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 The 2nd International Conference on Accounting, Business & Economics
Grand Mercure Hotel Yogyakarta, 26-27 October 2017
Faculty of Economics, Unversitas Islam Indonesia, ISBN: 978-602-61817-1-8

Islamic social report, good corporate governance,

financial performance and company value

Aida Nahar1, Anis Chariri2, Tri Jatmiko3

1
Ph.D Student Economic Department, Faculty of Economics and Business, Diponegoro
University, Semarang; Lecturer of Faculty of Economics and Business,
Nahdlatul Ulama Islamic University
2, 3
Faculty of Economics and Business, Diponegoro University, Semarang
e-mail: 1aida.unisnu@gmail.com

Abstract
This study examined the roles of disclosure of Islamic Social Reports and Good
Corporate Governance in moderating the relationship of financial performance and
company’s value. Panel data of this study was gathering from companies listed on the
Jakarta Islamic Index in the year of 2011 – 2015 and was then analyzed using regression
model. The findings showed that financial performance positively influence firm’s value.
More interestingly, good corporate governance moderated the relationship of financial
performance and company’s value. Meanwhile, empirical data showed that Islamic Social
Report didn’t moderate the relationship financial performance and firms value.
Keywords: Islamic social report, good corporate governance, financial performance and
company’s value

Introduction
An information disclosure in accounting can be seen as a communicative method by which
corporate activity is reported in the public sphere (Kuasirikun & Sherer, 2004). Disclosure of
accounting information is perceived as a motivational tool to stimulate actions of decision
makers (Bedford, 1973). Investors need a variety of information to assess firm financial
performance and position for the purpose of making economic decision. Companies need to
take into account the various demands of decision makers in the environment in which they
operate. Companies are responsible for providing all parties with relevant information
concerning the ways of the companies create profit.
The information required by outside parties is generally related to the company’s
financial condition and performance. However, the current demand on accounting
information are widespread not only related to financial position and performance but also
related to those concerning employees, society and environmental issues (Hannifa, 2002).
Companies are assumed to have wider responsibilities (beyond economic responsibility) and
must fulfill the changing expectations of society. Therefore, corporate disclosure policies
need to change because of changes in the values, norms, belief, and attitudes of individuals
in the society, including Moslem society. This implies that the need for information within
the Moslem community may be different from that of the secular community.
The Moslem community expects companies to disclose certain information
voluntary to assist Moslem decision makers in meeting their spiritual needs (Haniffa &
Cooke, 2000). Such information includes information relating to the social responsibility to
the public because the disclosure of this information may affect their spirituality. Moslem
society will feel safe and confortable if they invest their money in companies that conduct

The 2nd International Conference on Accounting, Business & Economics|1

transactions in accordance with Sharia law. Therefore, the company should disclose the
information to convince Moslem investors. Such disclosure can increase investor interests in
the company, and eventually will increase companies’ value in term of increasing share
prices.
The increase in corporate value is one of the company's main goals. This is
reasonable as the fact that when company’s share price increase, the prosperity of the
shareholders also increases. "The higher the value of a company, the greater the prosperity
the firm will receive" (Husnan & Pudjiastuti, 2002). To increase the value of the company,
management teams must consider company's financial performance.
Financial performance is one of important factors that is usually considered by
investors in buying shares. Financial performance can be used by the companies to attract
potential investors. Investors usually assess company performance by looking at financial
ratios. The investors’ interests in companies’ shares will determine the market values of the
companies.
A number of studies have been conducted to investigate factors affecting
company’s value. Previous studies indicated that financial performance had a positive effect
the corporate value in Indonesia (Alghifari, Triharjono, & Juhaeni, 2013; Nuryaman, 2015;
Ulupui, 2007). In the other hand, studies by Susianti (2013), Sussanto and Carningsih (2013),
and Setyorini (2011) found that financial performance has no effect on it. The inconsistent
findings implies that there should be contingent variables that may affect the relationship of
the two variables. To enhance findings of previous studies, this study will investigate the
moderating roles of good corporate governance and the disclosure of Islamic Social Report
in the relationship of financial performance and company’s value.
Good corporate governance is crucial to the continuity of a company's operations,
because good corporate governance is the only way for a company to achieve company’s goals
and strategy (Aras & Crowther, 2009).Therefore the company must effectively implement the
principles of governance and improve its strategy. Corporate governance deals with the
balance between economic and social goals and between individual and the company goals.
Corporate governance represents institutional arrangements, decision-making mechanisms, and
organizational design. The core issue for corporate governance is the principal–agent problem
(Jensen & Meckling, 1976),that is, how the principal, represented by corporate owners,
motivates and monitors the agent, represented by management. In fact, corporate governance
is ultimately a problem concerning “responsibility,” and the agent should bear the
responsibility entrusted by the principal (Hashima, Mahadia, & Amran, 2015).
Corporate governance has been based on agency theory, where corporate managers
must be supervised and controlled to ensure that companies are managed properly in
accordance with applicable rules and regulations (L’Huillier, 2014). In the context of
Indonesia, corporate governance is seen as a crucial issue as the fact that most of listed
Indonesian companies on the Indonesia Stock Exchanges are dominated by family
ownership. The patterns and ownership of such businesses will encourage corruption,
collusion and nepotism practices, and low protection of small investors, and then will
decrease company’s value (Muliani, Yuniarta, & Sinarwati, 2014).
Managerial ownership as one of the mechanisms of good corporate governance can
be considered as incentives for management to exercise his actions for the best interests of
shareholders. Ownership structure is believed to affect the way the company is managed
which ultimately affects the company's performance. By providing management with higher
managerial ownership, it is expected thatthe management will strive as much as possible for

2|UII-ICABE 2017
the benefit of shareholders. The reason is that the management will gain an advantage if the
company earns profit. In fact profit is one of the company's performance benchmarks. The
higherof the company earn profit the higher the company’s performance. This will eventually
affect the increase in corporate value. It is important for companies to disclose information
about managerial ownership as a reflection of good corporate governance mechanism.
In addition to good corporate governance information, investors also need information
on corporate social responsibility. Disclosure of social responsibility is information about the
activities of companies that deal with the community. Disclosure of corporate social
responsibility is seen as important for both conventional companies and Islamic laws-based
ones. Companies claiming that they operate their business in Islamic ways are expected to
perform their activities in accordance with Islamic law and society. Information relating to
these activities can be included in the corporate social responsibility report.
Social responsibility is a responsibility of companies for generating profit by
protecting the environment, caring for employees, being ethical in commerce, and engaging
in community activities(Dusuki & Abdullah, 2007). Hannifa (2002)emphasizedthat the basis
of the social responsibility of Islam is to realize socio-economic justice (alfalah) and to
recognize the fulfillment of obligations to God, the society and the individual concerned, by
the parties involved in the economic activity. The parties involved in economic activities
should discloses how the company fulfills its obligations in accordance with sharia, including
corporate legal transactions, zakat to beneficiaries, sodaqah (charity/rewards), wages, the
purpose of any business venture and initiative to protect environment
The framework of social responsibility reporting in accordance with the Qur'an and
Hadith is known as Islamic Social Report (ISR) (Hannifa, 2002). Disclosures of transactions
in accordance with the Qur'an and Hadith include the disclosure of corporate transactions
relating to transactions that have been free from the elements of usury, speculation and
gharar, and revealingzakat, the status of Sharia compliance and social aspects such as
sodaqoh, waqof, qordulhasan, up to the disclosure of worship in the corporate environment.
The provision of the information aims to increase the value of the company.
Companies operating in Islam can be seen in the Jakarta Islamic Index. Jakarta
Islamic Index (JII) was established on July 3, 2000 by PT Bursa Efek Jakarta in cooperation
with PT Danareksa Investment Management (PT DIM). Jakarta Islamic Index (JII) is a stock
index for stocks that meet the criteria of sharia. The purpose of establishing the Jakarta
Islamic Index is to increase investor confidence to invest in sharia-based stocks and provide
benefits to investors in running Islamic sharia to invest in the stock exchange.
Jakarta Islamic Index serves as a guide for investors who want to invest their funds
based on Islamic law without fearofthe usury fund. The Jakarta Islamic Index also serves as a
benchmark for performance in choosing a halal stock portfolio. This study aims to
investigate the influence of financial performance on the corporate value of the companies
listed on the Jakarta Stock Index. Secondly, the study was intended to examine the roles of
the Islamic Social Report and good corporate governance in moderating the relationship of
financial performance and corporate value of the companies.

Literature review
The financial performance, firm value, Islamic social report and corporate governance can be
explained by agency theory, where there is a contractual relationship between principals and
agents. The principal is a party that provides benefits to other parties, and agents to perform

The 2nd International Conference on Accounting, Business & Economics|3

all activities on behalf of the principals in their capacity as decision makers (Jensen &
Clifford W. Smith, 1984). The agency relationship is ensured that there is a contract in which
one or more persons (agents) perform services on behalf of the principal authorizing the
agent to make the best decision for the principal.
Principals and agents are the main actors and both have their own bargaining
position in the role and position. Principal as the stockholders has access to company internal
information while the agent as the perpetrator in the company's operational practices should
have information about the operation and company performance. In carrying out their
respective roles between the principal and the agent, there will be a conflict of interest, in
which there is conflict and attracting each other interest and influence. Weston and
Copeland (1996)argue that agency theory requires monitoring mechanism. This is because it
is hard to believe that management (agents) will always act in the interests of shareholders
(principal). Principal employs agents to carry out tasks including economic decision making
in uncertain environments such as corporations in financial distress. While the agent as a
manager will take the decision to perform various strategies to maintain the company's
continuity. The agent has an obligation to account for what has been mandated to the
principal to assess performance.
Performance is a description of the achievement level of the company's activities
implementation in realizing the goals, objectives, mission, and vision of an organization
contained in the Strategic Planning of a company (Bastian, 2006). One of performance
measurement is financial performance an indicator showing the work achievement by the
company in a certain period and embodied in the company's financial statements. A good
financial performance will attract shareholders to invest. Through financial performance, it
can be seen how successful the company management in managing assets and capital owned
to maximize the corporate value. Thus the higher the financial performance, the higher the
corporate value.
Besides financial performance, the non-financial performance has been considered
as important for investors in making investment. One of the non-financial performance is the
disclosure of corporate social responsibility. Investors are more interested in investing their
money in companies that implement corporate social responsibility programs. The corporate
social responsibility program on the Shariahstock exchange is well known as Islamic Social
Report. This is supported by research of (Pflieger, Curran, Fischer, Kupfer, & Eyerer, 2005)
which shows that company’s environmental conservation efforts will bring some advantages
such as the shareholders and stakeholders interest to the benefits of the company due to
responsible environmental management.
Islamic social report is a reporting framework of corporate social responsibility in
accordance with sharia principles which has two main purposes: to show accountability to
Allah the only God and society and to improve the business activities transparency by
providing relevant information in accordance with the spiritual needs of Muslim decision
makers(Hannifa, 2002). These two main goals can be broken down into more specific
statements. These objectives and statements explain the important characteristics of the
Islamic social report, which recognizes the importance of sharia and ummah concept
(religion and society), obligations, and restrictions relating to commercial activities. Rohana
Othman and Azlan Md Thani (2010)found six themes of disclosure within the framework of
Islamic social reporting as the following: finance and investment, product and services,
employees, community, environment, and corporate governance.

4|UII-ICABE 2017
 Corporate governance is a set of processes, practices, policies, rules and institutions
that influence the management and control of a company. The corporate governance also
involve the relationships between the stakeholders and the company’s management
objectives. The main parties in corporate governance are shareholders, management and
board of directors.
Corporate governance deals with creating a balance between the company economic
and social goals including aspects of resource use, the use of power accountability and the
enterprises behaviour efficiently in their social environment (Aras & Crowther, 2009).
Companies need to implement good corporate governance because the owner of the capital
has an interest in the company by obtaining a return on their investment. Corporate
governance mechanism will determine every aspect of the company's management role and
strive to remain balanced and develop control mechanisms to increase shareholder value and
other stakeholder satisfaction. Companies need to run the governance effectively and
efficiently.
Factors influencing good corporate governance implementation consist of internal
and external factors(Daniri, 2005). External factors are some factors that come from outside
the company that greatly affect the successful implementation of good corporate
governance, are: a) the existence of a good legal system to ensure the enforcement of a
consistent and effective legal supremacy, b) support for good corporate governance
implementation from public sector/government institution which is expected to also
implement good corporate governance and clean governance towards good governance, and
c) there are examples of the best practices of corporate governance that can be an effective
and professional corporate governance implementation standard. While internal factors are
the driving force for the successful of corporate governance practices originating from within
the company. Some internal factors are a) The existence of a corporate culture that supports
the corporate governance implementation in the mechanism and management work system
in the company, b)Various company’s regulations and policies refer to the application of
corporate governance values, c) The company's risk control management is based on
corporate governance standard rules, d) The existence of an effective audit system within the
company to avoid any deviations that may occur, and e) The existence of information
disclosure for the public to be able to understand every movement and management steps in
the company so that the public can understand and follow every step of the development
and dynamics of the company from time to time.
The most effective and efficient corporate governance mechanism is how to decrease
the occurrence of interest conflicts and ensuring that the company achieves its goals. This can
be done by establishing rules and mechanisms that effectively direct the company's operational
activities and the ability to identify those with control different interests. Internal control
mechanisms within the company include share ownership and control structures undertaken by
the commissioner’s board (Iskander & Chamlou, 2000). Through ownership mechanisms, the
effectiveness of corporate resource management can seen from market reaction to earnings
announcement. Stock ownership enables the principal to control the management through the
process of preparing and publishing financial statements.
The board of commissioners is part of corporate governance mechanism (Beiner,
Drobetz, Schmid, & Zimmermann, 2003). The board of commissioners supervises and
advises the directors. The board of commissioners take personal responsibility for the
company's losses. The board of commissioners acts for the company's interest and other
stakeholders. The board of commissioners' capability to supervise is a positive function of

The 2nd International Conference on Accounting, Business & Economics|5

the portion and independence of the external board of commissioners. The board of
commissioners is also responsible for the financial statement’s quality. The Board of
Directors is fully responsible in performing its duties for the company's interest in achieving
its aims and objectives. Each member of the board of directors performs its duties with due
observance of applicable legislation or in accordance with the business ethics code. The
business ethic code is a corporate policy that requires all employees and directors to behave
in accordance with ethical standards in serving the company's interest, employees and the
society. It will be implemented in accordance with the principles of transparency,
responsibility, accountability and fairness.
When corporate governance is implemented well, expected that companies can
improve their performance and eventually increase their stock prices as an indicator of the
corporate value. The corporate governance mechanism used in this research is managerial
ownership. The agency theory claims that managers’ interests seems to be different from the
shareholders’ ones. Managers can take the necessary action to increase their personal
interests against the efforts to maximize corporate value. Managerial ownership can be used
to direct management to act in accordance with the share-holders interests that is to increase
the company’s value, not based on personal interests. If managerial ownership increases,
then the corporate value will also increase.

Hypotheses development
1. Financial performance and corporate value
Financial performance is seen as an indicator of the success of a company. Financial
performance can be seen from financial ratios of the company and can be used as an
investment evaluation tool. Thus financial ratios may reflect the level of corporate value,
because financial ratios reflect useful information in the capital market through disclosure
mechanism. The company has to disclose information of the company both financial
andnon-financial one. All information and future prospects about the company is
expected to affect the corporate value. Corporate value is determined by the earnings
power of the company's assets (Modigliani & Miller, 1958). The higher earnings power
the more efficient of the asset turnover or the higher profit margin obtained by the
company. This will finally have an impact on the corporate value. The arguments are
supported by findings of Nuryaman (2015), Wijaya and Linawati (2015), Alghifari et al.
(2013), and Ulupui (2007) describing that return on assets has a positive effect on the
corporate value. Thus, the alternative hypothesis is proposed as follow:
HI: Financial performance positively affects corporate value
2. Financial performance, Islamic social report and corporate value
Several studies on financial performance and corporate value indicate the inconsistency
of the results. Wijaya and Linawati (2015), Alghifari et al. (2013), and Ulupui (2007)
found that return on asset (ROA) had a positive effect on corporate value. But other
studies such as Susianti (2013), Sussanto and Carningsih (2013), Mutmainah and
Anggitasari (2012) and Setyorini (2011) found that return on asset (ROA) has no effect
on corporate value. The conflicting findings implies that there should be other factors
moderating the relationship. Therefore this study included the disclosure of Islamic social
report as a moderating variable. This is because the company seeks to maximize
corporate value by disclosing more information on financial statements. In addition to the
mandatory financial information, the company also discloses voluntary ones. With the
disclosure of Islamic social report, shareholders will provide companies with a positive

6|UII-ICABE 2017
 appreciation as reflected on the increase in company’s stock price. This increase implies
the increase in corporate value. Hence, this study proposed the following hypothesis:
H2: The Islamic social report disclosure strengthens the relationship of financial
performance and corporate value.
3. Financial performance, good corporate governance and corporate value
Managerial ownership as a proxy of good corporate governance implementation is the
percentage of shares owned by directors, managers, and commissioners board. According
to agency theory, the separation between ownership and management of a company can
lead to agency conflicts as principals and agents have conflicting interests in maximizing
their own utility. Haruman (2008)pointed out that differences in interests between
management and shareholders, management will be cheating and unethical behaviour
that harms shareholders. It is needed a control mechanism that can align management
interests with to stocks prices.
Managers who also act as shareholders will increase the corporate value because
such increase will increase their wealth as a shareholder. The increase of the corporate
value will attract investors in investing their money to the company. Shareholders are
more likely to choose companies that have good and stable financial performance. Utama
and Yadnya (2016),Wijaya and Linawati (2015), Pd, Ak, and Hermawati (2014)and
Mutmainah and Anggitasari (2012) found that good corporate governance moderates the
relationship of financial performance and corporate value. Consequently, this study
claimed the following hypothesis:
H3: Disclosure of good corporate governance increases the relationship of financial
performance and corporate value

Research method
The population of this study is companies listed on the Indonesian Sharia Stock Index which
is consistently listed in the Jakarta Islamic Index for the period December 2011 to December
2015. The companies included in the calculation of the Jakarta Islamic Index from the period
of January 2011 to December 2015 and have full financial statements are 10 companies
which indicated on table 1:

Table 1: List of shares included in the calculation of the Jakarta Islamic Index (JII) and has a
complete financial report from 2011 to 2015
No Code Share
1 AALI Astra Agro Lestari Tbk
2 ASII Astra International Tbk
3 ASRI AlamSutera Realty Tbk
4 INTP Indocement Tunggal Prakarsa Tbk
5 KLBF Kalbe FarmaTbk
6 LSIP London Sumatra Indonesia Tbk
7 SMGR Semen Indonesia (Persero) Tbk
8 TLKM Telekomunikasi Indonesia (Persero) Tbk
9 UNTR United Tractors Tbk
10 UNVR Unilever Indonesia Tbk

Variables of this study are financial performance as independent variables and

corporate value as a dependent variable with the disclosure of good corporate governance

The 2nd International Conference on Accounting, Business & Economics|7

and disclosure of Islamic social report as moderating variables. The operational definitions of
the variables are summarized on the table 2:

Table 2: Operational Research Variables

Variable Variable Definition Measurement Scale
Fiancial Financial performace is proxied by using Return on assets = Ratio
performance return on assets (ROA). ROA is defined as
(X) net profit after tax divided by total assets Net profit after tax
(Brigham & Houston, 2006) Total assets

Corporate The corporate value is proxied using Ratio

MVS + D
Value Tobin’s Q ratio i.e. market value share Tobin’s Q =
TA
(Y) (number of shares multiplied by closing
price) plus debt,and the divisor is all total
assets (Tobin, 1969).
Disclosure of The disclosure of Islamic social report is The value of 0 is for each unrevealed Ratio
Islamic social proxied by ISR index consisting of 6 item .
report indicators namely investment and finance, The value of 1 is for each disclosed item.
(Z1) products and services, labor, social,
environment and organizational Islamic social report =
governance developed into 46 item The number of items
statement (Rohana Othman & Azlan Md the company disclosure
Thani, 2010). The number of items expected
to be disclosed by the company
Disclosure of Disclosure of good corporate governance is Good corporate governance = Ratio
good proxied by managerial ownership Share ownership by managers,
corporate (Boediono, 2005). directors, and commissioners
governance Number of outstanding shares
(Z2)

Data analysis in this research consisted of descriptive analysis and multiple linear
regression analysis. Descriptive analysis was used to describe variables consisting of mean
value, and standard deviation. While multiple linear regression analysis in this research was
used to test the research hypothesis. Hypothesis testing was performed through several
stages of classical assumption test, simultaneous significance test and statistical test

Result and Discussion

A. Descriptive statistics
Using 50 Companies listed on the Jakarta Islamic Index, the empirical data showed that
the companies have an average company ROA of 16.95 percent or 0.1695, and the
average value of Islamic social report disclosure of 56.13 percent and Tobin’s Q of 64.43.
The data waspresented on table 3:

Table 3: Descriptive Analysis Results

Performance Firm Value ISR GCG
N Valid 50 50 50 50
Mean 98,9184 16,9490 56,1304 64,4328
Std Deviation 198,73117 11,70074 9,21989 15,95166

8|UII-ICABE 2017
1. Company performance

71,51 AALI
ASII
ASRI
39,73 40,38 40,18 37,20 INTP
KLBF
LSIP
SMGR

Figure 1: Financial performace curve (return on assets) of company listed in

Jakarta Islamic Index year 2011 – 2015

Based on the financial performance curve (ROA), it can be seen that Unilever
Indonesia Tbk Company had the highest Return on Asset among other companies
starting from 2011 to 2015. While AlamSutera Realty TbkCompany had the lowest
return on asset among the companies listed in JII during 2011 - 2015.

2. Corporate Value

7,61 7,44 AALI

7,20
6,23 ASII
5,53
ASRI
INTP
KLBF
LSIP
SMGR

Figure 2: The corporate value curve listed in Jakarta Islamic Index 2011 - 2015

Based on the corporate value chart, it can be seen that Unilever TbkCompany
has the highest corporate value among other companies and Astra International
TbkCompany has the lowest corporate value among other companies listed in JII in
2011-2015. The majority of investors prefers to invest in Unilever Company
compared to other companies listed on the Jakarta Islamic Index.

The 2nd International Conference on Accounting, Business & Economics|9

 3. Disclosure of Islamic Social Report
158 AALI
138 143 140 134
120 124 118 122
ASII
94
ASRI
INTP
KLBF

Figure 3: The disclosure curve of Islamic Social Report companies listed on

the Jakarta Islamic Index 2011- 2015

Based on the graph above, the company that discloses the highest Islamic
Social Report is the Cement Indonesia PerseroTbkCompany and the lowest Islamic
social report disclosure is AlamSutera Realty Tbk Company. The disclosure of
Islamic social reports for companies listed on JII during 2011 - 2015 was still seen to
be minimal even though these companies had been categorized as sharia companies
by the capital market authority and financial institutions. Differences in levels of
disclosure of social responsibility of every company could be caused by internal and
external factorsof the company. One of the internal factors was the nature of the
operations and policies of the management of each company. While one external
factor was the pressure from the stakeholders of each sharia company to implement,
report and disclose social responsibility in accordance with the provisions of shariah.
In addition, the disclosure of social responsibility by sharia was voluntary.There is
no standard on the implementation of social responsibility in sharia, and there is no
standard on the principles of disclosure of social responsibility in sharia so that the
disclosure of corporate social responsibility was not the same.

4. Disclosure of good corporate governance

AALI
1,12 1,12
ASII
ASRI
INTP
KLBF
LSIP
0,51 0,51 0,51 SMGR
TLKM
UNTR
UNVR

Figure 4: The disclosure curve of good corporate governance companies listed

on the Jakarta Islamic Index 2011 - 2015

10|UII-ICABE 2017
 In line with the Good Corporate Governance curve, the figure showed that
Cement Indonesia (Persero) Tbk had the greatest Corporate Governance among the
listed companies in the Jakarta Islamic Index from 2011 to 2015. While the lowest
Corporate Governance was Kalbe FarmaTbk. This meant that the ownership of shares
by the management in Semen Indonesia (Persero) Tbk more than other listed
companies in the Jakarta Islamic Index. In contrast, Kalbe FarmaTbk had less share
ownership compared to other listed companies in the Jakarta Islamic Index.

B. Classic assumption test results

Classic assumption test conducted in this research was normality test, multicolinearity
test, heteroscedasticity test and autocorrelation test. The results of the classical
assumption test in this study indicated that this regression model was normal distribution,
free from multicolinearity and heteroscedasticity, and free from autocorrelation. This
means the model had fulfilled the classical assumption requirements.

C. Hypothesis testing results

The results of hypothesis testing were summarized in table 4 below:

Tabel 4: Hypothesis testing results

Model Sum of Squares df Mean Square F Sig.
1 Regression 22,038 3 7,346 5,330 ,003 b

Residual 63,404 46 1,378

Total 85,443 49
a. Dependent Variable: Corporate value
b. Predictors: (Constant), performance_ISR, performance_GCG, performance

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 4,161 ,937 4,439 ,000
Performance 2,625 ,729 1,190 3,598 ,001
Performance_ISR -,008 ,008 -,290 -1,011 ,317
Performance_GCG 2,278 ,668 ,954 3,412 ,001
a. Dependent Variable: Corporate value
Source: SPSS output from processed secondary data

Simultaneous regression test with F test showed F value of 5,330 with significance
level 0,003. This means that company performance, and moderating variable (Islamic
social report and good corporate governance) influence to corporate value. While t test
can be explained as follows:
1. The effect of financial performance to corporate value
Hypothesis 1 which states that financial performance had a positive effect on
corporate value, was accepted. It was based on the value of t arithmetic of 3.598
with p value 0.001. If p value was less than 0.05, then the hypothesis was accepted.
Financial performance was the fundamental information used to make investment
and credit decisions. Thus, the information had a value that was marked by a
positive response to the company stock market price. This supports research

The 2nd International Conference on Accounting, Business & Economics|11

 conducted by Wijaya and Linawati (2015), Alghifari et al. (2013), and Ulupui
(2007).
Based on the results of this study, it can be interpreted that when the level of
profit in the financial performance achieved the company is better, it will have a
positive effect in increasing the corporate value. The higher financial performance
as measured by Return on Assets (ROA) is the better asset productivity in obtaining
net profit. If the supply is high, it will increase demandwhich will further increase
the company attractiveness to investors. Increased attractiveness of the company
makes the company more attractive by investors, it is because the profits will be
greater. Therefore, Return on Assets (ROA) is one of factors that affects the
corporate value.
2. The effect of financial performance on corporate value with Islamic Social Report as
moderating variable
Hypothesis 2 stated that financial performance with the disclosure of Islamic Social
Report as a moderating variable affect the corporate value was rejected. It was
based on the t-value of -1.011 with p value 0.317. P value was greater than 0.05
whichmeant that the disclosure of Islamic Social Report did not moderate the
relationship between financial performance and the corporate value registered in the
Jakarta Islamic Index. The results of this study indicate that investors assume that all
companies registered in Jakarta Islamic Index are definitely doing social
responsibility in Islamic way so as not to pay attention to the disclosure of Islamic
Social Report, because if the company does not carry out social responsibility, the
company will be sanctioned with the prevailing provisions. In addition, investors
assume that all companies listed in the Jakarta Islamic Index had conducted and
disclosed transactions that had been free from the elements of usury, speculation
and gharar, and revealed zakat, the status of Sharia compliance and social aspects
such as sodaqoh, waqof, qordulhasan and the worship disclosure the corporate
environment.
The disclosure of Islamic Social Reports for companies listed on Jakarta
Islamic Index during 2011 - 2015 was still minimal even though these companies
had been categorized as sharia companies by the capital market authority and
financial institutions. Differences in levels of social responsibility disclosure by
shariah of every company can be caused by internal and external factors of the
company. One of the internal factors is the nature of the operations and the
management policies each company, while one of the external factor is the pressure
from the stakeholders of each sharia company to implement, report and disclose
social responsibility in accordance with the sharia provisions. In addition, the
disclosure of social responsibility by sharia is voluntary, there is no standard on the
implementation of social responsibility in sharia, and there is no standard on the
principles of disclosure of social responsibility in sharia so that the disclosure of
corporate social responsibility is not same.
3. The effect of financial performance on corporate value with good corporate
governance as moderating variable.
Hypothesis 3 stated that the financial performance with the disclosure of good
corporate governance as a moderating variable affect the Corporate Value. Based
on the results of SPSS 23 testing in table 4, it showed that the t-value of 3.412 with
p value of 0.001. P value was less than 0.05, then hypothesis 3 was accepted.It

12|UII-ICABE 2017
 means the disclosure of good corporate governance moderated the relationship
between financial performance and corporate value. Investors will invest in a
company by paying attention to information about the good corporate governance.
It meant in investing, investors will see the financial performance of a company if
the corporate governance is good. The higher the financial performance of a
company make the investor interest to invest in the company higher in which it will
have an impact on increasing the corporate value.
Based on the research results above, it indicates that companies should
implement good corporate governance as a requirement, not just compliance with
existing regulations. This is because there are long-term benefits in the
implementation of good corporate governance. They arebeing able to increase the
interest of investors to invest in the company and being able to improve the
company's reputation. In the implementation of good corporate governance, there
are several corporate governance mechanisms that need to be do. The corporate
governance mechanism used in this research was managerial ownership. Ownership
of management over common shares owned by the company is also one of factors
that can increase the corporate value. Manager’s ownership as the company
administrator will be different from the interests of shareholders. Managers can take
the necessary action to increase their personal interests against the efforts to
maximize corporate value.
Managerial ownership is essential for management in order to act as the
interest of the company. One of the interests is to increase the corporate value.
Directors/Managers and commissioners who are also shareholders will try to
increase the corporate value. Director / manager will lead the company while the
board of commissioners will also conduct supervision and give advice to the
directors for the interest of the company. It is because by increasing the corporate
value,it will increasethe wealth of shareholders as well. By increasing corporate
value, will attract investors in investing in the company. The corporate value will
increase if the ownership of the management of the company's shares is increasing.
The management will try as much as possible in increasing profit. Increased profit
of a company is one of indicators that show the occurrence of financial performance
improvement. The improvement of financial performancewill increase the
attractiveness of investors and potential investors to invest their capital into the
company. Increasing investor interest in investing shares in a company indicates that
corporate value is increasing.

Conclusion
Based on the statistical test results and discussion that has been described above, it was
concluded that the company's financial performance which was proxied by the return on
assets (ROA) affect the corporate value. The company's financial performance could increase
the corporate value, if the governance expressed in the financial statements showed good
governance. The good governance was revealed in the disclosure of good corporate
governance. Good corporate governance can be realized if the company’s shares are owned
by managers, directors and commissioners. With such managerial ownership, managers and
directors will make every effort to increase profits. Increased corporate earnings will increase
the return on assets of the company that will result in corporate value increased. Likewise,

The 2nd International Conference on Accounting, Business & Economics|13

the board of commissioners will conduct supervision and advice to the directors in the
provision of policies and in conducting company operations
The Islamic Social Report disclosure variable did not moderate the relationship
between financial performance and corporate value. It meant that the financial performance
of companies on the shariah stock exchange would affect the corporate value although the
investors did not take into account the social Islamic disclosure report of the company. This
was due to the disclosure of Islamic responsibility had become the obligation of companies
listed on the shariahstock exchange. Companies listed on the shariastock exchange already
had provisions to disclose social accountability in accordance with Islamic law. The
disclosure of social responsibility in accordance with shariaincludedthedisclosure of
transactions that is free from usury, speculation and gharar and reveal the zakat, sharia
compliance status and social aspects such as sodaqoh, waqof, qordulhasan, until the
disclosure of worship In the corporate environment.
Based on the conclusions, the researchers suggest for the futher research to use
another proxy on the variables used, namely the company's financial performance. The proxy
that may be used to determine the financial performance are proxies relating to company’s
cash flow because the financial performance of a company cannot be assessed simply by
looking at earnings in the financial statements, but also need to be supported by the
company's cash flow statement. Further studies may also use financial performance proxy
and other proxies good corporate governance, e.g. Price Book Value, Leverage, Independent
Commissioner, the Audit Committee or any other criteria that have been set. In addition to
the variables, the researcher should increase the number of research samples by extending
the years of observation.

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