CSR disclosure, politically connected supervisory board and cost of debt financing: evidence from Indonesia

We examine the effect of corporate social responsibility (CSR) disclosure on the cost of debt financing (COD) in an emerging market, Indonesia. Next, the moderating effect of political relations through a connected supervisory board (PC-SVB) is investigated in this association. The paper uses all Indonesian listed companies as our population, and the final sample is 1,886 observations. Moderated regression analysis is applied to investigate the moderating effect of political relations on the association between CSR and cost of debt. Also, we address the endogeneity problem by using the generalised method of moments (GMM). We find that firms with more CSR disclosure have lower costs of debt financing in Indonesia. It means that CSR is valuable from the perspective of creditors or lenders. Additionally, the relationship is stronger in the presence of politically connected supervisory boards.