The Study Findings

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Chapter Five has presented the findings pertaining to this objective by using both univariate and multivariate analyses. Comparative analysis based on estimated results from the pooled OLS regression has been used to evaluate the three EM models: the Jones (1991) (JM), the Modified Jones (Dechow et al. 1995) (MJM) and the Performance - Matched (Kothari et al. 2005)(PM) models. Firstly, the findings have revealed that ∆REV-∆REC was the variable that made the strongest significant contribution to MJM and PM models, while PPT was the weakest variable in the three models. Comparing the coefficient of ∆REV-∆REC variable, it was discovered that the strongest contribution by this variable was to the PM model. Secondly, the findings have revealed that PM has the highest explanatory power in terms of Adjusted R2 with 35 per cent as compared to 29 and 31 per cent for JM and MJM respectively. In view of these findings, the PM model was used as a primary model in the present study to measure EM.

Univariate analysis was based on the t-test to examine whether or not the means of high and low EM as well as positive and negative EM firms are insignificantly different from zero. In respect of the differences between high and low EM groups, the findings have showed that the differences between the means in the two groups were insignificant across years and industries. Regarding the differences between positive (income - increasing) and negative (income -decreasing) EM, the findings, in general, have revealed that across years and industries, the differences between the means in the two groups were insignificant at the 0.01 level.

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This objective has been addressed in chapter Six by testing the overall level and six themes of CSD as proxy for CSR through using both content analysis and disclosure index methods. The CSD themes were community (COM), employees (EMP), environment (ENV), products and services (PRO), customers (CUS), and others (OTH). According to the number of companies, the overall results have revealed that a higher number of UK firms are more interested in EMP, COM, ENV, and PRO, but are less concerned with OTH and CUS.

As for the content analysis approach, the findings have showed that the EMP theme has the highest number of words, followed by the COM and ENV themes. The OTH and PRO are the fourth and fifth themes respectively, while the CUS theme has the lowest number of words. The findings of the disclosure index have revealed similar results to those of the content analysis. On average, the findings have showed that EMP has the highest score, followed by COM. The third score is awarded to ENV, while the OTH and PRO are awarded the fourth and fifth scores respectively. The lowest score was awarded to CUS.

The relationship between the magnitude of EM and the level of CSR in the UK

The third research objective has been addressed in chapter Seven by using both univariate and multivariate analyses. Seven hypotheses were identified to answer this question and the overall results have suggested that the level of CSR impacts the magnitude of EM. In particular, firms with high levels of CSR report a lower magnitude of EM.

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Consistent with hypothesis 1 that there is a negative (positive) relationship between the level of EM and the total level of CSR information, the results have revealed a negative and significant relationship between the magnitude of EM and the level of CSR. This result implies that firms with a high level of CSR information report a lower level of EM. Hypothesis 2 has predicted that the level of EM is negatively (positively) associated with the level of the EMP theme. The results have showed that EM is negatively significant related to EMP, suggesting that firms with high level of EMP information report low levels of EM.

In respect of COM information, the results have revealed that firms with a high level of COM information report a lower level of EM, thus supporting hypothesis 3 which has predicted a negative (positive) association between EM and the COM theme. Consistent with hypothesis 4, which has predicted a negative (positive) relationship between EM and the ENV theme, the results have indicated that companies with a high level of ENV information report a low level of EM.

Hypothesis 5 has predicted that the association between EM and the PRO theme would be negative (positive). The results are in line with this hypothesis as they have revealed that the magnitude of EM is negatively significant related to PRO information, hence suggesting that firms with a high level of PRO information report a low level of EM. Contrary to hypothesis 6, which has suggested a negative (positive) relationship between EM and the CUS theme, the results have showed that there is no significant association between the level of EM and the level of CUS information. With respect to the OTH theme, the results have revealed that EM and the OTH theme are insignificantly related to each other, contrary to hypothesis 7

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which has predicted that the association between the level of EM and OTH information would be negative (positive).

When the study sample was divided into firms with positive (income - increasing) EM and firms with negative (income - decreasing) EM, the results have showed that firms with a higher level of CSR information engage in a lower level of income - increasing and income - decreasing EM. In addition, the results of the potential impact of the type of industry on the association between EM and CSR have revealed that the type of industry does not affect the association between the two variables.

The application of the alternative measurement of EM based on the MJM measurement has revealed that the main results are consistent and robust to the different measurements of EM. In addition, the results have revealed that the main results are consistent and robust to the different measurements of CSR, specifically when using the number of words as an alternative measurement to disclose scores. The study has also applied the alternative multivariate regression estimator and found out that the main results are not affected by the specific regression estimator. With regard to the endogeneity problem, the researcher has tested whether or not its existence impacts the main results of the study. It has been discovered that the main results are consistent and robust and are not affected by the problem of endogeneity between EM and CSR.