Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bogor, West Java, Indonesia

Research Article

Analysis of the Effect of Agency Problems on Sustainability Practices of Public Companies in Indonesia

  • @INPROCEEDINGS{10.4108/eai.14-9-2020.2304402,
        author={Raden Rara Yulia Anindya Pranawaningsih and Eka Pria Anas},
        title={Analysis of the Effect of Agency Problems on Sustainability Practices of Public Companies in Indonesia},
        proceedings={Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bogor, West Java, Indonesia},
        publisher={EAI},
        proceedings_a={ICOSMI},
        year={2021},
        month={5},
        keywords={agency problem agency proxies corporate governance corporate social responsibility sustainability practices},
        doi={10.4108/eai.14-9-2020.2304402}
    }
    
  • Raden Rara Yulia Anindya Pranawaningsih
    Eka Pria Anas
    Year: 2021
    Analysis of the Effect of Agency Problems on Sustainability Practices of Public Companies in Indonesia
    ICOSMI
    EAI
    DOI: 10.4108/eai.14-9-2020.2304402
Raden Rara Yulia Anindya Pranawaningsih1,*, Eka Pria Anas1
  • 1: University of Indonesia
*Contact email: yuliaanindya@yahoo.com

Abstract

The agency theory perspective of corporate social responsibility (CSR) considers CSR the manifestation of agency problems. It is related to the inefficiencies of corporate resources. On the other hand, good governance CSR regards a good-governed corporation as one that can reduce agency problems and usually has a high CSR rating. This study aims to analyze agency problems’ effects on sustainability practices in Indonesia’s public companies using a sample of 157 company-year observations over the 2014-2018 period and the regression method. We find that corporate cash holdings, free cash flow, and dividend payout ratio each have a significant positive effect on sustainability practices, while leverage has a significant negative effect. This study also shows that there is no significant relationship between capital expenditure and sustainability practices. Overall, consistent with the view of good governance on CSR, companies that curb agency problems have high CSR ratings.