Companies should prioritize stakeholder management

Oct 13, 2025 by vinooalluri.com 91 views

Analysis of Factors Affecting Social Disclosures in Manufacturing Companies Listed on the IDX

Introduction

In today's business world, social disclosure is a crucial aspect that companies need to consider, especially those registered on the Indonesia Stock Exchange (IDX). Social disclosure refers to the practice of companies sharing information about their social and environmental performance, which is essential for building trust and credibility with stakeholders. This study aims to analyze the factors that influence the practice of social disclosure in manufacturing companies listed on the IDX between 2007 and 2009. The five main factors used as proxies in this study are stakeholder management, financial leverage, company size, profitability, and age of the company.

The Importance of Social Disclosure

Social disclosure is a vital aspect of corporate social responsibility (CSR), which involves companies taking responsibility for their impact on society and the environment. By disclosing social and environmental information, companies can demonstrate their commitment to CSR and build trust with stakeholders. Social disclosure can also help companies to identify areas for improvement and develop strategies to address social and environmental issues.

Methodology

This study used a sample of 21 manufacturing companies listed on the IDX between 2007 and 2009. The five main factors used as proxies in this study are stakeholder management, financial leverage, company size, profitability, and age of the company. The study used a regression analysis to examine the relationship between these factors and social disclosure.

Analysis of Factors Affecting Social Disclosures

Stakeholder Management

Stakeholder management plays an important role in determining the extent to which the company is committed to social responsibility. If management actively involves various related parties, such as employees, consumers, and surrounding communities, the company tends to be more open in expressing the social initiatives carried out. This has a positive impact on the company's image and can increase public confidence. In this study, stakeholder management was found to have a significant effect on social disclosure, indicating that companies that actively involve stakeholders in their decision-making processes are more likely to disclose social information.

Financial Leverage

Financial leverage illustrates the extent to which the company uses debt to finance operations. Although high leverage can indicate a large profit potential, it also increases financial risk. This study shows that financial leverage has no significant influence on social disclosure, which may be caused by a greater company focus on financial stability compared to social responsibility. Companies may prioritize financial stability over social responsibility, which can lead to a lack of transparency and accountability.

Company Size

The size of the company is often considered a factor that influences social disclosure. Larger companies tend to have more resources to implement CSR initiatives. However, in this study, company size does not have a significant effect, which could be caused by differences in the company's strategy or lack of standards in social disclosure reports. Companies may not always use their size and resources to implement CSR initiatives, which can lead to a lack of transparency and accountability.

Profitability

Profitability is a measure of the company's ability to generate profits. Companies that are more profitable often have more funds to be invested in social activities. However, the results showed that profitability had no significant effect on social disclosure, indicating that companies may not always use their profits for CSR activities. Companies may prioritize profits over social responsibility, which can lead to a lack of transparency and accountability.

Company Age

The age of the company is also an analyzed variable. Older companies usually have more experience in operating and building relationships with stakeholders. However, the results showed that the company's age had no significant effect on social disclosure, perhaps because new companies could also show commitment to CSR even though it was still in the development stage. Companies may not always use their age and experience to implement CSR initiatives, which can lead to a lack of transparency and accountability.

Conclusion

In this analysis, it appears that stakeholder management has the most significant role in social disclosure, while other factors such as financial leverage, company size, profitability, and company age do not show a significant impact. This provides important insights for companies in the manufacturing sector to pay more attention to aspects of stakeholder management in order to increase their transparency and social responsibility. This study also opened up opportunities for further research related to other factors that might affect social disclosure in the future.

Recommendations

Based on the findings of this study, the following recommendations are made:

Companies should prioritize stakeholder management: Companies should actively involve stakeholders in their decision-making processes to increase transparency and accountability.
Companies should focus on CSR initiatives: Companies should prioritize CSR initiatives and use their resources to implement social and environmental projects.
Companies should develop standards for social disclosure: Companies should develop standards for social disclosure to ensure transparency and accountability.
Further research is needed: Further research is needed to examine other factors that might affect social disclosure in the future.

Limitations of the Study

This study has several limitations, including:

Sample size: The sample size of this study is relatively small, which may limit the generalizability of the findings.
Time period: The study only examined the period between 2007 and 2009, which may not reflect the current business environment.
Proxy variables: The study used proxy variables to examine the relationship between factors and social disclosure, which may not accurately reflect the underlying relationships.

Future Research Directions

This study opens up opportunities for further research related to social disclosure in the manufacturing sector. Some potential research directions include:

Examining other factors that affect social disclosure: Further research is needed to examine other factors that might affect social disclosure, such as corporate governance, industry type, and country of operation.
Developing standards for social disclosure: Further research is needed to develop standards for social disclosure to ensure transparency and accountability.
Examining the impact of social disclosure on company performance: Further research is needed to examine the impact of social disclosure on company performance, including financial performance and reputation.
Frequently Asked Questions (FAQs) about Social Disclosure in Manufacturing Companies

Q: What is social disclosure?

A: Social disclosure refers to the practice of companies sharing information about their social and environmental performance, which is essential for building trust and credibility with stakeholders.

Q: Why is social disclosure important for manufacturing companies?

A: Social disclosure is important for manufacturing companies because it helps to build trust and credibility with stakeholders, including investors, customers, and employees. It also helps companies to identify areas for improvement and develop strategies to address social and environmental issues.

Q: What are the benefits of social disclosure for manufacturing companies?

A: The benefits of social disclosure for manufacturing companies include:

Improved reputation and credibility
Increased transparency and accountability
Better relationships with stakeholders
Improved social and environmental performance
Increased access to capital and resources

Q: What are the challenges of social disclosure for manufacturing companies?

A: The challenges of social disclosure for manufacturing companies include:

Lack of resources and expertise
Difficulty in measuring and reporting social and environmental performance
Fear of negative publicity and reputational damage
Limited understanding of the benefits of social disclosure

Q: How can manufacturing companies improve their social disclosure practices?

A: Manufacturing companies can improve their social disclosure practices by:

Developing a clear and comprehensive social disclosure policy
Establishing a social disclosure committee or team
Conducting regular social and environmental audits and assessments
Reporting social and environmental performance in a transparent and consistent manner
Engaging with stakeholders and seeking feedback and input

Q: What are the key factors that influence social disclosure in manufacturing companies?

A: The key factors that influence social disclosure in manufacturing companies include:

Stakeholder management
Financial leverage
Company size
Profitability
Company age

Q: How can manufacturing companies measure and report their social and environmental performance?

A: Manufacturing companies can measure and report their social and environmental performance by:

Using established frameworks and standards, such as the Global Reporting Initiative (GRI)
Conducting regular social and environmental audits and assessments
Reporting social and environmental performance in a transparent and consistent manner
Engaging with stakeholders and seeking feedback and input

Q: What are the consequences of not disclosing social and environmental information?

A: The consequences of not disclosing social and environmental information can include:

Reputational damage and loss of trust with stakeholders
Increased regulatory scrutiny and potential fines
Difficulty in accessing capital and resources
Negative impact on company performance and profitability

Q: How can manufacturing companies stay up-to-date with the latest developments in social disclosure?

A: Manufacturing companies can stay up-to-date with the latest developments in social disclosure by:

Attending industry conferences and events
Participating in online forums and discussions
Reading industry publications and reports
Engaging with stakeholders and seeking feedback and input

Q: What are the future trends and directions in social disclosure?

A: The future trends and directions in social disclosure include:

Increased focus on sustainability and environmental performance
Greater emphasis on stakeholder engagement and participation
Development of new frameworks and standards for social disclosure
Increased use of technology and digital tools for social disclosure
Greater emphasis on transparency and accountability.