**3. Legal foundation for corporate social responsibility (CSR) in Indonesia**

The implementation or practice of CSR can be seen from several angles, one of which is the civil law raised by Elly Erawaty [6], which states there are some crucial things that need to be observed and must be based on strong laws, so it needs to be considered regarding the following matters:

*Implementation of Corporate Social Responsibility to Increase the Value of Companies Listed… DOI: http://dx.doi.org/10.5772/intechopen.93482*


Based on the description above, CSR is able to create a brand image for companies in the midst of a competitive market so as to create customer loyalty and build and maintain the business reputation.

CSR can help companies to get a license to operate from the government because the company is considered to have met certain standards and has social care.

Indonesian government regulations on CSR:

Regulations for sustainability reporting in Indonesia were adopted from the PWC publicizing paper [7] which states:


Starting in 2013, companies that have gone public must make a sustainability report referring to "G4" published by GRI, namely:

G4 places the concept of materiality at the heart of sustainability. The framework sets out the principles and indicators that organizations can use to measure and report on their economic, environmental, and social performance, focusing on the concept of "materiality."

Understanding GRI's guidelines will help you to create communications that convey your organization's sustainability efforts effectively and to an international standard as well as to allow comparability across companies. GRI provides a 2-year transition period where the GRI reports are issued after December 31, 2015 and must follow G4 guidelines.

Until now, there are only four legal regulations that require companies to carry out CSR as well as one international guide on sustainability in Indonesia, namely:

	- a.The Partnership Program is a program to improve the ability of small businesses to become resilient and independent through the use of funds from the BUMN profit share.
	- b.The Community Development Program is a program to empower the social conditions of the community by SOEs through the utilization of funds from the profit share of SOEs, including assistance for victims of natural disasters; assistance in education and/or training, improving health, developing infrastructure, and/or public facilities and religious facilities; and support for nature conservation.

International Standard Organization (ISO) 26000 Guidance on Social Responsibility definition is as follows:

*"Corporate social responsibility is a responsibility of the organization for the impact of its decisions and activities on society and the environment, through*  *Implementation of Corporate Social Responsibility to Increase the Value of Companies Listed… DOI: http://dx.doi.org/10.5772/intechopen.93482*

*transparent and ethical behavior that contributes to sustainable development, including health and welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior; and is integrated through the organization and practiced in its relationship."*

## **4. Company's value**

Brigham and Erdhardt [8] provide an understanding of the company's value as follows: "Corporate value which is the present value of expected free cash flow, discounted at weighted average cost of capital," and Gitman [9] provides an understanding of the company's value more to the actual value per share of common stock as follows: "The actual amount per share of common stock that would be received if all the firm's assets were sold for the market value."

Suad and Enny [10] explained that "the value of the company is the price that is willing to be paid by the buyer if the company is sold. For companies going public is reflected in the company's stock price."

Company's value is the perception of investors to increase the prosperity of owners and shareholders as reflected in the share price (Brigham and Houston) [8]. But according to Weston and Copelan [11], the value of a company is measured through the price-to-book value.

Price-to-book value (PBV) is the comparison between the price of a share and the net book value per share expressed in the number of times between the price of a share and the value of a share according to accounting; the formula used is:

$$\text{Price} \, ? \, \text{to} \, ? \, \text{book value} = \frac{\text{Stock price}}{\text{Book value stock}} \tag{2}$$

$$\text{Book value stock} = \frac{\text{Assets} - \text{liabilities}}{\text{Outstanding stock}} \tag{3}$$

In this study, researchers used price-to-book value in measuring company's value.

#### **5. The influence of corporate social responsibility on company's value**

Corporate social responsibility is disclosed in an annual report called sustainability reporting. The aim is to increase the value of the company. The value of the company will grow sustainably if the company pays attention to the economic, social, and environmental dimensions contained in CSR. Research conducted by Clacher and Hagendorff [12] states that companies with poor environmental performance will reduce the value of shareholder wealth.

Brine and Hacke [13] said corporate social responsibility contributes to financial performance. This is because, in making decisions, we must consider various social and environmental issues. If the company wants to maximize long-term financial results that can increase the value of the company. Also, as stated by Friedmen in Lako [14], the company believes it will generate maximum profits by including CSR as its business strategy.
