Proceedings of 23rd International Business Research Conference November, 2013, Marriott Hotel, Melbourne, Australia, ISBN:

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1 Corporate Social Responsibility as Mediating Variable on Good Corporate Governance Influences toward Corporate Value: Empirical Study at Indonesian Government Bank Listed in Indonesian Stock Exchange, 2012 Tigor Sitorus, Tivia Venica Tami Sitorus and Edoardus Satya Adhiwardana The objective of this research is to build a theoretical and an empirical model of the Good Corporate Governance to disclose of Corporate Social Responsibility and impacted to Corporate Value in banking industries, and this study wanted to investigate and test empirically direct and indirect effects of ; First, Good Corporate Governance to Corporate Value; Second, Good Corporate Governance to Corporate Social Responsibility, Third, Corporate Social Responsibility to Corporate Value or mediate effect of Corporate Social Responsibility on affecting of Good Corporate Governance to Corporate Value at the Indonesian government bank which listed in Indonesian Stock Exchange in The Structural Equation Modeling and Analysis of Path by Amos Software used to analysis data which result have a high goodness of fit, and the test of simultaneous and individual test proved significant with coefficient < 0.05 and the variation of the dependent variable could be explained or estimated by the independent variables with coefficient adjusted R Square > The results of the analysis shows that ; First, directly, Good Corporate Governance has no significant influence to Corporate Value; Second, Good Corporate Governance has significant influence to Corporate Social Responsibility, Third, Corporate Social Responsibility has significant influence to Corporate Value or mediate effect of Corporate Social Responsibility more strong than direct of Good Corporate Governance to Corporate Value. This study recommends about the importance of building Good Corporate Governance indicated by existence of board of Comisioner, Comisioner independence, board of audit, in implementing of Corporate Social Responsibility by dimensions such as; social empowerment, community volunteering, Corporate Philanthrophy, and building corporate value and impacted to growth of amount equity and liability. Keywords: Equity, Good Corporate Governance, Social Responsibility, Corporate Value, Dr. Tigor Sitorus, sitorus_tigor@yahoo.com, Tivia Venica Tami Sitorus, Student Economic Faculty, Dipenegoro University, Semarang, Indonesia, spainisthechampion@hotmail.com Edoardus Satya Adhiwardana, SE, Student Magister of Accounting Diponegoro University, Semarang, Indonesia, Edoardus_adiwardana.yahoo.com 1

2 I. Introduction 1.1 Background Due to the globalization era and issue development that truly can t be avoid by each of human as a part of citizens, the issue is estimated to increase step by step. In this global competition situation, GCG is the obligation to build the condition that can be defined as a though and sustainable. GCG is a practice to manage a corporation prudentially while notice a balancing of the stakeholder priority. By implementing a GCG, Human Resourcing management is expected to be 3E (economist, efficient, effective). As corporate governance continues to be an area of focus for most companies, regardless of whether they are involved in global operations, there are many questions and issues that firms still struggle with: What is good corporate governance and why is it so important? Why are so many firms and governments promoting improved techniques in corporate governance? What are those techniques and best practices and is there evidence that these reforms and policies are useful for firms in promoting transparency, sustainability and the confidence of global markets and investors? In general, corporate governance is about how companies make decisions, how they organize themselves and how they communicate with shareholders and the rest of the world. Typically, corporate governance deals with issues such as how boards and executives are chosen, what mandate and responsibilities boards and executives have, whether shareholders have any right to participate in certain types of corporate decisions through voting and, if so, what form these shareholder rights take. These issues are important because they promote good business practices, good decision-making and opportunities for investors to ensure the integrity of their investment. Because these issues are so important to developing good businesses and a good business environment, both companies and policy-makers are very interested in ensuring that good corporate governance is adopted widely and is effectively institutionalized throughout the firm and may implementing throughout Corporate Social responsibility (CSR). Currently, the CSR has become a widespread phenomenon discussed, as a responsibility for every company, especially state or private enterprises to implement the CSR program because CSR helps improve financial performance, enhance brand image and increases the ability to attract and retain the best workplace, contributing to the market value of the company and also declared that Corporate Social reporting is one approach how companies published or disclosed their Corporate Social Responsibility activities (Said, 2009). It is not only companies and policy makers that are focusing on the importance and forms of good corporate governance. Investors are also focused on corporate governance issues in order to inform their investment decisions. Increasingly, institutional investors are identifying key corporate governance policies and practices that they want to see in order to attract their investment. Some institutional investors 2

3 have requirements or benchmarks for corporate governance such that they are not permitted to invest in companies that do not meet those benchmarks. Paying attention to corporate governance issues is becoming an important part of investment decisions and the way that large institutional investors such as pension funds view their fiduciary responsibility when making and managing investment decisions. Many companies around the world do not meet some of the basic requirements and benchmarks for what investors require in making their investment decisions. In some cases, companies have very few policies and practices on corporate governance and, even if they do, there is little transparency or disclose about what those policies are. These corporate governance problems can be exacerbated in those countries where the legal environment provides very few corporate governance practices, few disclosure requirements and few shareholder rights. Together, these policies and practices create an environment where investors are unable or unwilling to invest in the firms and countries with inadequate corporate governance laws and policies. It is not only potential investors that are constrained in their investment choices when corporations and countries have inadequate corporate governance laws and practices, the opportunities for partnerships and mergers and acquisitions are also limited. In fact, emerging market businesses have the potential to be leaders in promoting and adopting good corporate governance practices. With this objective in mind, it is important to identify the specific requirements and policies for how corporate governance is evolving, the policies and practices that are being adopted as best practices, and the various benefits and challenges in adopting these best practices in corporate governance. Some phenomenon as mention above made the author be interesting to research the relating of corporate governance with corporate social responsibility and its stimulated to social wealthy with title Corporate Social Responsibility as Mediating Variable on Good Corporate Governance Influences toward Corporate Value. 1.2 Problem Formulation According the background, the phenomenon in the banking business and the research gap that has been described above, the authors propose research problems are, How is corporate governance involving company s Rules of the Game in order company have a responsibility to empower social or stakeholder in order the company can obtain Good Corporate Value. According these problems, the author make three research questions as bellows : 1). What is the kind and the type of corporate governance which implemented Indonesian banking sector 2). Does the GCG Influence to Corporate Value 3). Does the CSR Influence to Corporate Value 3

4 4). Does the CSR mediate the affecting GCG to Corporate Value 1.3 Objective of Research 1) To script the kind and the type of corporate governance which implemented Indonesian banking sector 2) To analyze the Influence of GCG to Corporate Value 3) To analyze the Influence of CSR to Corporate Value 4) To analyze mediate effect of CSR on the affecting of GCG to Corporate Value 1.4. Benefit of Research This study is expected may contributing to academics and practitioners in the form of the development of theories and models on the development of empirical models of the concepts of the relationship of corporate governance with Corporate Social Responsibility and its stimulated to social wealthy. 1). Academic Benefit This has implications for academic research by providing support for the development of Sustainable competitive advantage theory (SCA) by a result of study the relationship of corporate governance with Corporate Social Responsibility and its stimulated to social wealthy. 2). Practical Implications To provide guidance in improving the relationship of corporate governance with Corporate Social Responsibility. To make an awareness of the importance of the implementation Good corporate governance and Corporate Social Responsibility in order social wealthy be stimulating and the company may operate their activity as sustainable. Ii. Literature View 2.1. Corporate Governance Corporate governance is becoming more complicated, sophisticated and is providing both greater opportunities and expectations for businesses. To understand how corporate governance is evolving and changing, there are a few important ideas that are critical for businesses. Companies must not only implement general corporate governance practice but must focus on best practices in good corporate governance. A key element of good corporate governance is good. Another key element of good corporate governance is managing a company s reputation and how it is perceived in the global and local community. 4

5 What is Good Corporate Governance? Most companies have structures, policies and processes that create a governance process. Whether required by law or by the necessity to create a decision-making process, companies have created boards, committees of board, management, and reporting processes. Some companies have gone beyond these basic governance requirements and have focused on types of techniques and processes that allow them to improve the quality of their boards, management team, and relationship with shareholders. In some countries, some of these governance techniques are required by law. In other countries, these techniques are chosen and implemented by companies not because they are required to do so by law but rather because companies believe that they add value and make good business sense. Good corporate governance extends beyond the basic minimum of what companies need to make decisions and create a governance structure. Good corporate governance includes a much more sophisticated structure for improving decisionmaking and creating avenues for shareholder engagement. These good corporate governance techniques may include improvements in how boards are chosen and compensated, how management is chosen and compensated, how much information is available to the investors and the community at large, how companies identify and analyse risks including the disclosure of these risks, providing for shareholder voting on board election and management compensation issues. While good corporate governance practices vary from company to company, and from place to place, there is growing consensus on what are best practices in good corporate governance. The OECD, for example, has provided a model for good corporate governance that companies can adopt. Beyond these OECD guidelines, companies operating around the world provide useful models in good corporate governance and set the standard for other companies in respect of what is possible for corporate governance practices. These examples of good corporate governance are particularly important since many of the corporate governance practices and techniques have been adopted because companies recognize the business value and strategy in investing in good corporate governance practices Good Corporate Governance (GCG) World Bank defined GCG " is a collection of laws, regulations and rules that must be met to encourage the performance of company resources work efficiently, generate economic value of sustainable long-term shareholder and the communities as a whole ". While the Forum for Corporate Governance in Indonesia (FCGI) defines Corporate Governance are: A set of rules governing the relationship between shareholders, trustees ( managers ) of the company, the creditors, the government, employees and internal stakeholders and external relating to the rights and their obligations or in other words a system that controls the company. Corporate Governance goal is to create added value for stakeholders. 5

6 The term corporate governance itself for the first time introduced by the Cadbury Committee in 1992 that uses the term. In their report, known as the Cadbury Report, this report is seen as a turning point ( turning point) that are critical to the practice of corporate governance around the world. Cadbury Report defines corporate governance are : " A system that serves to direct and control an organization ". Another definition of the Cadbury Report looked at corporate governance asmanagers, creditors, government, employees and interested partiesothers both internally and externally in relation to the rights and responsibilitiesthey replied. The Organization for Economic Corporation and Development (OECD) defines corporate governance as follows : " Corporate governance is the system by roomates business corporations are directed and control. The corporate governance structure specifies the distributian of rights and responsibilities among different participant in the corporattion, such as the board, the managers, shareholders and other staheholder, and spells out the rules and procedures for decision making on corporate affairs. By doing this, it also provides the structure through roomates the company objectives are set, and the means of attaining those objectives and monitoring performance "Bank as intermediary and trust institutions, in carrying outbank business activities must adhere to the principle of openness (transparency ), has a range of performance measures of all banks based measures consistent withcorporate values, business objectives and strategy of the bank as a reflection of the bank accountability, adhering to prudential banking practices and ensure the implementation of the provisions in force as a form of bank accountability, objective or free from any side pressure in decision-making (independency), and always consider the interests of all stakeholders based on the principles of equality and fairness (fairness). In relation to the principle of a bank should consider the following; 1).Disclosure ( Transparency ), the Bank shall disclose information in a timely, adequate, clear, accurate and comparable dandapat accessible to stakeholders in accordance with their rights. 2). Accountability, the Bank shall establish clear responsibilities of each organ are aligned with the organization 's vision, mission, business objectives and strategy of the company. Banks should ensure the presence of a check and balance system in the management of the bank. Banks should have a measure of performance of all ranks based bank agreed ukuranukuran consistent with the value of the company (corporate values), business objectives and strategy of the bank and has a rewards and punishment system.3). Responsibility, to maintain the continuity of its business, the bank must adhere to the principle of prudence and ensure the implementation of the regulations. Bank should act as a good corporate citizen ( good company ) including care for the environment and social responsibilities.4). Independence, Banks should avoid undue dominance by any stakeholder and is not affected by the unilateral interests and free of conflicts of interest (conflict of interest ). Bank's decision-making should be objective and free from any pressure from any side. 5). Fairness, Bank must always consider the interests of all stakeholders based on the principles of equality and fairness. Bank should provide the opportunity for all stakeholders to provide input and express opinions in the interest the bank as well as having access to information in accordance with the principle of openness. 6

7 GCG provides a frame of reference that allows effective supervision so as to create a mechanism of checks and balances in the company. Survey conducted by institutions such as the world-class consultants McKinsey and Company shows that the institutional investors are more confident in corporations that have Corporate Governance and Corporate Governance regard as qualitative criteria determinants, matching the criteria of financial performance and growth potential. the essence of corporatecorporate governance is improved performance through supervision or monitoring of performance management and management accountability to shareholders and stakeholders Other interests based on the framework of rules and regulations (Tri Gunarsih, 2003). Implementation of good corporate governance by using principles -internationally accepted principles, namely (FCGI, 2001); 1). The rights of the holders ofshares, which must be properly informed and timely manner regardingcompanies, can participate in the decision making of the company, andparticipate in the profits of the company, 2) equal treatment for shareholders, especially the minority shareholders and foreign shareholders,with important disclosure information, and to prohibit the distribution of its own partyand stock trading by insiders, 3) The role of shareholdersshould be recognized as established by law and active cooperation between enterprises and stakeholders in creating wealth, jobs andhealthy companies of financial aspects, 4). Disclosure of accurate and precise intime as well as transparency about all the things that are important to the performance of the company ownership, as well as stakeholders, 5). The responsibility of the boardin the management, control and accountability to corporate managementand the shareholders. Implementation of GCG in Indonesia In Asian countries, the implementation of the principles of good corporate governance is an essential part of the economic reforms are essential to cope with the economic crisis. thus also in Indonesia, efforts to improve corporate governance has begun. This can be seen from the Memorandum of Understanding ( Letter of Intent ) signed by the Government of Indonesia and the International Monetary Fund ( IMF ), and the continuation of financial assistance from the IMF depends on improvements in the field of corporate governance. In line with this, the National Committee on Corporate Governance ( KNKCG ) found in Indonesian companies have a responsibility to implement corporate governance standards that have been implemented at the international level. However, although aware of the importance of good corporate governance, many parties still lack firm reported that applying these principles. There are many companies apply the principles of good corporate governance and regulation as encouragement to avoid existing sanctions than those who regard the principle as part of the company culture. In addition, the application of the principles of good corporate governance obligations should have a positive influence on the quality of published financial statements. Since the country is mired in an economic crisis in 1997, all aspects of life in this country was stagnant. Worse, the fact that not only the government but also experienced by business organizations. Many such companies have to tighten all forms 7

8 of expenditure in running the business, while not a few were forced to lay off employees and ceased operations. The financial crisis is also a big impact on the banking sector, which is the heart of the Indonesian economy. Where banks act as agencies intermediary between the parties and the excess funds are underfunded. Bank duty to collect funds from the public and channel them back in form of credit or loans to the public (businesses) that are not directlyindonesia can help create a better economy. But the crisis in In 1997 it resulted in the worst banking crisis in the history of national banking. In the restructuring of the banking seminar in Jakarta in 1998 concluded some cause of the reduced performance of the banking, among others: The increasing problem loans banks, which led to the elimination of reserves banks must provide substantial debt resulting in the ability of banks to provide credit is limited Impact of bank liquidation 1 November 1997 which caused a decline in confidence the banking community and the government, leading to the withdrawal of funds as massive or rush. The decline in bank capital Many banks are not able to pay off its obligations because of the declining value ofexchange Bank management is not professional. According to these problematic conditions, the Indonesia government provided banking reform on 38 March 1999 by the closure of banks, bank takeovers, bank recapitalization, and instructed about 73 banks to sustain its operations without doing so in 2001 recapitalize banks remaining number were 151 banks. In addition to implementing banking reform policy, in 2004 the government, through Bank Indonesia (BI) to reform the national banking system is fundamental to the issuance of the API ( Indonesian Banking Architecture ). Indonesian Banking Architecture (API) system is a basic framework Indonesian banks are comprehensive and provide direction, shape, and structure the banking industry for a period of five to ten years. There are six main pillars which is the target to be achieved, one of which is creating corporate governance to strengthen internal condition of national banks. Not just stop there, to show the seriousness of the issue CG,January 30, 2006 on Bank Indonesia ( BI ) issued a policy package of bankingwhich is better known as Pakjan 2006, the new regulations concerning the contents megenaiimplementation of good corporate governance for banks in the form of Bank Indonesia Regulation (PBI No. 8/4/2006. Implementation of good corporate governance is considered to improve banks that had a bad image, protect and enhance the interests stakehoderscompliance with laws and regulations in force and the general ethics of the banking industry in order to create a sound banking system. moreoverimplementation of good corporate governance in banking is expected to affect the performance of banks, due to the implementation of corporate governance can beimprove financial performance, reduce risk due to management actions tend to benefit themselves, and increase investor confidence. 8

9 Learning from these experiences, this time more parties agreed that the implementation of GCG is one thing that can not be avoided anymore and become an important prerequisite for the survival of the business world and the economy. Not less than multilateral institutions like the World Bank, Organisation for Economic Cooperation and Development, The Bassel Committee on Banking Supervision (from The Bank for International Settlements / BIS is headquartered in Basel, Switzerland), all giving GCG implementation of the directives. These institutions argue advances in the application of GCG will help countries hit by the financial crisis to immediately rebuild the competitiveness of industry and country management practices, improve confidenceinvestors, as well as promoting sustainable economic growth. 2.2 Corporate Social Responsibility (CSR) Corporate Social Responsibility ( CSR ) contains the same meaning as individuals, the company has a moral duty to be honest, obey the law, uphold the integrity of, and not corrupt CSR emphasizes that companies shoulddevelop ethical business practices, and the sustainable economic, social and environment (Yakup, 2004). World Business Council for Sustainable Development (WBCSD) defines Corporate Social Responsibility as an ongoing commitment among business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as local communities and society as a whole (Iriantara, 2004, p.49). Corporate Social Responsibility is a firm commitment to improve community being well through the practice of good business and contribute most of the company's resources ( Kotler & Nancy, 2005, p.4 ). Corporate Social Responsibility Forum define a business as that carried out in a transparent and open as well as based on moral values and uphold respect for employees, communities and the environment (Wibisono, 2007). Kotler in the book " Corporate Social Responsibility : Doing the Most Good for Your Company " (2005 ) mentions some form of Corporate Social Responsibility programs to choose from, namely; : 1). Cause Promotions In this cause promotions company seeks to increase awareness community about a particular issue, where this issue should not be related to or relating to the company's business lines, and then the company invites the public to donate time, funds or their property to help solve orprevent these problems. In cause these promotions, the company couldimplement programs individually or in collaboration with other institutions, for example : non- government organization. Cause Promotions can be done in form; Increase public awareness and concern for one particular issue, Invites the public to find out in depth on aparticular issue in society, Invites the public to donate money, time or goods belonging them to help resolve and 9

10 prevent a particular problem, Inviting people to participate in the administration of a particular event,for example : following the path of motion, signed petitions, etc. 2. Cause Related Marketing In cause related marketing, the company will invite the public to buy or use the product, be it goods or services, in which a portion of the profits will be donated to help the company overcome or prevent a particular problem. Cause related marketing can be: Any item that is sold, a percentage will be donated. Each opening accounts or new accounts, then a few dollars will be donated. 3. Corporate Social Marketing Corporate social marketing is done by the company with the aim to change people's behavior (behavioral changes) in a particular issue. usually corporate social marketing focuses on areas such as; Health sector, Field safety, Environmental Areas of society. 4. Corporate Philanthrophy Corporate philanthropy may be a form of Corporate Social Responsibility of the oldest. Corporate philanthrophy is done by the company by contributing / direct contributions in the form of funds, services or equipment to those in need both institutions, individuals or certain groups. 5. Community Volunteering Community Volunteering is a form of Corporate Social Responsibility in which encourage or invite company employees involved in the programcorporate Social Responsibility is being run by the contributingtime and energy. 6. Socially Responsible Bussiness Practises Practises in socially responsible business, the company made changes to one or the whole system works in order to reduce adverse impacts on the environment and society. Socially responsible business practises, can be done in the form of : Improve the production process, Discontinue products that are considered dangerous but not illegal, Make the age limit in doing the sale, such as certain goodswill not be sold to children who have not turned 18 years old. In contrast to Kotler and Lee, according to The Committee on Accounting for Corporate Social Performance of Nation Association of Accountants ( Yuniarti, 2002) forms of corporate social responsibility can be classified as follows; Community involvement, Human Resources, Physical Environment and Resources, Contribution of products or services. 10

11 Kotler and Lee (2005 ) stated that the company's participation in various forms of social responsibility can provide many benefits for companies, among others : 1. increase sales and market share,strengthen brand positioning,improve the company's image and influence, improve the ability to captivate, motivate and retain, lower operating costs, and increase the desire for investors to invest. III Research Method 3.1 Research Design The design of this study used study document. This research is an approach to economic and management, especially with the main study accounting banking finance and banking management science, management control systems and strategic management, learning process and behavior. In particular, using contingency theory and agency theory regarding the external business environment uncertainties and other variables, namely strategic planning, internal control systems, social empowerment and marketing approach Population and Research Sample The population in this study is all financial report of Indonesian local banks in Jakarta. The choice of banks because the banks have audited by external auditor beside have a bigger performance problem than other business, Based on a preliminary study obtained data on the number of national banks listed on the Stock Exchange until the year 2011 amounted to 32 banks with over 5000 branches across Indonesia (Viva news, 2011). Remembering is not possible to take the whole unit population, taking into account the ability of researchers in terms of money, time and facilities and other support, it is also possible to do the census. Therefore, in this study conducted sampling for each branch that can represent all population units. Sampling method that used by the author is purposive sampling method (Ferdinand Augusty, 2006). The reasoning for choosing purposive sampling method is to consider all information related to the research problem can be extracted from reporting and document which directly give to the author a describe about implementing CSR and it s affect to the ability of bank to collect the third party s deposit. Therefore, the samples in this study are financial reports and other document like company profile where every bank was represented by 4(four) years from 2008 until Operationalization of Variables Basically the necessary data in this study can be grouped into 3 (three) groups of variables, namely: Independent Variable, Dependent Variable, Variable Mediation (intervening) Tuckman (1988), Mohammad Nazir (2005), Paul Jose (2008). All the variables used in this study are: 11

12 1) The first variable (X1) is the Good and Clean Governance. This variable is an independent variable indicated by the existence of Board Commisioner, Independence Commisioner, Board of Audit. 2) The second variable (X2) is Corporate Social Responsibility. This variable is a mediating variable which indicated by social empowerment, community volunteering, Corporate Philanthrophy. 3) The Third variable (Y) is the corporate value. This variable is the dependent variable and the results achieved in the form of the ability of bank to collect public fund as measured by collect deposit, saving account, their debt, to grow up equity Measurement Scale The measurement that used in this study is numerical data and interval data with Likert scale (Likert, 1963). This results in a measurement scale that allows the calculation of average, standard deviation, statistical parameters, correlation and so forth. (Summated rating methods, C. Bird, 1988), and developed by Tsui, Anne S., Lyman W.Porter (1997) in measuring the effect of investment in manpower to employee performance, with scoring from agree to strongly agree (score of 1 to 10) Data Collection Techniques The data required in this study consisted of primary data and secondary data. Primary data required in this study was collected by conducting field research that is, directly to the bank listed on the Stock Exchange. Secondary data was collected through library research. 1). Field Research Primary data required in this study relates to the identity of the bank which is the first group. The second group of data used to measure variables control environment, information systems, control activities as well as bank loan performance variables. To obtain primary data, used field research (field research) with the following data collection techniques are; study document, observation and interview. 2). Research Bibliography Library research is needed to collect the data needed to support the secondary as well, complement, and to complete primary data. Secondary data collection technique is to learn from the journals, reports from relevant agencies as well as other writings that had to do with this research, such as; the financial statements of the banks listed on the Stock Exchange in in Indonesia Stock issued in the Indonesian book Capital Market Directory. 12

13 3.6. Research Procedures 1) Phase Trials Research Once the indicators developed from the concept (construct) a theoretical variable, first discussed with the other party (second opinion), especially with the knowledge and competence relevant to the research topic. Further trials to target populations in relatively small quantities are supposed to represent the actual characteristics of the target population. 2). Testing Data Given the data collection using questionnaires, the seriousness of the respondents in answering these questions is very important in research. Legality or validity of the results of social research is determined by the measuring instruments used. If the measure is not used or is not valid and can be trusted, the results of research do not describe the real situation. Necessary to tackle these two kinds of testing; test of validity and test of reliability. 3.7 Method of Analysis In this study, the authors used a technique of analysis by the method of Structural Equation Modeling (SEM). SEM is a method of analysis in addition to providing information about the simultaneous causal relationship between the variables, it also provides information about the load factors and measurement errors. Measurement errors that usually arise in the multiple linear regression because of the use of latent variables, overcome by SEM through equations that exist in the measurement model. SEM was able to analyze the relationship between latent variables with indicator variables, the relationship between latent variables with one another, as well as knowing the size of the measurement error. (Ghozali and Fouad, 2005). To be able to use analysis techniques can be used Structural Equation Modeling software (software) that support. In this study, the authors use the software Amos. IV. Discussion and Finding a. Feasibility Testing Research Model The SEM assumptions that must be met are as follows: 1. Sample Size Sample size that must be met in the modeling of SEM is the minimum amount to 100 then use the comparison of 5 observations for each parameter to be estimated. Therefore, when developing a model with 20 parameters used then minimum 100 samples. In this study, the number of samples selected

14 people, so that the number of eligible sample (Hair et al, Tabachic & Fidel in Augusty Ferdinand, 2006). 2. Normality and Linearity Distribution of data must be analyzed to see if the assumptions of normality are met so that data can be processed further with SEM modeling. Normality can be tested with melihar image histogram can be tested with the data or statistical models. Normality test is done by using the skewness test that showed almost all normal variables at the 0.01 level (1%). This is reflected in the value of skewness CR under ± 2.58 (Arbuckle, 1997:78). Multivariate value in testing multivariate normality is kurtosis coefficient, if the results are still below the limit of ± 2.58, this means that there is data used multivariate normal distribution. 3. Extreme numbers (Outliers) Outliers are observations that appear extreme values both univariate and multivariate namely that arise due to the combination of its unique characteristics and look very much different from the other observations. This full model proves no Outliers 4. Multicolinearity Multicolinearity is a condition in which there is a high correlation between some or all of the independent variables in a multiple regression (Cooper and Emory, 1996:324). Multicollinearity can be detected from the determinant of the covariance matrix. Covariance matrix determinant value is very small gives an indication of multicolinearity problem. In Table visible correlation between the independent variable value is less than 1 (r <1), meaning the independent variable no symptoms of multicolinearity. According to Arbuckle (1997:85) AMOS is also used to identify the proposed model meets the criteria of a good structural equation models. The criteria are: 1) Degrees of Freedom (Degree of Freedom) must be Positive Output results, degree of freedom is 7, which means that the model is being developed to meet the criteria as a good model. 2) χ2 (Chi Square Statistic) and Probability Fundamental test equipment to measure the overall fit is the likelihood ratio chi-square statistic. Significant level of acceptance is recommended if p 0.05 (Hair et al., 1998:389). Besides ratio chi-square equal 7,2339, according to Hair et al. (1998:340) recommended value of conformity to accept a model is the 14

15 value of CMIN / DF is less than or equal to 2.0 or 3.0. while the value of CMIN / DF = or < 2.0, meaning this model well and can be used. 3) Goodness of Fit Index (GFI) GFI is used to calculate the weighted proportion of the variance in the sample covariance matrix is described by the covariance matrix can estimated population. 16:00 Amos output results demonstrate GFI coefficient of or 97,9%. This index reflects the overall suitability of the model are calculated from the residual quadratic model that predicted compared with the actual data. Goodness of Fit Index value is usually from 0 to 1. The larger the sample size the study the greater the value of GFI. Better value close to 1 indicates that the tested models have good agreement (Hair et al., 1998:387) is said to be good value GFI ) Adjusted GFI (AGFI) GFI AGFI states is an analogue of R2 (R square) in a multiple regression. Fit Index can adjusted the degree of freedom available to test whether the model is accepted estimated. 16:00 Amos output results show AGFI coefficient of or 93,7%. Acceptance rate is recommended if has a value equal to or greater than ) Tucker-Lewis Index (TLI) TLI is an alternative incremental fit index that compares a model was tested against a baseline models. 16:00 Amos output results show TLI coefficient of or 98,8%. Acceptance rate is recommended if has a value equal to or greater than ) CFI (Comparative Fit Index) CFI is also known as the Bentler Comparative Index. CFI is an incremental suitability indices are also compared with the null model tested and estimated models. Amos output results show the CFI coefficient of or 99,9%. Was said to be a good index to measure the suitability of a model because it is not affected by sample size (Hair et al., 1998:289). Index indicating suitability models tested had a good is if the CFI ) RMSEA (Root Mean Square Error of Approximation) RMSEA values indicate the goodness of fit is expected when the model is estimated in the population. Amos output results show RMSEA index of or 1,6%. RMSEA value is less than or equal to 0.08 (8%) is an index to the acceptability of the model showed a close fit of the model was based on degree of freedom. RMSEA is an index of measurement that is not influenced by the size 15

16 of the sample so that the index is usually used to measure the fit model on large sample numbers. The indices are used to test the feasibility of a model can be summarized in the table below. Table 4.1: Goodness of Fit Full Model the Affecting of Good Corporate Governance to Corporate Value mediated by Corporate Social Responsibility. Goodness of Fit Index Cut off Value Result Evaluation Model χ2 Chi square < Good Hoelter ( 0.05 ) > Good Significance Probability 0,05 0,404 Good GFI 0,90 0,979 Good AGFI 0,90 0,937 Good CMIN/DF 2,00 1,033 Good TLI 0,90 0,998 Good CFI 0,90 0,999 Good RMSEA 0,08 0,016 Good Source: Results Output Full Amos 16:00 b. Hyphothesis Testing Figure 1: The Pictograph of Affecting of GCG to Growth of Corporate Value Mediated by Corporate Social Responsibility Source: Results Output Full Amos 16:00 16

17 Where as ; GCG =Good Corporate Governance DK = Board of Commisioner KI = Commisioner independence DA = Board of Audit CSR = Corporate Social Responsibility VAL = Corporate Value VL = The Growth of Liability VE = The Growth of Equity Estimates (Group number 1 - Default model) Scalar Estimates (Group number 1 - Default model) Maximum Likelihood Estimates Regression Weights: (Group number 1 - Default model) Table 4.2: The Affecting of GCG to Growth of Corporate Value Mediated by Corporate Social Responsibility Estimate S.E. C.R. P Label CSR <--- GCG 4,1733,7451 5,6008 *** par_3 VAL <--- CSR,0033,0029 1,1393 *** par_5 VAL <--- GCG -,0303,0241-1,2614,2072 par_6 DA <--- GCG 1,0000 KI <--- GCG 1,0157,1018 9,9760 *** par_1 DK <--- GCG 1,8896, ,0166 *** par_2 VL <--- VAL 1,0000 VE <--- VAL,5624,7180,7833,4335 par_4 Standardized Regression Weights: (Group number 1 - Default model) Estimate CSR <--- GCG,5128 VAL <--- CSR,1318 VAL <--- GCG -,1469 DA <--- GCG,7180 KI <--- GCG,8910 DK <--- GCG 1,0022 VL <--- VAL,9159 VE <--- VAL,

18 Hypothesis 1: Good Corporate Governance Has Positive Effect to Corporate Value Statistical tests of this hypothesis (Table 4.2), shows that variable Good Corporate Governance has coefficient of negative but not significant on influencing of Corporate value, where the value of P = > 0.05, meaning hypothesis 1 is not acceptable, or Good Corporate Governance directly has negative and no significant effect to Corporate Value. This study different with Robert Adamson (2011) who stated that the failure of Good Corporate Governance can have negative impacts not only for the company but for investors and the community at large and impacted to Corporate Value. This study also different with the study of Forum for Corporate Governance in Indonesia (2001) that found the implement of good corporate governance significant to increase company performance, shareholder value and corporate value and has positive impact to the company trust to borrow the money from the creditors. Hypothesis 2: Social Good Corporate Governance has positive effect to Corporate Responsibility Statistical tests of this hypothesis (Table 4.2), shows that variable Good Corporate Governance has coefficient of positive and significant on influencing of Corporate Social Responsibility, where the value of P = 0,0000 < 0.05, meaning hypothesis 1 is acceptable, or Good Corporate Governance directly has positive and significant effect to Corporate Corporate Social Responsibility. This study support to Belkaoui (2000) who said that the company demanded to inform public about social activity, and the argument of Ikhsan dan Ishak (2007) that regarding to social accounting perspective, the disclosure of CSR as a measurement, an indicating and reporting about the contributing and involving of company to their community. This study also support to Diah Febriyanti (2010) who argued that the role of Good Corporate Governance has positive effect to disclosure and implementing Corporate Social Responsibility with evidence the Indonesian Government s Corporate. Hypothesis 3: Corporate Social Responsibility has positive effect to Corporate Value Statistical tests of this hypothesis (Table 4.2), shows that variable Corporate Social Responsibility has coefficient of positive and significant on influencing of, where the value of P = 0,0000 < 0.05, meaning hypothesis 3 is acceptable, or Corporate Social Responsibility directly has positive and significant effect to Corporate Value. 18

19 This statistical testing prove that the mediate effect of Corporate Social Responsibility has coefficient equal positive 0,07 (0,5128 x 0,1318), this coefficient more strong than direct effect of Good Corporate Governance to Corporate Value. This study support to Kotler & Nancy (2005) and (Wibisono, 2007). who argued that Corporate Social Responsibility define a business as that carried out in a transparent and open as well as based on moral values and uphold respect for employees, communities and the environment and impacted to Company value, and Kotler and Lee (2005 ) stated that the company's participation in various forms of social responsibility can provide many benefits for companies such as ; increase sales and market share, strengthen brand positioning, improve the company's image. This study also support to Said, (2009) who argued that CSR helps improve financial performance, enhance brand image and increases the ability to attract and retain the best workplace, contributing to the market value of the company. This study support also to Robert Adamson (2011) who argued that For many companies, investing in CSR policies and programs is a way to manage a company s reputational risk, manage relationships between the company and shareholders and other stakeholders, and preempt potential problems in how products are produced, sourced and sold. V. Conclussion and Implication 5.1 Conclussion 1) Variable Good Corporate Governance has negative coefficient equal but not significant on influencing of Corporate value, where the value of P = > 0.05, meaning hypothesis 1 is not acceptable, or Good Corporate Governance directly has negative and no significant effect to Corporate Value. 2) Variable Good Corporate Governance has positive coefficient equal and significant on influencing of Corporate Social Responsibility, where the value of P = 0,0000 < 0.05, meaning hypothesis 2 is acceptable, or Good Corporate Governance directly has positive and significant effect to Corporate Corporate Social Responsibility. 3) Variable Corporate Social Responsibility has positive coefficient equal and significant on influencing of, where the value of P = 0,0000 < 0.05, meaning hypothesis 3 is acceptable, or Corporate Social Responsibility directly has positive and significant effect to Corporate Value. This statistical testing prove that the mediate effect of Corporate Social Responsibility has coefficient equal positive 0,07 (0,5128 x 0,1318), this coefficient more strong than direct effect of Good Corporate Governance to Corporate Value. 19

20 5.2. Implication 1) Academic Recommendation This study proves and contributes to the academics in the form of recommendation and the new theoretical model affecting of Good Corporate Governance to grow up Corporate Value. This study has implications for academic research by providing support for the development of social accounting theory and the theory of organization that look from a wider perspective, namely; 1). Suggests Good Corporate Governance directly has no significant effect to Corporate Value or directly Good Corporate Governance can not increasing Corporate Value, so this variable must be mediated by other variable in order effected and more strengthen to increase Corporate Value, 2). Proposes that by using an indirect effect of Good Corporate Governance to Corporate Value mediated by the disclosure of Corporate Social Responsibility could be strength, caused by it has positive and more strength coefficient of than direct effect. 2) Practical Recommendations. Policy implications of these results for practitioners bank provide a guidance in improving the Corporate Value when operating their business. Corporate Social Responsibility must be implemented by Organization as well as adequate, beside the practitioner must implementing organizational learning to build and developed organizational capacity. This study has implications for practitioner such as; 1) The Importance of implementing Corporate Social Responsibility like ; social empowerment, community volunteering, Corporate Philanthrophy. 2). To Implement Corporate Social Responsibility, the Organization must be build organization capacity, a positive and conducive environment, transparancy and independency. VI. Limited of Research and Agenda Some testing and conclusion of this research still has some limitations like; To obtain Data and information about Good Corporate Governance, Corporate Social Responsibility and Corporate Value relatively more difficult because it is limited by bank secrecy laws, so that the researchers could not obtain the documents, data and information from the bank as quickly, and the researchers can not interview the respondents. In the future research it is suggested that the object of research not only Bank but also involve the other Financial Institution. 20

21 References Frederickson, George H The Spirit of Public Administration. Jossey-Bass Publisher. San Fransisco Fox, Tom., Halina Ward, dan Bruce Howard (World Bank) Public Sector Roles in Strengtening Corporate Social Responsibility : A Baseline Study. Fransiska, Asmin. The Need of Human Security Protection in Indonesia: The Role of Bussiness Sector Hohnen, Paul Corporate Social Responsibilty, Implementation Guide for Business. < - > Kotler & Nancy (2005) and Moon, Jeremy dan David Vogel Corporate Social Responsibility, Government, and Civil Society - oxford_ chapter.pdf Said, Zaim (2009). Developing the CSR and Filantrophic and Aplicable Filantropi_yang _Aplikatif.pdf Shauki, Elvia dan Chaerul D. Djakman. Corporate Social Responsibility and Poverty Allevation : Social Performance Indicators in The Indonesian Companies. unisa.edu.au/ commerce/ events/ docs/2008/poverty.doc World Bank The Role of Public Sector in CSR - Ekonomika/ 86/55-67.pdf 21