3. CHAPTER: CORPORATE SOCIAL RESPONSIBILITY (CSR) DISCLOSURE
3.3 CSR disclosure about developing countries
CSR disclosure studies in the developing countries mainly focused on the African and Asian regions (see Fifka, 2013 – Meta analysis; Belal & Momin, 2013 – review paper). In Africa, the predominant focus was on South African companies (see Belal & Momin, 2009; Fifka, 2013). In the Asian region, CSR disclosure researchers paid more attention to East Asia (e.g. China, Hong Kong, Japan, South Korea) and South East Asia (e.g. Indonesia, Malaysia, Philippine, Singapore, Thailand) and lesser attention to other regions: South Asia (e.g. Bangladesh, India) and the Middle East (e.g. Jordan, Qatar, Saudi Arabia) (see Fifka, 2013). Furthermore, most attention was given to China and Hong Kong in East Asia, to Malaysia and Singapore in South East Asia, and to Bangladesh in South Asia (derived from Fifka, 2013). Thus, in the developing/emerging countries, CSR disclosure studies were mainly targeted on Malaysia, Singapore, South Africa, China, Hong Kong and Bangladesh.
Consistent with the studies of developed countries, the studies conducted in developing countries made more use of the content analysis research method, in comparison to interviews and surveys, in ascertaining the determinants/motivations of CSR disclosure (or non-disclosure) (see Table 3.2 & 3.3; Belal & Momin, 2009; Fifka, 2013). Further, consistent with the studies in developed countries, these studies mainly focused on CSR (or environmental) disclosure measured in the quantitative way (see Table, 3.2). This pattern is also consistent with the findings of earlier CSR disclosure review papers (see Mathew et al., 1997; Gray, 2002; Parker, 2005; Belal & Momin, 2009; Parker, 2011).
46
Table 3.2: Determinants/motivations of CSR (or environmental) disclosure in developing countries (content analysis based studies)
Authors Country Theoretical perspective
Determinants CSR Disclosure Measurement Company Characteristic External Contextual Internal Contextual ED* HRD* PCD* CID* TD* Qn* Ql* Singh and Ahuja
(1983)
India N/A* Size (+), industry (+), financial
performance (+)
Teoh and Thong (1984)
Malaysia N/A Size (+) related to commitment
to social reporting
Foreign ownership (+) related
to commitment to social
reporting
s
Tsang (1998) Singapore LT* Industry (+) Govt. initiatives resulted in
increase in disclosure
Williams (1999) Asian-pacific
nations #
PE* Culture, political, social system
(+)
De-Villiers (2003) South Africa N/A Absence of legal requirements
(-)
Non-availability of data (-), Lack of motivation for CSR disclosure (-)
Gao et al. (2005) Hong Kong N/A Size (+), industry (+)
Haniffa and Cooke (2005)
Malaysia LT Size (+), industry (+), multiple
listing (+), financial
performance (+)
Culture (+) proxied by malay directors
Governance structure (+),
Alsaeed (2006) Saudi-Arabia N/A Size (+), industry (0), financial
performance (0), firm age (0)
Creditors i.e. leverage (0), audit firm size (0), Ownership dispersion (0)
Amran and Devi (2007)
Malaysia PE* Influence of government (+) –
proxied by govt. shareholdings (+) and dependence on govt. (+)
Kamla (2007) Middle-East# N/A Country specific factors (+)
resulted in variation in themes of disclosure
Amran and Devi (2008)
Malaysia IT* Size (+), industry (+) Influence of govt. (+) – proxied
by govt. shareholdings (+), Dependence on govt. (+)
Branco and
Rodrigues (2008)
Portugal LT & RBV Size (+), media exposure (+)
Wanderley et al. (2008)
Emerging Countries#
N/A Country (+)
Rizk et al. (2008) Egypt N/A Industry (+) Ownership structure (+)
Mitchell and and Hill (2009)
South Africa N/A Absence of legal requirements
(-)
Lack of motivation for
disclosure (-), non-availability of data (-), cost of obtaining data (-)
# Asian-pacific nations: Australia, Malaysia, Singapore, Indonesia, Hong Kong, Thailand, and Philippines; Middle-East: Saudi Arabia, Qatar, Kuwait, United Arab Emirates, Bahrain, Syria, Oman, Egypt, and Jordan; Emerging countries: Chile, Brazil, China, Indonesia, India, Thailand, Mexico, and South Africa
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Table 3.2: Determinants/motivations of CSR (or environmental) disclosure in developing countries (content analysis based studies)
Authors Country Theoretical perspective
Determinants CSR Disclosure Measurement Company Characteristic External Contextual Internal Contextual ED* HRD* PCD* CID* TD* Qn* Ql*
Sobhani et al.
(2009)
Bangladesh N/A Industry (+)
Tagesson et al.
(2009)
Swedish AT, LT, & ST* Size (+), industry (+),financial
performance (+)
Ownership (govt. vs private) (+)
Monteiro and Aibar- Guzman (2010)
Portugal N/A Size (+), industry (0), stock
market listing (+), financial performance (0), environmental certification (0), foreign percent company (0)
Buniamin (2010) Malaysia LT Size (+), industry (+)
Huang and Kung (2010)
Taiwan ST* Industry (+) Govt. (+), creditors i.e.
leverage (-), consumers (+), suppliers (-), competitors (+), employees (+), shareholding concentration (-)
Audit firms (+)
Khan (2010) Bangladesh LT Size (+), financial performance
(+)
Non-executive directors on board (+), existence of foreign nationals on board (+)
Saleh et al. (2010) Malaysia N/A Institutional ownership (+)
Mahadeo et al.
(2011)
Mauritius LT Size (+), financial performance
(0) Leverage (+) related to HR and ED Abd-Rahman et al. (2011)
Malaysia N/A Size (+)
Haji (2013) Malaysia LT Size (+) Managerial ownership (-),
government ownership (+),
Board size (+) related to Qnt
Khan et al. (2013) Bangladesh LT Managerial ownership (-),
public ownership (+), foreign ownership (+)
Independent directors on
board (+), presence of audit
committee (+), Multiple
directorship of chairman (0)
Chiu and Wang
(2014)
Taiwan ST Size (+), media visibility (+) Impact of global supply chain
(+), international capital markets (+) Existence of independent CSR department (+) Goncalves et al. (2014)
Brazil N/A Size (+), industry (+), listing in
social investment funds (+)
Kansal et al. (2014) India N/A Size (+), industry (+) Third party recognition i.e.
awards and social rating (+)
Comment: Scarcity of studies examining determinants of individual dimension of CSR disclosure (i.e. human resource, products and consumers, and community involvement disclosure). Scarcity of studies examining determinants of CSR disclosure measured in qualitative way
ED: environmental disclosure, HRD: human resource disclosure, PCD: products and consumers disclosure, CID: community involvement disclosure, and TD: total CSR disclosure; N/A: Not
Applied,Qn; Quantity, Ql; Quality, AT: Agency theory, LT: Legitimacy theory, ST: Stakeholder Theory, IT: Institutional Theory, RBV: Resource Based View, PE: Political economy theory, CBF:
Cost and benefit framework, BonT: Bonding theory, MT: Multi-theory: Economic incentives, public pressures & institutional, SigT: Signalling theory, +: significant positive correlation OR proof of influence, ‘-‘: significant negative correlation, ‘0’: No evidence OR relationship, S: survey (questionnaire) method
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Table 3.3: Motivations/reasons for presence (or absence) of disclosure in developing countries (interviews or surveys based studies)
Author Country Purpose Theoretical Perspective
Methods used General Contextual Factors Internal Contextual Factors De-Villiers
(2003)
South Africa To know the managers’ attitude
towards environmental
disclosure and reasons for
insufficient environmental
disclosure
N/A Questionnaire was used
to elicit views of corporate directors
Absence of legal requirements Positive attitude towards environmental
disclosure
Non-availability of environmental data
Rahaman et al. (2004)
Ghana To explain social and
environmental disclosure in
Volta River Authority
Institutional theory
Document analysis and interview (with 54 top and operational staff member of VRA)
In response to institutional pressures (from World Bank regulatory requirement)
Kuasirikun (2005)
Thailand To know accounting
professional’s attitude towards
social and environmental
accounting
N/A Questionnaire and
interview
Have latent positive attitude towards social accounting that may result in CSR disclosure
Belal and
Owen (2007)
Bangladesh To explore perception about current and future state of CSR disclosure
N/A Interview with 23 senior
managers
To manage economically powerful
stakeholder (notable parent companies, international buyers, and investors demand) Weak institutions is reason of absence of disclosure
To enhance corporate image
Islam and
Deegan (2008)
Bangladesh To examine pressures
influencing social and
environment performance in Bangladeshi garment manufacturing sector Legitimacy, stakeholder, and institutional theory
Content analysis and in- depth interviews (with 12 senior executives)
To respond to powerful stakeholders’ (e.g.
international buyers, NGOs, Buying
companies’ government, international
media) demands and To meet global expectations Mitchell and
Hill (2009)
South Africa To explores the reasons for
non-implementation of GRI
reporting
N/A Interviews and
questionnaire
Absence of legal requirements Lack of motivation for disclosure,
non-availability of data, cost of obtaining data
Belal and
Cooper (2011)
Bangladesh To explore reasons for the non- disclosure of CSR information
Political economy theory
23 semi-structured
interviews with senior
executives
Lack of public awareness Lack of legal requirements Fear of bad publicity
Lack of resources
Departure from shareholder wealth
maximization objective Poor corporate performance Momin and
Parker (2013)
Bangladesh To explore motivations for the CSR reporting by MNSs in an emerging country Legitimacy and Institutional theory Case study – Documentary reviews
(annual reports and
newsletters) and 39 semi- structured interviews with senior management
To respond to social and industry
awareness are the main reasons for MNSs CSR reporting.
External environment of MNSs (informal norms and beliefs, very low expectations for
CSR reporting, lax formal reporting
regulation, low level of implementation of
Law) is a major limitation for the
development of MNSs CSR reporting
Management culture of parent company and enhance corporate Image are the main reasons for MNSs CSR reporting.
Consistent with the studies in developed countries, company characteristics and general contextual factors got most attention in the research conducted in developing countries (see Table, 3.2 & 3.3). In contrast with the studies in developed countries, the majority of the studies reviewed in developing countries did not use a specific theory to explain the determinants/motivations of CSR (or environmental) disclosure (see Table 3.2 & 3.3). These inferences are consistent with the findings of Belal and Momin (2009). They reviewed CSR disclosure studies conducted in developing countries and found that this research is under-theorised. However, as in developed countries, legitimacy theory remained a dominant theoretical framework among the studies which used a specific theory to explain the determinants/motivations of CSR (or environmental) disclosure (see Table 3.2 & 3.3). This is also consistent with the findings of Belal and Momin (2009). Now the specific factors examined in the context of developing countries are discussed under their respective categories.
3.3.1 Company Characteristics
Consistent with the studies in developed countries, based on the studies reviewed, corporate size and corporate industry appeared to be the most frequently examined determinants of CSR (or environmental) disclosure in developing countries. Corporate size, as in studies in developed countries, was found to have a significant positive relationship with CSR (or environmental) disclosure (see Singh & Ahuja, 1983; Teoh & Thong, 1984; Gao et al., 2005; Haniffa & Cooke, 2005; Alsaeed, 2006; Amran & Devi, 2008; Branco & Rodrigues, 2008; Tagesson et al., 2009; Buniamin, 2010; Haji, 2013; Chiu & Wang, 2014; Kansal et al., 2014). Similarly, corporate industry, except for a few studies which showed an insignificant relationship (Alsaeed, 2006; Monteiro & Aibar-guzman, 2010), was found to be associated with
50 CSR (or environmental) disclosure (see Singh & Ahuja, 1983; Tsang, 1998; Gao et al., 2005; Haniffa & Cooke, 2005; Amran & Devi, 2008; Rizk et al., 2008; Sobhani et al., 2009; Buniamin, 2010; Huang & Kung, 2010; Goncalves et al., 2014; Kansal et al., 2014). Consistent with results for the developed countries, corporate financial performance appeared to be the third most commonly examined determinant in the developing countries (see Table 3.2). Some of these studies showed that the financial performance characteristic has a significant positive relationship (Singh & Ahuja, 1983; Haniffa & Cooke, 2005; Tagesson et al., 2009; Khan, 2010; ) while some have shown an insignificant relationship with CSR (or environmental) disclosure (see Alsaeed, 2006; Monteiro & Aibar-guzman, 2010; Mahadeo et al., 2011). Furthermore, some studies showed that corporate media exposure does influence CSR (or environmental) disclosure in developing countries (see Branco & Rodrigues, 2008; Chiu & Wang, 2014). In addition to these factors, other corporate characteristics for example multiple listing of a firm (Haniffa & Cooke, 2005), stock market listing (Monteiro & Aibar-guzman, 2010) and listing in social investment funds (Goncalves et al., 2014) positively influenced CSR (or environmental) disclosure in developing countries.
3.3.2 General Contextual Factors
Consistent with the studies conducted in developed countries, differences in national contextual (e.g. social, political and cultural) factors also resulted in variation in CSR disclosure in developing countries (see Williams, 1999; Kamla, 2007; Wanderley et al., 2008). This inference is consistent with the argument made in earlier studies (see Campbell, 2007; Carroll, 1979; Jones, 1980; McWilliams & Siegel, 2001; Muthuri & Gilbert, 2011). These argued that CSR is a socially constructed and dynamic
51 concept. This means that the same corporate behaviour which is considered acceptable at one place, may not be acceptable at another place and this may result is variation in types of CSR disclosure. As in the developed countries, some studies have shown that government initiatives (or regulations) have influenced the CSR reporting agenda in developing countries (see Tsang, 1998; Amran & Devi, 2007 & 2008; Huang & Kung, 2010). Complementary to this finding, the absence of CSR reporting regulations and their implementation are seen as a major reason for non- disclosure of CSR information in developing countries (see De-Villiers, 2003; Mitchell & Hill, 2009; Belal & Cooper, 2011; Momin & Parker, 2013).
In addition to government regulations, ownership structure does influence CSR disclosure in developing countries (see Rizk et al., 2008) as some studies have shown that government ownership (see Amran & Devi, 2007 & 2008; Haji, 2013), institutional ownership (Saleh et al., 2010) and foreign ownership (Teoh & Thong, 1984; Khan et al., 2013) each have a positive relationship with CSR disclosure while managerial ownership (Haji, 2013; Khan et al., 2013) and ownership concentration (Khan et al., 2013) have a negative relationship. Furthermore, a corporation’s presence in a global value chain also influences its CSR practices in general and disclosures in particular (see Lund-Thomsen & Nadvi, 2010; Chiu & Wang, 2014). In contrast to the developed countries, CSR responding agenda in developing countries is mainly influenced by the external forces/powerful stakeholders e.g. international buyers (see Belal & Owen, 2007; Islam & Deegan, 2008), foreign investors (Teoh & Thong, 1984; Belal & Owen, 2007; Khan et al., 2013; Chiu & Wang, 2014), international media concerns (Islam & Deegan, 2008) and international regulatory bodies e.g. World Bank (see Rahaman et al., 2004). Furthermore, in
52 contrast to developed countries, corporations in developing countries perceive little pressure from the local public for CSR disclosure (see Belal & Owen, 2007; Belal & Cooper, 2011; Momin & Parker, 2013).
3.3.3 Internal Contextual Factors
In contrast to the developed countries, internal contextual factors were given importance equal to other factors i.e. company characteristics and general contextual factors in developing countries (see Table 3.2 & 3.3). Under this category, more attention was given to checking the relationship between corporate governance structure and CSR (or environmental) disclosure. The disclosure studies have shown that corporate governance characteristics e.g. multiple directorships of the chairman of the board (Haniffa & Cooke, 2005), presence of non-executive directors on the board (Khan, 2010), independence of directors (Khan et al., 2013), existence of foreign nationals on the board (Khan, 2010), board size (Haji, 2013), presence of an audit committee (Khan et al., 2013) and existence of an independent CSR department in a company (Chiu & Wang, 2014) have positively influenced CSR (or environmental) disclosure.
Some studies, consistent with those for developed countries, have shown that companies in developing countries also disclose information to enhance corporate reputation (see Belal & Owen, 2007; Momin & Parker, 2013) and/or to win corporate awards (Kansal et al., 2014). Furthermore, some studies have shown that corporate executives have a positive attitude towards CSR disclosure (see De-Villiers, 2003; Kuasirikun, 2005).
Certain studies have explored the internal reasons for non-disclosure of CSR information. The studies have found that non-availability of CSR data (De-Villiers,
53 2003; Mitchell & Hill, 2009), lack of motivations for CSR disclosure (De-Villiers, 2003; Mitchell & Hill, 2009), cost of CSR reporting (Mitchell & Hill, 2009; Belal & Owen, 2007), and poor corporate performance (Belal & Owen, 2007) are major internal reasons for non-disclosure of CSR information in developing countries.