Islamic Banking, Accounting and Finance International Conference- The 9th iBAF 2020
232
Islamic Banking, Accounting And Finance International Conference–
The 9
thiBAF 2020
The Effects of Perceived Severity 0f Violation and Perceived Corporate Social Responsibility on Boycott Towards Halal Products
Muhamad Azrin Nazri
1, Nor Asiah Omar
2, Sumaiyah Abd Aziz
11 Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia (USIM),
2Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM) E-mail ([email protected])
1. Introduction
The halal industry that includes banking & finance, takaful, transportation, tourism as well as food becomes the global growing business sectors. Halal food industry is becoming very important sector since the Muslim religion is also progressing (Khalek and Ismail, 2015). The growth of halal food products consumption among Muslim around the world has necessitated many companies to apply halal certification. According to Abdur Razzaque and Nosheen Chaudhry (2013) the value of global halal food was at USD436.8 billion in 2016 and it was estimated that the halal food industry would grow by 6.1 percent in the near future. Basically, food is considered halal when it is free from any prohibited elements and must be accordance to Shariah law right from the farm until it is served on the table (Soon, Chandia and Regenstein, 2017).
The halal food certification involves the food inspection process conducted by an authorized body that complies with the Shariah guideline that covers all aspects e.g. slaughtering, preparation, processing, handling and distribution (Sahilah, Laila, Aravindran, Aminah and Mohd, 2016). The authorized body that handles all aspects of inspection process becomes one of initiatives by many countries to warrant the quality of halal certification and accreditation (Omar et al., 2017). There were few cases in Malaysia where halal certification was temporary removed because the production company failed to comply with halal guidelines set by the halal authorized body. The halal certification violation had created a negative impact on the company’s image and reputation, consequently caused many Muslim consumers to boycott and avoid the products.
2. Methodology
The research’s reflective constructs were measured by using 5-point Likert scales where the measurement items were adapted from previous studies of Omar et al. (2017); Bansal and Zahedi (2015); Lichtenstein et al. (2004); Abosag and Farah (2014) and Rose et al. (2009). The purposive sampling method was applied where a total of 400 questionnaire were distributed to respondents who were aware and had experienced with halal product violation incidents. However, only 334 questionnaires were valid for further analysis contributing to around 83 percent of response rate. The valid questionnaires were analyzed by applying the structural equation modelling techniques; partial least squares (PLS) to test the hypotheses.
3. Results and discussion
The measurement model assessment had resulted to maintain all measurements items except one item of perceived severity and two items of perceived CSR that were lower than 0.708. The composite reliability (CR) exceeded the cut-off value of 0.7, and the average variance extracted (AVE) met the minimum level of 0.50. The evaluation of discriminant validity confirmed the items fulfilled the criterion of Fornell-Larcker, cross-loading, and HTMT. The hypothesis testing showed the three paths were statistically significant at the 0.05 and 0.001 levels. Hypotheses H1 and H2 were supported where the path coefficient of perceived severity of the halal violation on consumer boycott was equal to 0.395, t = 8.896, p < .000 and perceived CSR showed a significant negative effect on consumer boycott at β = -0.188, t = 3.163, p < 0.001. The hypotheses H3 was also supported showing the moderating effects of CSR on perceived severity and the consumer boycott at β = -0.219, t = 3.480, p-value < 0.000.
The results reflect that Muslim customers are more aware and sensitive in consuming halal products or services that meet the Shariah requirements (Battour and Ismail, 2016). A company’s involvement in CSR activities will create a perception among consumers that the organization is fair and responsible, leading towards trust among customers (Bustamante, 2018), positive shareholder values (Hogarth et al., 2018) and the organizational performance (Wang et al., 2015).
4. Conclusion
Generally, the research offers the empirical findings where perceived severity and perceived CSR contribute to consumer boycott during halal violation. Specifically, perceived CSR contributes negatively to consumer boycott and significantly moderates the relationship of perceived severity and consumer boycott. Managerially, the findings contribute towards service recovery management in the context of halal industry.
Islamic Banking, Accounting and Finance International Conference- The 9th iBAF 2020
233 Acknowledgement
The authors would like to express appreciation for the supported given by Malaysian Research University Network (MRUN) grant scheme: EP-2019-004/(UPM/800-4/11/MRUN/2019/5539140) and USIM grant scheme: PPPI/FEM/0217/051000/10818.
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