Impact of Profitability and Liquidity on Corporate Social Responsibility: The Moderating Role of Company Size

Abstract

Increasing awareness of the finite nature of natural resources and the environmental impacts of corporate operations has heightened expectations for businesses to operate sustainably and responsibly. This study examines the relationships between profitability, liquidity, and Corporate Social Responsibility (CSR) disclosure, with company size acting as a moderating variable, within Indonesia’s agricultural sector. Utilizing data from 10 agricultural companies listed on the Indonesia Stock Exchange from 2020 to 2022, moderated regression analysis was conducted using SmartPLS. The results reveal a significant negative relationship between profitability and CSR disclosure, indicating that more profitable companies tend to disclose less CSR information. Conversely, liquidity positively influences CSR disclosure, suggesting that companies with higher liquidity are more capable of allocating resources to CSR initiatives. Additionally, company size moderates these relationships: larger firms amplify the negative effect of profitability on CSR and strengthen the positive impact of liquidity on CSR. These findings highlight the complex interplay between financial performance and social responsibility, emphasizing the influential role of company size in shaping CSR practices. The study recommends expanding the sample across different industries, incorporating additional variables, and utilizing longitudinal and qualitative methods for deeper insights. This research contributes to a better understanding of how companies can effectively integrate sustainability and social responsibility into their business strategies.