The reconciliation of management and shareholders through Indonesian government policy on voluntary corporate social activity disclosure

This study examines the effect of corporate social responsibility (CSR) disclosure on bond ratings and market share to represent the alignment of interest between management and shareholders. In a country that is dominated by family firms, such as Indonesia, the CSR of family firms underperforms that of non-family firms. Moreover, in a voluntary CSR disclosure atmosphere, the reporting does not have the objective of fulfilling the government's rule. We assume that CSR activity needs support from majority shareholders in family firms because it will reduce their welfare. We predict that higher CSR disclosure implies an effort by management to impress creditors and society. The creditor needs to guarantee the ability to pay back loans and interest, while society-represented customers prefer high-quality products. It implies that investors can consider non-financial performance, such as CSR performance, because it becomes a benchmark for the company's efforts to avoid financial problems from negative events related to reputation.