Analysis of the Effect of Corporate Social Responsibility Towards Investment Efficiency of Oil and Gas Companies in Indonesia

Abstract

Investment efficiency in any business sector is absolute. Investment efficiency in this study was investigated using the prevailing cash flow approach through which we examined its effect on the six dimensions of upstream oil and gas corporate social responsibility (CSR)/community development program (CDP) expenditures in Indonesia. This study aimed to provide information on the most important CSR/CDP expenditures that needed to be prioritized, as the expenditure had a broad impact on the company’s investment efficiency and was a part of the license-to-operate strategy. Descriptive analysis with panel data regression was used as the research method. The novelty of the research was on CSR activities and the forms of CSR, which included donation, social, and economic, in the Indonesian upstream oil and gas industry. The use of the company age as an additional control variable in the research also became a research novelty. The research samples were oil and gas companies in Indonesia at the exploitation stage, which already have gross revenue and equity to be split and reported CSR activities, with research observation conducted from 2018 to 2021. The results of the study concluded that CSR on education and the profit before interest and tax control variable had a significant and positive effect on investment efficiency, while the company age and sales growth control variables had a significant and negative effect on investment efficiency. As an implication, the CSR implemented by the contractors must be carried out holistically, accompanied by accurate, precise, and careful calculations in CSR/CDP funds realizations. Additionally, the Special Task Force for Upstream Oil and Gas Business Activities (Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi; SKK Migas), as the contractor management, must provide CSR/CPD contributions evidence as part of the upstream oil and gas social investment. Our recommendation for future studies is to change dependent variables into social investment results, the result of the monitoring and evaluation program, and other factors.