Stakeholder pressure and manufacturing firm profitability: The mediation effect of environmental performance

Abstract

This study aims to examine the role of environmental performance in mediating the effect of stakeholder pressure on corporate profitability, with firm size as a control variable. Stakeholder theory is employed as the grand theory, while legitimacy theory serves as the supporting theory. This research was conducted on manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023. The sample was determined using a purposive sampling technique, resulting in 922 observation data. Data collection was carried out through non-participant observation by downloading data from the companies’ official websites and the IDX website. The analytical technique used was Partial Least Squares (PLS) analysis, employing the WarpPLS program. The findings indicate that environmental pressure, customer pressure, and investor pressure have a positive effect on a company’s environmental performance, whereas employee pressure has a negative effect. Furthermore, environmental pressure, customer pressure, and employee pressure have a positive effect on corporate profitability. In addition, environmental performance can mediate the effect of environmental pressure, customer pressure, and employee pressure on the profitability of manufacturing companies.