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Diversification and corporate social performance in manufacturing companies

Author

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  • Dina Patrisia

    (University of Huddersfield
    State University of Padang)

  • Shabbir Dastgir

    (University of Huddersfield)

Abstract

The effects of diversification on financial performance are well-established, less so the way in which diversification influences company behaviour towards stakeholder demand and social concern. This paper investigates the relationship between business diversification and corporate social performance (CSP) in an industrial setting, in Indonesia. CSP is measured with an index constructed from content and disclosure analysis of annual company reports in line with global reporting initiative standards. A sample of 107 listed manufacturing companies from the Indonesian Stock Exchange is used to estimate a lagged multiple regression model to show that industry-level diversification does not have an effect on CSP. However, distinguishing between related and unrelated diversification produces a different outcome whereby, related diversification is negatively and statistically significantly correlated with CSP. Unrelated diversification, on the other hand, shows a positive and statistically significant relationship. It means the relationship between unrelated diversification and CSP is more positive than the relationship between related diversification and CSP. The findings offer a unique insight into industrial diversification and CSP in Indonesia’s expanding manufacturing sector.

Suggested Citation

  • Dina Patrisia & Shabbir Dastgir, 2017. "Diversification and corporate social performance in manufacturing companies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 121-139, April.
    • Handle: RePEc:spr:eurasi:v:7:y:2017:i:1:d:10.1007_s40821-016-0052-6
    DOI: 10.1007/s40821-016-0052-6
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    More about this item

    Keywords

    Diversification; Related diversification; Unrelated diversification; CSP; Manufacturing; Indonesia;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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