The Effect of CEO Power on Firm Performance Moderated by Corporate Social Responsibility (CSR) Disclosure (Empirical Evidence in Manufacturing Companies Listed on Indonesia Stock Exchange (IDX) For Period 2018-2020)

DIPONEGORO JOURNAL OF ACCOUNTING http://ejournal-s1.undip.ac.id/index.php/accounting Volume 11, Nomor 1, Tahun 2021, Halaman 1-15 ISSN (Online): 2337-3806 The Effect of CEO Power on Firm Performance Moderated by Corporate Social Responsibility (CSR) Disclosure (Empirical Evidence in Manufacturing Companies Listed on Indonesia Stock Exchange (IDX) For Period 2018-2020) Safira Alifah, Puji Harto 1 Departemen Akuntansi Fakultas Ekonomika dan Bisnis Universitas Diponegoro Jl. Prof. Soedharto SH Tembalang, Semarang 50239, Phone: +622476486851 ABSTRACT The purpose of this study is to examine the effect of CEO power on firm performance and the moderating influence of Corporate Social Responsibility (CSR) disclosure on the relationship between CEO power and firm performance. Indicator of CEOs Power studied were the CEO ownership and the CEO tenure in the company. The firm performance studied with the calculation of Return on Assets (ROA). This study is conducted by quantitative methods using secondary data. The population is the manufacturing company listed on the Indonesia Stock Exchange (IDX) for the period 2018 – 2020, and the samples were taken by the purposive sampling method with linear regression analysis technique through the SPSS program. The sample used in this study were 89 companies with 256 observations. The results of the hypothesis test indicate that the CEO Power with CEO ownership and also CEO tenure as indicators are positively affect the firm performance with return on assets (ROA) calculated. The Corporate Social Responsibility (CSR) disclosure moderates the relationship between the CEO ownership and firm performance. Meanwhile, Corporate Social Responsibility (CSR) disclosure does not moderate the relationship between the CEO tenure and firm performance. Keywords: CEO Power, Corporate Social Responsibility (CSR), Firm Performance (ROA). INTRODUCTION In today's highly competitive business environment, every firm is continually competing to improve its performance in front of the public and other interested parties, particularly investors. Maximizing the performance of the firm is something that any firm should accomplish since by doing so, the firm will also fulfill its major goals, which is the prosperity of its shareholders (Wahyudi & Pawestri, 2006). The Ministry of Industry said that the manufacturing sector is still the largest contributor to the national economy, including through an increase in the addition of domestic raw materials, absorption of local workers, and foreign exchange earnings from exports. Regarding employment, the Ministry of Industry said that in 2019 there will be 17.01 million people, an increase compared to 2018 which reached 15.54 million people. This achievement led to a reduction in the unemployment rate and poverty in Indonesia is quite significant. According to the Minister of Industry, increasing competitiveness and investment attractiveness in Indonesia's industrial sector is aided by the availability of raw resources. and professional human resources (HR), with a qualified, competent, and powerful CEO anticipated to improve the company's performance and attract investors. The firm's CSR activities are also expected to preserve raw material availability since the company pays attention to environmental conditions without damaging nature, allowing the company to function better in the future. The ownership structure is said to be able to impact the firm's operating and performance in accomplishing the firm's aims, notably maximizing the firm's worth. This is due to the power they have. In this era of emerging economies, the CEO is primarily responsible for a firm's performance. CEO power is becoming more widely recognized as a possible factor of firm performance. 1 Corresponding author DIPONEGORO JOURNAL OF ACCOUNTING Volume 11, Nomor 1, Tahun 2021, Halaman 2 Firm performance is a very significant factor for the success of a firm. CEO Power is one of the factors that affect firm performance. A CEO is responsible for the day-to-day operational tasks of the firm to the actions needed in the course of business. As stated on (Tien et al., 2013), the role of the CEO is crucial in a business because of his role as a leader who will be responsible for the failure and success of a firm. At present many companies in doing business set high goals standards: efficient business growth and high progress, predictable results from the strategy to be carried out, and obtain business income quickly. As stated on (Sudana & Aristina, 2017) Chief Executive Officer (CEO) is the top position in the executive ranks, responsible for all of the firm's operational activities. According to (Certo et al., 2007), the CEO has the power to influence potential investors' investment decisions. The CEO's power can originate from their ownership (Ownership Power), formal roles (Structural Power), expertise from their tenure (Expert Power), and social ties (Prestige Power), all of which are nonfinancial information utilized by investors to judge the firm's future prospects (Daily & Johnson, 1997). Essentially, the primary objective of a firm is to achieve maximum profits. Therefore, firm must have a CEO that have the ability to manage the firm. The position of CEO genuinely determines whether the firm is doing well or not, CEO can also lead a firm to be either successful or failure. The responsibility of every CEO must have the abilities which requires good leadership and decisionmaking skills. CEO can influence the disclosure of firm information about the value of CSR and the value of firm (Javeed & Lefen, 2019).The relation between CEO Power and CSR is associated with the agency theory. Because stockholders are widely distributed and there is no shareholder who may exercise direct control, the CEO position provides a great deal of influence over the firm's resources. Thus, the CEO greatly influences the disclosure of information about the value of CSR. The previous research that has tested CEO Power and CSR disclosure are (Harper & Sun, 2019; Li et al., 2016; Rashid et al., 2020). CEO Power refers to a CEO's potential to leveraged holdings or positions to pursue their own goals. When a CEO's power is uncontrolled by an independent commissioner, it is more likely to behave in his or her own self-interest, decreasing shareholder wealth. (Dunn, 2004; Frankforteret.al., 2000). According to (McWilliams & Siegel, 2001), Corporate Social Responsibility (CSR) defined as an action that appears as a continuation of social action, the higher the firm as required in law. In Indonesia, corporate social responsibility is required by law. This is stated in Law Number 40 year 2007 regarding the Limited Liability Companies (PT) which was passed on July 20, 2007 in the matter of Limited Liability Companies which obliged companies in order to carry out CSR. Companies are increasingly expected to play a positive role in society by contributing to longterm development. (...truncated)