Empirical Investigation of the Role of Sharia’s Corporate Social Responsibility on the Relationship Between Firm Size and Profitability

Abstract

TThe aim of this research is to investigate the role of shari’ah corporate social responsibility on the relationship between firm size and profitability. This research uses explanatory research method. This research uses a sample of 78 firm-year observations from 13 firms listed on the Indonesian Stock Exchange (IDX) that entered the Jakarta Islamic Index from 2011 to 2016. Partial Least Square (PLS) has been used to analyze the data. This research finds that there is no effect of firm size on profitability both directly and indirectly through shari’ah corporate social responsibility. Furthermore, there is no evidence that shari’ah corporate social responsibility can increase profitability. However, the empirical result show that firm size has positive impact on shari’ah corporate social responsibility. For future research, that shari’ah corporate social responsibility as measured by Islamic Social Reporting (ISR) should be applied to companies that are purely Islamic. The application of shari’ah corporate social responsibility is expected to give shari’ah value added that is profitability and corporate non-financial performance. For future research is expected to investigate the effect shari’ah corporate social responsibility on corporate non-financial performance