information needs. In addition, companies with high ROA
values do not necessarily conduct SRDs because in Indonesia they are still voluntary and
there is no good control mechanism from the government.
Leverage proxied by DAR has a negative and significant influence on SRD. This
shows that the DAR value directly affects the SRD at that time. Thus, the greater
leverage the company has, the less likely the company will disclose and vice versa; if the
leverage level of a company is small, the greater the probability the company will report
SRDs. The same thing is obtained from the results of the Liquidity Effect (CR) on
Sustainability Report Disclosures. Liquidity proxied by CR has a negative and significant
influence on SRD. This shows that the CR value directly affects the SDR at that time.
Thus, the greater the liquidity has, the less likely the company will disclose and vice
versa; if the liquidity of a company is small, the greater the probability the company will
report SRDs. The other reason is that companies with high leverage tend to want to report
higher profits that will reflect the company's stable financial condition assist in raising
capital. To achieve high profits, companies will reduce costs, including the costs of
SRDs.
Emphasis on future research is needed so that management is consistent in reporting
full SRDs that can have a pos impact on company marketing that can attract investors.
Limitations of this research are its scope and number of research samples. Further research

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could examine other variables, e.g. SRD potential, different sized companies, and
company value, and increase the number of samples to obtain more comprehensive results.
The government is firm in enforcing the law regarding companies that do not
implement SRDs. One thing that can be done is to establish a sustainable performance
assessment system that is standardised in a company's licensing rules and annually
evaluate the performance of a company’s social environment activities. Thus, the
implications of this study’s results cannot be a single reference for interested parties due to
the limitations of the research sample. Variations in company policy must also be
considered in behavioural research linked to a company's SRD compliance.

CONCLUSION
Based on the results of hypotheses testing on the three independent variables, only ROA
does not affect SDR. The other two variables, DAR and CR, have an effect on SDR, but in
the opposite direction, which means that companies with high leverage and liquidity often
fail to report SRDs. The author recommends that further research test other profitability
factors, namely ROI and ROE. In addition, a greater number of samples and years could
be examined. This reveals that company management appears not to be focused on social
and environmental activities and requires further studies regarding variables that support
the government's intent.

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