How poilitical connection moderate audit committee characteristics and csr: evidence from Indonesian companies
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Published:
Nov 8, 2023
Keywords:
Agency Theory, Audit Committee, Characteristics; CSR, Resource Dependency Theory, Social Exchange Theory
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Economy
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Abstract
This study aimed to examine the moderation of corporate political connections on the relationship between audit committee characteristics and CSR. This article has developments from various literature on the relationship between corporate governance and CSR; one of those is the audit committees in recent years, which have been synonymous with financial reporting and process audits. This study also uses agency theory, Resource Dependency Theory (RDT), and Social Exchange Theory (SET). The results show a significant positive effect of audit committee independence and expertise. Moreover, political connection is not effect on CSR. Then, political connection can be low moderate between audit committee independence and CSR and political connection can be hight moderate between expertise and CSR
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How to Cite
Nurhandika, A. and Manalu, V. G. (2023) “How poilitical connection moderate audit committee characteristics and csr: evidence from Indonesian companies ”, Jurnal Mantik, 7(3), pp. 1653-1660. doi: 10.35335/mantik.v7i3.4161.
References
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Adel, C., Hussain, M. M., Mohamed, E. K. A., & Basuony, M. A. K. (2019). Is corporate governance relevant to the quality of corporate social responsibility disclosure in large European companies? International Journal of Accounting & Information Management.
Appuhami, R., & Tashakor, S. (2017). The impact of audit committee characteristics on CSR disclosure: An analysis of Australian firms. Australian Accounting Review, 27(4), 400–420.
Arora, P., & Dharwadkar, R. (2011). Corporate governance and corporate social responsibility (CSR): The moderating roles of attainment discrepancy and organization slack. Corporate Governance: An International Review, 19(2), 136–152.
Bédard, J., Coulombe, D., & Courteau, L. (2008). Audit committee, underpricing of IPOs, and accuracy of management earnings forecasts. Corporate Governance: An International Review, 16(6), 519–535.
Bhaduri, S. N., Selarka, E., Bhaduri, S. N., & Selarka, E. (2016). Impact of corporate governance on corporate social responsibility in india—empirical analysis. Corporate Governance and Corporate Social Responsibility of Indian Companies, 87–113.
Bhuiyan, M. B. U., & D’Costa, M. (2020). Audit committee ownership and audit report lag: evidence from Australia. International Journal of Accounting & Information Management.
Bianchi, M. T., Monteiro, P., Azevedo, G., Oliveira, J., Viana, R. C., & Branco, M. C. (2019). Political connections and corporate social responsibility reporting in Portugal. Journal of Financial Crime, 26(4), 1203–1215.
Bliss, M. A., & Gul, F. A. (2012). Political connection and cost of debt: Some Malaysian evidence. Journal of Banking & Finance, 36(5), 1520–1527.
Buallay, A., & Al-Ajmi, J. (2020). The role of audit committee attributes in corporate sustainability reporting: Evidence from banks in the Gulf Cooperation Council. Journal of Applied Accounting Research, 21(2), 249–264.
Chakroun, S., Ben Amar, A., & Ben Amar, A. (2022). Earnings management, financial performance and the moderating effect of corporate social responsibility: evidence from France. Management Research Review, 45(3), 331–362.
Chaney, P. K., Faccio, M., & Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1), 58–76. https://doi.org/https://doi.org/10.1016/j.jacceco.2010.07.003
Djayanti, A., & Abidin, Z. (2023). The effect of good corporate governance (GCG) and company characteristics on the timeliness of financial reporting. Jurnal Mantik, 7(2), 780–791.
Dwekat, A., Seguí?Mas, E., Tormo?Carbó, G., & Carmona, P. (2020). Corporate governance configurations and corporate social responsibility disclosure: Qualitative comparative analysis of audit committee and board characteristics. Corporate Social Responsibility and Environmental Management, 27(6), 2879–2892.
Firmansyah, A., Arham, A., Qadri, R. A., Wibowo, P., Irawan, F., Kustiani, N. A., Wijaya, S., Andriani, A. F., Arfiansyah, Z., & Kurniawati, L. (2022). Political connections, investment opportunity sets, tax avoidance: does corporate social responsibility disclosure in Indonesia have a role? Heliyon.
Gupta, A., Briscoe, F., & Hambrick, D. C. (2017). Red, blue, and purple firms: Organizational political ideology and corporate social responsibility. Strategic Management Journal, 38(5), 1018–1040.
Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391–430. https://doi.org/10.1016/j.jaccpubpol.2005.06.001
Houston, J. F., Jiang, L., Lin, C., & Ma, Y. (2014). Political connections and the cost of bank loans. Journal of Accounting Research, 52(1), 193–243.
Iliev, P., & Roth, L. (2018). Learning from directors’ foreign board experiences. Journal of Corporate Finance, 51, 1–19.
Jiao, J., Liu, C., Xu, Y., & Hao, Z. (2022). Effects of strategic flexibility and organizational slack on the relationship between green operational practices adoption and firm performance. Corporate Social Responsibility and Environmental Management, 29(3), 561–577.
Joni, J., Ahmed, K., & Hamilton, J. (2020). Politically connected boards, family business groups and firm performance: evidence from Indonesia. Journal of Accounting & Organizational Change, 16(1), 93–121.
Karamanou, I., & Vafeas, N. (2005). The association between corporate boards, audit committees, and management earnings forecasts: An empirical analysis. Journal of Accounting Research, 43(3), 453–486.
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy. Journal of Business Ethics, 114(2), 207–223. https://doi.org/10.1007/s10551-012-1336-0
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761–796.
K?l?ç, M., Uyar, A., Kuzey, C., & Karaman, A. S. (2021). Drivers and consequences of sustainability committee existence? Evidence from the hospitality and tourism industry. International Journal of Hospitality Management, 92, 102753.
Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), 98–110.
Lin, K. J., Tan, J., Zhao, L., & Karim, K. (2015). In the name of charity: Political connections and strategic corporate social responsibility in a transition economy. Journal of Corporate Finance, 32, 327–346.
Lin, K. Z., Mills, L. F., Zhang, F., & Li, Y. (2018). Do political connections weaken tax enforcement effectiveness? Contemporary Accounting Research, 35(4), 1941–1972.
Mangena, M., & Tauringana, V. (2007). Corporate compliance with non-mandatory statements of best practice: the case of the ASB statement on interim reports. European Accounting Review, 16(2), 399–427.
McDaniel, L., Martin, R. D., & Maines, L. A. (2002). Evaluating financial reporting quality: The effects of financial expertise vs. financial literacy. The Accounting Review, 77(s-1), 139–167.
Mohammadi, S., Saeidi, H., & Naghshbandi, N. (2021). The impact of board and audit committee characteristics on corporate social responsibility: evidence from the Iranian stock exchange. International Journal of Productivity and Performance Management, 70(8), 2207–2236.
Musallam, S. R. M. (2018). The direct and indirect effect of the existence of risk management on the relationship between audit committee and corporate social responsibility disclosure. Benchmarking: An International Journal, 25(9), 4125–4138.
Nurhandika, A. (2023). Analisa Determinasi Perusahaan Mengganti Auditor. Permana?: Jurnal Perpajakan, Manajemen, Dan Akuntansi, 15(2), 149–162.
Nurhandika, A., & Hamzah, A. (2019). Pengaruh Tata Kelola Perusahaan Terhadap Dampaknya Pada Nilai Perusahaan. Sosio E-Kons, 11(3), 249–258.
Nurhandika, A., & Rahim, F. (2020). Faktor-Faktor Yang Mempengaruhi Kualitas Pengungkapan Tanggung Jawab Sosial Perusahaan. Jurnal Perspektif, 4(2), 66–81.
Othman, R., Ishak, I. F., Arif, S. M. M., & Aris, N. A. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia-Social and Behavioral Sciences, 145, 330–342.
Phan, D. H. B., Tee, C. M., & Tran, V. T. (2020). Do different types of political connections affect corporate investments? Evidence from Malaysia. Emerging Markets Review, 42, 100667. https://doi.org/https://doi.org/10.1016/j.ememar.2019.100667
Pozzoli, M., Pagani, A., & Paolone, F. (2022). The impact of audit committee characteristics on ESG performance in the European Union member states: Empirical evidence before and during the COVID-19 pandemic. Journal of Cleaner Production, 371, 133411.
Qian, W., & Chen, X. (2021). Corporate environmental disclosure and political connection in regulatory and leadership changes: The case of China. The British Accounting Review, 53(1), 100935.
Selin, M., Joni, J., & Ahmed, K. (2023). Political affiliation types and corporate social responsibility (CSR) commitment: Evidence from Indonesia. Journal of Accounting & Organizational Change, 19(1), 24–39.
Sun, Y., Yi, Y., & Lin, B. (2012). Board independence, internal information environment and voluntary disclosure of auditors’ reports on internal controls. China Journal of Accounting Research, 5(2), 145–161.
Tee, C. M. (2020). Political connections and income smoothing: Evidence of institutional investors’ monitoring in Malaysia. Journal of Multinational Financial Management, 55, 100626. https://doi.org/https://doi.org/10.1016/j.mulfin.2020.100626
Uyar, A., Elbardan, H., Kuzey, C., & Karaman, A. S. (2023). Audit and CSR committees: are they complements or substitutes in CSR reporting, assurance and GRI framework adoption? International Journal of Accounting & Information Management, 31(1), 1–36.
Wong, W. Y., & Hooy, C. W. (2018). Do types of political connection affect firm performance differently? Pacific Basin Finance Journal, 51, 297–317. https://doi.org/10.1016/j.pacfin.2018.08.009
Yu, J., Xu, Y., & Zhang, J. H. (2016). The effects of the existence and financial expertise of audit committees on firms’ controversial activities—Evidence from IPOs. Journal of Forensic & Investigative Accounting, 8(3), 400–427.
Yudhanti, C. B. H., & Tjahjadi, B. (2021). Drivers of social responsibility disclosure: the moderation of the president director’s busyness and political connections. Asian Journal of Accounting Research.
Zhang, Y., Zhou, J., & Zhou, N. (2007). Audit committee quality, auditor independence, and internal control weaknesses. Journal of Accounting and Public Policy, 26(3), 300–327.
Adel, C., Hussain, M. M., Mohamed, E. K. A., & Basuony, M. A. K. (2019). Is corporate governance relevant to the quality of corporate social responsibility disclosure in large European companies? International Journal of Accounting & Information Management.
Appuhami, R., & Tashakor, S. (2017). The impact of audit committee characteristics on CSR disclosure: An analysis of Australian firms. Australian Accounting Review, 27(4), 400–420.
Arora, P., & Dharwadkar, R. (2011). Corporate governance and corporate social responsibility (CSR): The moderating roles of attainment discrepancy and organization slack. Corporate Governance: An International Review, 19(2), 136–152.
Bédard, J., Coulombe, D., & Courteau, L. (2008). Audit committee, underpricing of IPOs, and accuracy of management earnings forecasts. Corporate Governance: An International Review, 16(6), 519–535.
Bhaduri, S. N., Selarka, E., Bhaduri, S. N., & Selarka, E. (2016). Impact of corporate governance on corporate social responsibility in india—empirical analysis. Corporate Governance and Corporate Social Responsibility of Indian Companies, 87–113.
Bhuiyan, M. B. U., & D’Costa, M. (2020). Audit committee ownership and audit report lag: evidence from Australia. International Journal of Accounting & Information Management.
Bianchi, M. T., Monteiro, P., Azevedo, G., Oliveira, J., Viana, R. C., & Branco, M. C. (2019). Political connections and corporate social responsibility reporting in Portugal. Journal of Financial Crime, 26(4), 1203–1215.
Bliss, M. A., & Gul, F. A. (2012). Political connection and cost of debt: Some Malaysian evidence. Journal of Banking & Finance, 36(5), 1520–1527.
Buallay, A., & Al-Ajmi, J. (2020). The role of audit committee attributes in corporate sustainability reporting: Evidence from banks in the Gulf Cooperation Council. Journal of Applied Accounting Research, 21(2), 249–264.
Chakroun, S., Ben Amar, A., & Ben Amar, A. (2022). Earnings management, financial performance and the moderating effect of corporate social responsibility: evidence from France. Management Research Review, 45(3), 331–362.
Chaney, P. K., Faccio, M., & Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1), 58–76. https://doi.org/https://doi.org/10.1016/j.jacceco.2010.07.003
Djayanti, A., & Abidin, Z. (2023). The effect of good corporate governance (GCG) and company characteristics on the timeliness of financial reporting. Jurnal Mantik, 7(2), 780–791.
Dwekat, A., Seguí?Mas, E., Tormo?Carbó, G., & Carmona, P. (2020). Corporate governance configurations and corporate social responsibility disclosure: Qualitative comparative analysis of audit committee and board characteristics. Corporate Social Responsibility and Environmental Management, 27(6), 2879–2892.
Firmansyah, A., Arham, A., Qadri, R. A., Wibowo, P., Irawan, F., Kustiani, N. A., Wijaya, S., Andriani, A. F., Arfiansyah, Z., & Kurniawati, L. (2022). Political connections, investment opportunity sets, tax avoidance: does corporate social responsibility disclosure in Indonesia have a role? Heliyon.
Gupta, A., Briscoe, F., & Hambrick, D. C. (2017). Red, blue, and purple firms: Organizational political ideology and corporate social responsibility. Strategic Management Journal, 38(5), 1018–1040.
Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391–430. https://doi.org/10.1016/j.jaccpubpol.2005.06.001
Houston, J. F., Jiang, L., Lin, C., & Ma, Y. (2014). Political connections and the cost of bank loans. Journal of Accounting Research, 52(1), 193–243.
Iliev, P., & Roth, L. (2018). Learning from directors’ foreign board experiences. Journal of Corporate Finance, 51, 1–19.
Jiao, J., Liu, C., Xu, Y., & Hao, Z. (2022). Effects of strategic flexibility and organizational slack on the relationship between green operational practices adoption and firm performance. Corporate Social Responsibility and Environmental Management, 29(3), 561–577.
Joni, J., Ahmed, K., & Hamilton, J. (2020). Politically connected boards, family business groups and firm performance: evidence from Indonesia. Journal of Accounting & Organizational Change, 16(1), 93–121.
Karamanou, I., & Vafeas, N. (2005). The association between corporate boards, audit committees, and management earnings forecasts: An empirical analysis. Journal of Accounting Research, 43(3), 453–486.
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy. Journal of Business Ethics, 114(2), 207–223. https://doi.org/10.1007/s10551-012-1336-0
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761–796.
K?l?ç, M., Uyar, A., Kuzey, C., & Karaman, A. S. (2021). Drivers and consequences of sustainability committee existence? Evidence from the hospitality and tourism industry. International Journal of Hospitality Management, 92, 102753.
Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), 98–110.
Lin, K. J., Tan, J., Zhao, L., & Karim, K. (2015). In the name of charity: Political connections and strategic corporate social responsibility in a transition economy. Journal of Corporate Finance, 32, 327–346.
Lin, K. Z., Mills, L. F., Zhang, F., & Li, Y. (2018). Do political connections weaken tax enforcement effectiveness? Contemporary Accounting Research, 35(4), 1941–1972.
Mangena, M., & Tauringana, V. (2007). Corporate compliance with non-mandatory statements of best practice: the case of the ASB statement on interim reports. European Accounting Review, 16(2), 399–427.
McDaniel, L., Martin, R. D., & Maines, L. A. (2002). Evaluating financial reporting quality: The effects of financial expertise vs. financial literacy. The Accounting Review, 77(s-1), 139–167.
Mohammadi, S., Saeidi, H., & Naghshbandi, N. (2021). The impact of board and audit committee characteristics on corporate social responsibility: evidence from the Iranian stock exchange. International Journal of Productivity and Performance Management, 70(8), 2207–2236.
Musallam, S. R. M. (2018). The direct and indirect effect of the existence of risk management on the relationship between audit committee and corporate social responsibility disclosure. Benchmarking: An International Journal, 25(9), 4125–4138.
Nurhandika, A. (2023). Analisa Determinasi Perusahaan Mengganti Auditor. Permana?: Jurnal Perpajakan, Manajemen, Dan Akuntansi, 15(2), 149–162.
Nurhandika, A., & Hamzah, A. (2019). Pengaruh Tata Kelola Perusahaan Terhadap Dampaknya Pada Nilai Perusahaan. Sosio E-Kons, 11(3), 249–258.
Nurhandika, A., & Rahim, F. (2020). Faktor-Faktor Yang Mempengaruhi Kualitas Pengungkapan Tanggung Jawab Sosial Perusahaan. Jurnal Perspektif, 4(2), 66–81.
Othman, R., Ishak, I. F., Arif, S. M. M., & Aris, N. A. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia-Social and Behavioral Sciences, 145, 330–342.
Phan, D. H. B., Tee, C. M., & Tran, V. T. (2020). Do different types of political connections affect corporate investments? Evidence from Malaysia. Emerging Markets Review, 42, 100667. https://doi.org/https://doi.org/10.1016/j.ememar.2019.100667
Pozzoli, M., Pagani, A., & Paolone, F. (2022). The impact of audit committee characteristics on ESG performance in the European Union member states: Empirical evidence before and during the COVID-19 pandemic. Journal of Cleaner Production, 371, 133411.
Qian, W., & Chen, X. (2021). Corporate environmental disclosure and political connection in regulatory and leadership changes: The case of China. The British Accounting Review, 53(1), 100935.
Selin, M., Joni, J., & Ahmed, K. (2023). Political affiliation types and corporate social responsibility (CSR) commitment: Evidence from Indonesia. Journal of Accounting & Organizational Change, 19(1), 24–39.
Sun, Y., Yi, Y., & Lin, B. (2012). Board independence, internal information environment and voluntary disclosure of auditors’ reports on internal controls. China Journal of Accounting Research, 5(2), 145–161.
Tee, C. M. (2020). Political connections and income smoothing: Evidence of institutional investors’ monitoring in Malaysia. Journal of Multinational Financial Management, 55, 100626. https://doi.org/https://doi.org/10.1016/j.mulfin.2020.100626
Uyar, A., Elbardan, H., Kuzey, C., & Karaman, A. S. (2023). Audit and CSR committees: are they complements or substitutes in CSR reporting, assurance and GRI framework adoption? International Journal of Accounting & Information Management, 31(1), 1–36.
Wong, W. Y., & Hooy, C. W. (2018). Do types of political connection affect firm performance differently? Pacific Basin Finance Journal, 51, 297–317. https://doi.org/10.1016/j.pacfin.2018.08.009
Yu, J., Xu, Y., & Zhang, J. H. (2016). The effects of the existence and financial expertise of audit committees on firms’ controversial activities—Evidence from IPOs. Journal of Forensic & Investigative Accounting, 8(3), 400–427.
Yudhanti, C. B. H., & Tjahjadi, B. (2021). Drivers of social responsibility disclosure: the moderation of the president director’s busyness and political connections. Asian Journal of Accounting Research.
Zhang, Y., Zhou, J., & Zhou, N. (2007). Audit committee quality, auditor independence, and internal control weaknesses. Journal of Accounting and Public Policy, 26(3), 300–327.
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