How Halo Effect Phenomena Works on Financial Performance, Corporate Social Responsibility Disclosure, and Stakeholder Pressure

Abstract

The phenomenon that companies do not fulfill the concept of sustainability will result in poor financial performance. So, to overcome this, the company discloses Corporate Social Responsibility (CSR). This study aims to examine the influence of customer and employee stakeholder pressure in strengthening the influence of CSR disclosure proxied by third-party reviews of CSR reports on financial performance proxied by return on assets.  The population of this study are all mining companies listed on the Indonesia Stock Exchange for the 2019-2021 period. The sampling technique used was purposive sampling technique and obtained a sample of 75 observations. Data is obtained from sustainability reports, annual reports and company financial reports and analyzed using SmartPLS3 software. The data analysis technique in this study uses moderated regression analysis estimated with SEM-PLS. The results of this study provide evidence that customer stakeholders (sales) have a positive and significant effect or can strengthen the influence of third-party reviews of CSR reports on financial performance in a positive direction so that it is free from the halo effect. Employee stakeholder pressure negatively and significantly weakens the influence of third-party reviews of CSR reports on financial performance in a negative direction, resulting in a halo effect

Keywords: Financial Performance, Corporate Social Responsibility, Stakeholder, Hallo Effect

DOI: 10.7176/RJFA/14-14-07

Publication date:July 31^st 2023