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JAEE
10,1 Determinants of GRI-based
sustainability reporting: evidence
from an emerging economy
140 Nurlan Orazalin and Monowar Mahmood
Bang College of Business, KIMEP University, Almaty, Kazakhstan
Received 10 December 2018
Revised 1 May 2019
20 June 2019
12 August 2019 Abstract
Accepted 14 August 2019 Purpose – The purpose of this paper is to investigate the extent and determinants of sustainability
performance disclosures reported by publicly traded companies in Kazakhstan by using the Global Reporting
Initiative (GRI) framework. Among the different possible determinants, stand-alone sustainability reporting
(SR), reporting language, leverage, cash flow capacity, profitability, size, age and auditor type were selected to
investigate their impacts on the quality and scope of sustainability information.
Design/methodology/approach – The study analyzes data from publicly traded companies at the
Kazakhstani Stock Exchange for the years 2013–2015. To investigate the extent, nature and quality of
sustainability reports, the study measures and analyzes economic, environmental and social performance
parameters, as suggested in the GRI guidelines.
Findings – The results indicate that determinants such as stand-alone reporting, reporting language,
firm profitability, firm size and auditor type substantially influence the extent, nature and quality of
sustainability-reporting practices of Kazakhstani companies.
Practical implications – The findings of the study suggest that managers, practitioners, regulators and
policy makers in emerging economies should adopt the GRI guidelines to report sustainability performance
disclosures and focus on specific factors to improve the quality of sustainability disclosures.
Originality/value – This study is one of the first studies to investigate the extent, nature and possible
determinants of corporate SR in central Asian-emerging economies.
Keywords Environmental performance, Kazakhstan, Social responsibility, Global reporting initiative,
Economic contribution, Sustainability performance disclosures
Paper type Research paper

Journal of Accounting in Emerging
Economies
Vol. 10 No. 1, 2020
pp. 140-164
© Emerald Publishing Limited
2042-1168
DOI 10.1108/JAEE-12-2018-0137
1. Introduction
Increased concerns of global warming and widespread income inequality have raised
questions about the contributions of modern business organizations toward achieving
sustainable economic growth and social development of the world (Bapuji et al., 2018;
Kolk et al., 2017; Lodhia and Hess, 2014; van Zanten and van Tulder, 2018). Organizations
are now under increased pressure to meet the diverse needs and expectations of different
stakeholders and justify their license to operate and earn profit (Bose et al., 2018; Pope and
Lim, 2019; Siddiqui and Uddin, 2016). In response to the stakeholders’ expectations, business
organizations use sustainability reports, including information on economic, environmental
and social activities to provide insights of their sustainability-related activities (Bose et al.,
2018; Higgins and Coffey, 2016). The use of such sustainability reports helps organizations
communicate effectively with stakeholders, improve corporate reputation and justify their
legitimacy in society (Kılıç et al., 2015; Pope and Lim, 2019). Therefore, the importance of
sustainability reporting (SR) is increasing overwhelmingly among managers and all other
stakeholders (Kuzey and Uyar, 2017; Orazalin and Mahmood, 2018).
Sustainability reports provide a wide range of information to stakeholders so that they
can assess a firm’s economic, environmental and social activities (Kuzey and Uyar, 2017;
Orazalin and Mahmood, 2018; Sotorrío and Sánchez, 2010). In other words, SR is one of the
principal channels for managers to convey and disseminate information on sustainability
activities to all stakeholders. Moreover, SR enables firms to meet their social, environmental,
and ethical responsibilities toward the environment and the society in which they operate
(Boolaky et al., 2018; Md Zaini et al., 2018) and to manage risks and improve corporate Determinants
financial stability (Orazalin et al., 2019). Usually, global investors evaluate business of GRI-based
strategies and risks, customers are concerned about the quality of products and services, SR
and employees wish to work in companies that are held accountable for their sustainability
activities (Belal and Owen, 2007). All these needs and expectations have led to an increased
prevalence of SR (Lee, 2008; Orazalin and Mahmood, 2018).
Unlike previously reported environmental and CSR reports, sustainability reports are 141
commonly prepared in accordance with the widely known reporting framework, the Global
Reporting Initiative (GRI) guidelines (Global Reporting Initiative, 2013). The GRI is one of
the most widely acceptable and recognized sustainability-reporting systems in the world
(Dissanayake et al., 2019; Pope and Lim, 2019; Wachira et al., 2019). It provides a set of
common elements of SR (Watts, 2015) and helps organizations present sustainability reports
with better uniformity and comparability across different countries (Kuzey and Uyar, 2017;
Simmons et al., 2018). In most emerging economies, the adoption of SR practices is still
voluntary and business organizations are yet to understand the importance of such
reporting practices (Aboud and Diab, 2018; Md Zaini et al., 2018; Piñeiro-Chousa et al., 2019).
However, the adoption of such standardized reporting practices in emerging economy
contexts could improve the credibility and acceptance of information to diverse stakeholder
groups (Agyei and Yankey, 2019; Kiliç et al., 2016; Manawadu et al., 2019; Wachira et al.,
2019). Considering the importance and the assumed benefits of SR, many organizations in
emerging countries have already started preparing and disseminating sustainability reports
on a regular basis, which help organizations achieve competitive advantages (Aboud and
Diab, 2018; Beck et al., 2018; Md Zaini et al., 2018; Mukherjee and Nuñez, 2019). Given that
drivers of SR have changed over time and will be a subject of further changes in the future
(Lodhia, 2015; Pope and Lim, 2019), research on GRI-based reporting is needed to identify
future directions of SR practices in the emerging market context (Kuzey and Uyar, 2017;
Orazalin and Mahmood, 2018; Yadava and Sinha, 2016). Therefore, the present study
explores the extent and quality of sustainability performance disclosures reported by public
companies in Kazakhstan and investigates the relationships between the underlying factors
and GRI-based sustainability information.
Earlier studies have revealed variations in the adoption of standardized reporting practices
among different countries (Boolaky et al., 2018; Piñeiro-Chousa et al., 2019) and found that the
adoption of different reporting practices is heavily influenced by both internal and external
factors (Agyei and Yankey, 2019; Aribi et al., 2018; Bose et al., 2018; Hessayri and Saihi, 2018;
Phiri et al., 2019). However, empirical studies examining the factors influencing SR as well as
variations of SR practices in emerging markets are quite limited (Boolaky et al., 2018;
Kuzey and Uyar, 2017; Md Zaini et al., 2018; Orazalin and Mahmood, 2018). Business
organizations in emerging economies are still unaware of the necessity as well as the demand
for voluntary SR practices (Mahmood and Orazalin, 2017), though the adoption of such
voluntary reporting practices could enhance the firm’s value over time(Agyei and Yankey,
2019; Beck et al., 2018; Mukherjee and Nuñez, 2019). Moreover, it is not possible to generalize
the research findings from developed countries to emerging markets because of the differences
in civil society, policy development, regulatory frameworks, institutional systems and
stakeholders’ expectations (Belal and Owen, 2015; Kuzey and Uyar, 2017; Uddin et al., 2017).
In addition, the underlying factors driving CSR reports in emerging markets may not be the
same as those in the developed economies (Boolaky et al., 2018; Piñeiro-Chousa et al., 2019;
Uddin et al., 2018). Thus, examining the nature and extent of voluntary disclosures in emerging
markets contributes to the academic debate because understanding SR practices in these
markets provides some indication on the extent to which business the environment and
economic development affect sustainability activities (Ghazali, 2007; Kuzey and Uyar, 2017).
Considering the dearth of knowledge on corporate reporting practices in emerging markets,
JAEE especially in the Central Asian region, the present study aims to investigate the extent,
10,1 nature, and possible determinants of corporate SR practices in the context of the emerging
market, i.e., Kazakhstan.
The present study makes several contributions to the literature. First, to provide an
overview of the extent, nature and quality of SR, this study analyzes and measures
economic, environmental and social performance indicators of SR based on the GRI
142 guidelines. Second, by using both individual and composite SR indices, this study examines
the impacts of the possible determinants of SR, including stand-alone SR, reporting
language, leverage, cash flow capacity, profitability, size, age and auditor type on the
quality and scope of sustainability information. Finally, this study attempts to provide
empirical evidence on SR practices in the emerging market of Kazakhstan, representing
the Central Asian and Commonwealth of Independent States (CIS) regions and suggests that
policy makers, regulators, practitioners and business organizations consider the necessary
conditions for the development of SR practices in the future. The findings of the study will
encourage managers to adopt GRI guidelines in reporting practices and focus on specific
factors to improve the quality and acceptability of SR in the context of emerging economies.
Therefore, the present study extends the existing literature in the emerging market context
by examining the extent and determinants of sustainability performance disclosures
reported by publicly traded companies in Kazakhstan by using the GRI framework.
The remainder of the paper consists of five sections. Section 2 discusses the current state
of SR practices of public companies in Kazakhstan. Section 3 presents the theoretical
framework, reviews prior literature and develops hypotheses. Section 4 describes data and
the research methodology. The findings, analysis and discussion are presented in Section 5.
Section 6 concludes the paper.

2. GRI and sustainability-reporting practices in Kazakhstan

As SR practices are gaining increased attention in the corporate world, the format and tools
of SR have evolved over time with varied demands of different stakeholders (Pope and Lim,
2019; Siew, 2015; Yadava and Sinha, 2016). Among different frameworks and tools, the GRI
framework is considered to be the most widely acceptable mechanism for SR practices
considering its adoption, comprehensiveness, prestige and visibility around the world
(Dissanayake et al., 2019; Kuzey and Uyar, 2017; Siew, 2015; Simmons et al., 2018). Although
the GRI guidelines are not mandatory disclosure requirements, they improve corporate SR
practices substantially (Lock and Seele, 2016; Venturelli et al., 2019) by providing an
integrated assessment of the economic, environmental and social aspects of sustainability
performance (Maas et al., 2016; Yadava and Sinha, 2016). While other SR frameworks have
analyzed different dimensions of SR in an isolated manner (Maas et al., 2016), the GRI
framework helps managers provide globally acceptable and relatively comprehensive
information on sustainability performance (Dissanayake et al., 2019; Fonseca et al., 2012).
Moreover, the use of GRI guidelines to assess corporate sustainability disclosures enables
greater stakeholder engagement (Lu and Abeysekera, 2017; Yadava and Sinha, 2016).
Therefore, we follow the GR3.1guidelines to incorporate all complex, integrated and
multidimensional aspects of SR to assess the overall quality of SR practices of the publicly
traded companies operating in Kazakhstan.
An emerging economy in Central Asia, Kazakhstan is located in the heart of Eurasia, and
is the world’s ninth largest country in terms of land area. Since gaining independence in
1992, Kazakhstan has undergone significant policy reforms and changes in its journey
toward a free market economy. Among the 15 former USSR transition economies,
Kazakhstan is the second largest economy after the Russian Federation and is considered to
be the financial and economic hub of Central Asia. The importance of SR practices in
Kazakhstan and other former USSR countries has received relatively less attention
compared with other developed and developing countries worldwide. According to the GRI Determinants
database, only six Kazakhstani organizations have been officially registered to disclose of GRI-based
sustainability reports in alignment with the GRI standards. Figure 1 shows a number of SR
officially registered organizations in the region, i.e., the former USSR countries. As it shows,
SR among the reporting organizations in the region is not widely spread compared with
other developed and developing economies.
143
3. Literature review and hypothesis development
In the context of widespread information asymmetry problems in transition economies, the
necessity and tenets of research can be traced to the essence of the agency theory, the legitimacy
theory and the signaling theory of business organizations. As argued by Cormier et al. (2005)
and Simmons et al. (2018), SR practices are a complex phenomenon, and therefore, cannot be
examined with one single theory. Thus, consistent with prior studies (Kuzey and Uyar, 2017;
Matuszak et al., 2019; Orazalin and Mahmood, 2018; Reverte, 2009; Ruhnke and Gabriel, 2013),
the present study takes a multi-theory approach to investigate the extent and determinants of
sustainability performance disclosures reported by publicly traded companies in Kazakhstan.
The agency theory postulates that managers should disclose all relevant information
available to stakeholders since principals cannot oversee all routine corporate activities
(Fama and Jensen, 1983; Jensen and Meckling, 1976). This often leads to principals dealing
with adverse selection problems since they are not always aware of better agents as well as
agency costs. To alleviate such hidden information problems, including moral hazard and
adverse selection, companies should improve transparency through corporate disclosure
policies and develop incentive mechanisms that encourage agents to disclose their hidden
information and knowledge (Spence, 1973). In this regard, sustainability reports, prepared in
accordance with the GRI framework, play a crucial role in mitigating information
asymmetry between managers and stakeholders (Kuzey and Uyar, 2017; Orazalin and
Mahmood, 2018; Ruhnke and Gabriel, 2013).
The legitimacy theory is based on the notion that business organizations are socially
constructed institutions and that people in society have certain implicit and explicit
expectations from corporations (DiMaggio and Powell, 1991; Meyer and Rowan, 1977).
Therefore, organizations should consider the expectations of all participants in the society in
general, not merely the rights of investors. As Deegan (2014) noted, failure to comply with
societal expectations may lead to sanctions in the form of restrictions and impeding
business operations, economic resources and demand for products and services.
The legitimacy theory influences the corporate disclosure policy, which is necessary for
stakeholders to obtain useful information for decision-making purposes (Bradley, 2004).
Companies publish a greater amount of voluntary disclosures in order to ensure compliance

160 144
140
120
100
80 Figure 1.
60 The total number of
40 21 officially registered
20 1 2 2 2 3 6 9 9 business organizations
0 0 0 0 0
0 from former Soviet
republics that provide
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JAEE with laws and regulations for cases in which mandatory corporate disclosures are
10,1 insufficient (Cheung et al., 2010). In this regard, SR serves as a tool for legitimizing business
activities, and indicates that a reporting organization is operating within the acceptable
norms and values of society. According to the legitimacy theory, CSR disclosure might be
used as a tool to manipulate stakeholders’ perceptions about the firm, demonstrate
compliance with laws and regulations and allow the firm to pursue other economic benefits
144 (Arena et al., 2018). As stated by Haniffa and Cooke (2005), SR might be used as a tool to
legitimize corporate activities toward stakeholders, and therefore, companies have more
incentives to disclose higher levels of sustainability information.
The signaling theory suggests that companies voluntarily disclose more economic,
environmental and social information to communicate their superior position in the market
in order to promote a positive impression among the stakeholders (Crowther and Aras, 2014;
Kuzey and Uyar, 2017; Orazalin and Mahmood, 2018). Managers distinguish themselves
from other market participants by providing more information and signaling certain firm
characteristics hidden from stakeholders (Spence, 1973). In other words, from the signaling
theory perspective, companies improve their corporate disclosure practices to send
messages to different stakeholders about their sustainability performance to improve
corporate reputation and image (Ruhnke and Gabriel, 2013). Prior research carried out on
the extent of SR indicates that sustainability disclosures have value relevance and
sustainability information serves as a signaling device to stakeholders (Crowther and Aras,
2014; Kuzey and Uyar, 2017; Orazalin and Mahmood, 2018).

3.1 Stand-alone sustainability reports and quality of sustainability reporting

Recent trends in the academic literature have shown that the importance of stand-alone
reporting, which includes information on economic, environmental and social activities, has
been increased over the last few years (Clarkson et al., 2011; Higgins et al., 2015). According to
the signaling theory, companies prepare stand-alone voluntary reports as an essential signal of
their superior position regarding different activities (Brammer and Pavelin, 2008; Clarkson et al.,
2008). Higgins et al. (2015) found that approximately 90 percent of Australian companies issue
stand-alone sustainability reports to improve their reputations and to signal their commitment
to CSR and sustainability. In other words, companies issue stand-alone sustainability reports to
inform stakeholders of their activities related to social responsibility and environmental
performance (Clarkson et al., 2011). Ruhnke and Gabriel (2013) concluded that firms that issue
separate sustainability reports in accordance with the GRI guidelines provide more
comprehensive and high-quality information, which in turn, serves as a signaling tool for
credibility. Other studies also supported the importance of stand-alone reports because such
reports provide more transparent and extensive information for stakeholders to evaluate a
firm’s sustainability-related activities (Dhaliwal et al., 2014; Gray and Herremans, 2012).
Mahoney et al. (2013) found a positive relationship between stand-alone reporting practices and
CSR performances for US publicly held companies, thus concluding that publishing separate
sustainability reports leads to higher levels of voluntary disclosure. Similarly, Orazalin and
Mahmood (2018) provided evidence that stand-alone SR leads to more transparent
and extensive sustainability information in the case of oil and gas companies in Russia.
Agyei and Yankey (2019) revealed that the majority of timber firms in the emerging market of
Ghana disclose information on environmental performance in separate stand-alone documents.
Based on the signaling theory and the discussion of prior studies, it is assumed that companies
issuing stand-alone sustainability reports will incur lower costs and provide higher-quality
sustainability disclosures. Thus, the following hypothesis is constructed:
H1. Stand-alone SR is positively related to the quality of sustainability performance
disclosures reported by Kazakhstani companies, all else being equal.
3.2 Medium of language and sustainability reporting Determinants
Prior studies suggest that the language used in preparing annual reports and other of GRI-based
voluntary disclosures affects investors’ information-processing costs, corporate visibility, SR
information asymmetry, as well as investors’ decisions. As noted by Jeanjean et al. (2015),
informational constraints for foreign investors are greater from companies that do not
report their voluntary disclosures in English compared with companies that report in
English. This notion suggests that providing voluntary disclosure in English may reduce 145
investors’ information-processing costs, increase visibility and reduce information
asymmetry among stakeholders. Ferreira and Matos (2008) concluded that US
institutional investors prefer investment opportunities in English-speaking markets.
Consistent with this, Hales et al. (2011) argued that the language used in corporate
disclosures is likely to be an important factor influencing investors’ decision. In other words,
the widespread use of English as an external reporting language serves as a signaling
device to stakeholders, through which companies disclose more extensive information
voluntarily to mitigate information asymmetry and promote a positive impression among
global investors in general. By using data from Greek companies, Leventis and Weetman
(2004) concluded that companies that report in both English and Greek provide more open
and transparent voluntary disclosures than companies that report only in Greek. In the case
of Mexican companies, Meyskens and Paul (2010) concluded that early adopters of CSR
reporting more frequently issue formal CSR reports that are available in both English and
Spanish. Given the above arguments, it is expected that disclosing sustainability
information in English will serve as a signaling tool and make public disclosures more
available for stakeholders who do not know the local language, thereby reducing the
information asymmetry between local and international investors. Thus, the second
hypothesis is proposed:
H2. English reporting is positively related to the quality of sustainability performance
disclosures reported by Kazakhstani companies, all else being equal.

3.3 Financial leverage and sustainability reporting

From the agency theory perspective, Jensen and Meckling (1976) argued that highly indebted
companies provide more voluntary disclosures to mitigate agency costs and reduce the
cost of capital. This can be explained by the fact that companies burdened with high debt
levels have a greater contractual obligation to satisfy information requirements of lenders and
reduce information asymmetry, and therefore, produce more sustainability-related
disclosures (Aribi et al., 2018; García-Meca and Sánchez-Ballesta, 2009; Watson et al., 2002).
However, Brammer and Pavelin (2008) concluded that a low level of leverage enables
firms to invest more in CSR activities, because lenders exert less pressure over managers’
activities related to CSR. Nevertheless, the relationship between risk and sustainability
performance is not as widely examined in prior studies (Kansal et al., 2014). By using data
from European companies, De Beelde and Tuybens (2015) concluded that highly indebted
companies tend to issue more voluntary disclosures. Similarly, Aribi et al. (2018) provided
evidence that highly leveraged firms convey more voluntary information to investors in the
emerging market of Jordan. Barako et al. (2006) found a positive association between leverage
and voluntary disclosure in the top-listed companies in Kenya. However, this relationship
is not supported by other studies (Dissanayake et al., 2016; Liu and Anbumozhi, 2009;
Rettab et al., 2009). Branco et al. (2014) and Sierra et al. (2013) provided evidence
that firm leverage is negatively related to sustainability information. Fama and Miller (1972)
provided a classic result supporting the notion that leverage is positively related to voluntary
disclosure. Therefore, based on the essence of the agency theory, we assume that
highly leveraged companies are likely to produce more sustainability-related disclosures
JAEE to reduce information asymmetry. In other words, companies with higher debts are expected
10,1 to have better SR practices to satisfy information requirements of lenders. Hence, the
following hypothesis is developed:
H3. Leverage is positively related to the quality of sustainability performance disclosures
reported by Kazakhstani companies, all else being equal.

146
3.4 Financial capacity and sustainability reporting
Free cash flow capacity shows a firm’s ability to generate cash flows from its core
operations and measures the availability of financial resources for costly sustainable
investments and voluntary disclosures (Kuzey and Uyar, 2017; Orazalin and Mahmood,
2018). In other words, free cash resources demonstrate a firm’s financial capacity, which
enables it to support the proprietary costs of high-quality sustainability reports to meet its
stakeholders’ expectations and needs, thus serving as the signaling device. From the
signaling theory perspective, firms with better financial capacities are likely to disclose
more information to all stakeholders in order to create a positive impression (Alsaeed, 2006).
As noted by Reverte (2009), the most obvious relationship between sustainability
information and firm performance depends on the availability of economic resources, which
indicate confidence by management in terms of financial capacity. Sìmnett et al. (2009) and
Ruhnke and Gabriel (2013) supported this notion and concluded that companies with higher
financial capacity are likely to have higher levels of external assurance statements and
sustainability disclosures. By using the data of top companies listed on the Istanbul Stock
Exchange, Aksu and Kosedag (2006) provided evidence that financial capacity is positively
associated with SR, thus concluding that firms with greater cash resources tend to have
higher levels of sustainability disclosure. Josée Ledoux et al. (2014) concluded that
companies with greater cash resources have a greater tendency to support proprietary costs
based on data from companies listed on the Toronto Stock Exchange. As mentioned above,
financial capacity in terms of free cash flows supports the signaling theory, and is therefore
considered an important factor influencing the extent and quality of sustainability
performance disclosures. Based on the discussion above, it is assumed that companies with
higher financial capacity are likely to disclose more extensive sustainability information.
Therefore, our next hypothesis is as follows:
H4. Financial capacity is positively related to the quality of sustainability performance
disclosures reported by Kazakhstani companies, all else being equal.

3.5 Firm profitability and sustainability reporting

Profitability is a significant determinant of voluntary disclosures as profitable firms tend to
publish more sustainability information to legitimize their operations. As noted by
Waddock and Graves (1997) and Sìmnett et al. (2009), profitable firms provide more
extensive and transparent sustainability information for external assurance. Moreover,
profitable companies have greater incentives to disclose more information to stakeholders to
promote a positive impression as a signaling device (Alsaeed, 2006). Aksu and Kosedag
(2006) provided evidence that firm profitability is positively associated with transparency
and disclosure practices followed by top-listed companies in Turkey. Similarly, by using
panel data of Portuguese companies, Branco et al. (2014) reported a positive link between
firm profitability and SR assurance. This theoretical relation is supported by other studies
for developed and some developing markets (Kansal et al., 2014; Liu and Anbumozhi, 2009;
Ruhnke and Gabriel, 2013; Waddock and Graves, 1997). However, some studies provided
evidence that firm profitability is negatively associated with CSR and sustainability
disclosures (Coffie et al., 2018; Ho and Taylor, 2007), while others found no association
(Dissanayake et al., 2016; Reverte, 2009; Wachira et al., 2019). Based on the signaling theory Determinants
and the extant research evidence on the positive relationship between firm profitability and of GRI-based
SR, it is expected that profitability will be positively related to sustainability disclosures. SR
Specifically, it is assumed that more profitable companies in Kazakhstan are likely to
disclose more sustainability information based on higher GRI application levels. Hence, the
following hypothesis is developed:
H5. Profitability is positively related to the quality of sustainability performance 147
disclosures reported by top public companies in Kazakhstan, all else being equal.

3.6 Firm age and sustainability reporting

Firm age may be a significant factor influencing the extent of SR practices since older and
more established companies are likely to disclose more sustainability information due to
their longer reporting experience. Prior studies on the relationship between firm age and
sustainability disclosure have provided in conclusive results (Delaney and Huselid, 1996;
Dissanayake et al., 2016; Mahmood and Orazalin, 2017; Rettab et al., 2009). In the case of
US firms, Delaney and Huselid (1996) concluded that older companies tend to publish more
sustainability information. Similarly, Khan et al. (2013) provided evidence that firm age is
positively related to CSR disclosures in the context of Bangladesh. By using data of oil and
gas companies in Kazakhstan, Mahmood and Orazalin (2017) found a positive relationship
between firm age and sustainability disclosures. Mnif Sellami et al. (2019) reported that
firm size has a positive impact on the assurance of sustainability information in the case of
France. Other studies have also confirmed a positive association between firm age and SR
(e.g. Cormier et al., 2005; Orazalin and Mahmood, 2018). However, some studies have
provided evidence that there is a negative relationship between firm age and sustainably
information (e.g. Liu and Anbumozhi, 2009; Rettab et al., 2009). Based on the legitimacy
theory perspective, it is assumed that older and more established companies would
produce more sustainability information since they have already established their
legitimacy to stakeholders and managed their reporting systems. Thus, the following
hypothesis is proposed:
H6. Firm age is positively related to the quality of sustainability performance
disclosures reported by Kazakhstani companies, all else being equal.

3.7 Firm size and sustainability reporting

Prior studies on the relationship between firm size and sustainability disclosure have revealed
that firm size is a significant determinant influencing the nature of SR because larger firms are
more visible to stakeholders, thus providing more voluntary information to satisfy greater
stakeholder scrutiny, such as heavy regulations and high media attention (Dissanayake et al.,
2016; Kansal et al., 2014; Kuzey and Uyar, 2017; Liu and Anbumozhi, 2009; Nazari et al., 2015;
Sumiani et al., 2007). Larger entities that are exposed to more social pressure disclose more
voluntary information to show their corporate citizenship, thus legitimizing their activities
(Ghazali, 2007; Matuszak et al., 2019). Furthermore, large firms have more financial resources
than small ones, and therefore, the cost of disclosing voluntary information is decreasing for
large firms due to the economies of scale (Ho and Taylor, 2007; Matuszak et al., 2019). By using
data from large companies in Malaysia, Sumiani et al. (2007) concluded that firm size is a main
factor influencing the extent of sustainability information due to greater stakeholder scrutiny
and higher external pressures that larger companies face. Chiu and Wang (2015) found a
positive relationship between firm size and corporate social disclosures of Taiwanese
companies. Dissanayake et al. (2016) reported that SR is quite significant among larger
companies in the case of Sri Lankan companies. Similarly, Bowrin (2018) provided evidence
JAEE that larger firms provide more voluntary disclosures in the Caribbean and Southern Africa.
10,1 Other researchers have also found positive associations between firm size and voluntary
disclosures in Bangladesh (Khan et al., 2013), Canada (Nazari et al., 2015), China (Liu and
Anbumozhi, 2009), Ghana (Coffie et al., 2018), India (Kansal et al., 2014), Kazakhstan (Orazalin,
2019) and Turkey (Kuzey and Uyar, 2017). Within the context of the legitimacy theory, many
of these studies provided evidence that larger companies facing more stakeholder scrutiny
148 and greater external pressures disclose more information to avoid possible losses due to
illegitimacy. Based on the legitimacy theory and the findings of prior literature, we posit that
larger companies disclose higher levels of sustainability performance disclosures. Hence, the
following hypothesis is proposed:
H7. Firm size is positively related to the quality of sustainability performance disclosures
reported by Kazakhstani companies, all else being equal.

3.8 Auditor type and sustainability reporting

The agency theory posits that the external audit is an effective governance mechanism to
monitor managers’ activities and provide reasonable assurance on the credibility of
corporate disclosure ( Jensen and Meckling, 1976; Watts and Zimmerman, 1983).
Most prior studies advocated the idea that corporate disclosure is more reliable from
clients audited by large international auditing firms than that from those audited by other
auditing firms (Teoh and Wong, 1993). Moreover, large auditing firms are a larger target
for litigation, which gives them an incentive to be more conservative and diligent, and
therefore, provide high-quality audit services (Brown et al., 2010). As noted by DeAngelo
(1981), large and more independent auditing firms invest more to maintain their reputation
as providers of high-quality assurance services compared with smaller audit firms. Thus,
large auditing firms motivate their clients to follow mandatory disclosure rules and
disclose more comprehensive relevant information than that required to reserve their
reputations (Firth, 1979). Most prior studies found a significant relationship between large
auditing firms and higher corporate disclosure levels (Haniffa and Cooke, 2002; Orazalin
and Mahmood, 2018; Pucheta-Martínez et al., 2019). Sierra et al. (2013) concluded that the
decision to issue CSR disclosures depends on whether financial reports are audited
by Big Four or not. Recently, Orazalin and Mahmood (2018) found a positive association
between auditor type and sustainability information and concluded that firms audited by
Big Four disclose more extensive sustainability information. Similarly, Pucheta-Martínez
et al. (2019) provided evidence that companies audited by large auditing firms report more
CSR information. Therefore, external auditors play a significant role in the dissemination
of transparent and reliable corporate disclosures, including sustainability reports.
Based on the agency theory and the above discussion, it is assumed that companies
audited by international Big Four auditing firms are likely to report more extensive
sustainability information to reduce information asymmetry. Therefore, the following
hypothesis is proposed:
H8. Auditor type is positively related to the quality of sustainability performance
disclosures reported by Kazakhstani companies, all else being equal.

4. Research methodology
4.1 Sample and data collection
The initial sample of our study includes publicly traded companies at the Kazakhstani Stock
Exchange for the years 2013–2015. We exclude financial institutions due to their different
accounting implications and specific industry characteristics. Furthermore, we eliminate
companies with missing data on sustainability disclosures from our sample. Based on these
filters, 53 companies satisfy the selection and reporting criteria in accordance with the GRI- Determinants
reporting system, and therefore, are included as samples in this study. After removing of GRI-based
13outliers from both tails, our final sample comprises 146 firm-year observations spanning SR
three main industries, including energy, manufacturing and service companies. Although
the sample size is relatively small, it presents enough data to conduct relevant statistical
analyses and to provide preliminary empirical evidence in order to inform future research.
Moreover, the sample size is comparable with other studies examining the link between SR 149
and its determinants (e.g. Branco et al., 2014; Dissanayake et al., 2016; Yang and Yaacob,
2012). We hand-collect data on sustainability performance from CSR reports and annual
reports available on the webpage of the Kazakhstani Stock Exchange and company
websites. These reports are used to assess and measure individual dimensions of
sustainability performance and construct individual subindex scores and a composite SR
index. We obtain financial data from audited financial statements available on the webpage
of the Kazakhstani Stock Exchange (www.kase.kz/) and the depository that contains
financial reports of public companies (www.dfo.kz). The sample includes some foreign
companies that disclose financial reports in foreign currency rather than local currency, i.e.,
Kazakh tenge. Therefore, for consistency, accounting data reported in Kazakh tenge were
converted into US dollars by using historic exchange rates provided by the National Bank of
Kazakhstan for the period 2013– 2015.

4.2 Measurement of dependent variables

The dependent variables in this study include economic, environmental and social
dimensions of SR and an overall SR index. By following prior studies (Allegrini and Greco,
2013; Mahmood and Orazalin, 2017), we construct individual dimensions of SR based on a
dichotomous approach assigning a value of 1 if a corresponding information is reported
and 0otherwise. In particular, we calculate subindices for economic (ECON),
environmental (ENVI) and social (SOCI) indicators of sustainability through the
application of the globally recognized GRI guidelines and standards. The GRI guidelines
address the importance of economic, environmental, and social performance aspects
applicable for all entities (Brown et al., 2009; Yadava and Sinha, 2016). Thus, we follow the
GRI-reporting standards that consist of 79 items from three main GRI-based performance
indicators including economic contribution (9 items), environmental performance
(30 items) and social responsibility (40 items).
The first dimension relates to economic performance of SR and indicates how a reporting
organization affects the economic conditions of all stakeholders and other economic systems
at the local, regional, national and global levels (Global Reporting Initiative, 2002).
The economic performance of SR consists of nine indicators under three main subcategories,
including economic performance, market performance and economic impacts on a broad
range of groups within a society. The second dimension of SR reflects how an organization
accounts for environmental issues (Global Reporting Initiative, 2002).In particular, the
environmental performance assesses an organization’s impacts on living and nonliving
natural systems related to inputs (e.g. energy, material, land and water) and outputs
(e.g. emissions, effluents and waste). In all, 30 indicators are classified into 9 subcategories,
including energy, materials, biodiversity, water, emissions, effluents and waste, products
and services, transport, compliance and overall. The third dimension relates to social
performance of sustainability and measures a reporting organization’s impacts on the
society within which it operates (Global Reporting Initiative, 2002). The social dimension
includes 40 performance indicators that are grouped into four subcategories, including labor
practices, human rights, product responsibility and society.
We measure economic, environmental and social performance indicators based on a
binary scale. Specifically, each of the performance indicators within the economic,
JAEE environmental and social categories is answered based on GRI-based disclosures, and
10,1 assigned a value of 1, if a particular indicator is disclosed, otherwise 0. All answered items
are added to obtain total individual scores for all three dimensions for each reporting
company. Then, each subindex is calculated as the total number of items disclosed by the
total number of items presented in GR3.1 guidelines. To assess the overall quality of
sustainability information, we develop a composite SR index for each company. SPIND is
150 calculated as the total number of items disclosed in all three dimensions divided by the total
number of 79 performance indicators. Therefore, all indices are presented in percentages
and range from 0 to 100.The latest version of the GRI reports that GR4 guidelines were
issued in 2013 and had set a 2-year period for transformation from GR3.1 to GR4. In other
words, sustainability reporters must follow GR4 guidelines, effectively from January 1, 2017.
Since our study covers the period 2013–2015, we select the GR3.1 guidelines for our
analysis. Moreover, our data set shows that only five companies out of 53 have disclosed
their sustainability reports in accordance with GR4 guidelines, and only for the year 2015.
Therefore, we measure individual dimensions of SR and a composite SR index by using the
GR3.1 guidelines.

4.3 Measurement of independent variables

We select explanatory variables based on previous literature of voluntary disclosures to
account for possible determinants in the dissemination of sustainability information. In
particular, we include independent variables, including SAREP, reporting language,
leverage, financial capacity, profitability, firm age, firm size and auditor type. Stand-alone
reporting (SAREP) is a dummy variable, taking a value of 1 if the company reports a
separate stand-alone sustainability report and 0otherwise. Reporting language (SAREP) is a
dummy variable, taking a value of 1 if the company discloses sustainability information in
English and 0 otherwise. Leverage (LEV ) is the ratio of debts to total equity. Financial
capacity (FCF) is measured as the free cash flows to asset ratios. Firm profitability (ROE) is
calculated as net profit divided by total equity. Firm age (AGE) is the number of years since
the establishment of the company. Firm size (SIZE) is measured by the logarithm of the total
assets. Auditor type (AUDIT) is a dummy variable, taking a value of 1 if financial reports of
the company are audited by Big Four auditing firms, and 0 otherwise. Definitions and
measurements of all variables are summarized in Table I.

4.4 Regression analysis

Since our study is based on panel data, we use panel regression models to control for the
unobserved heterogeneity over time and across companies. In particular, the following
regression model is employed to estimate the dependence of the driving factors of
sustainability disclosures on SR variables:

SPI N Dit ¼ a0 þb1 ðSAREP it Þþb2 ðSRLN Git Þ þb3 ðLEV it Þþb4 ðFCF it Þþb5 ðROE it Þ

þb6 ðAGE it Þ þb7 ðSI Z E it Þþb8 ðAU DI T it ÞþZi þeit ;

where SPINDit is the quality of sustainability performance disclosures, including economic,
environmental and social dimensions of SR, and an overall SR of company i at time t;
SAREPit is a type of report used for sustainability disclosure (annual reports or stand-alone
reports); SRLNGit is a language used for sustainability disclosure; LEVit is a leverage ratio;
FCFit is the free cash flows to the total asset ratios; ROEit is a return to the equity ratio;
AGEit is firm age; SIZEit is the firm size; AUDITit is a dummy variable representing the type
of the auditing company (Big Four or others); ŋi is the unobserved heterogeneity or the
unobservable individual firm effects; and εit is the error term.
Variables Acronym Operationalization
Determinants
of GRI-based
Dependent variables SR
Economic ECON Each of 9 indicators related to economic performance takes a value
performance (%) of 1 if the corresponding GRI-based information is reported, otherwise 0.
Thus, the total economic index ranges between 0 and 9, and is calculated
in percentages
Environmental ENVI Each of 30 indicators related to environmental performance takes a value of 151
performance (%) 1 if the corresponding GRI-based information is reported, otherwise 0.
Thus, the total environmental index ranges between 0 and 30, and is
calculated in percentages
Social performance SOCI Each of 40 indicators related to social performance takes a value of 1 if the
(%) corresponding GRI-based information is reported, otherwise 0. Thus, the
total social index ranges between 0 and 40, and is calculated in percentages
Sustainability- SPIND SPIND is calculated as the total number of indicators received from all three
reporting index (%) individual dimensions of SR divided by the total number of indicators
presented in the GRI. Thus, the total sustainability score ranges between
0 and 79, and is calculated in percentages
Independent variables
Stand-alone SAREP Takes a value of 1 if a reporting entity issues a stand-alone sustainability
reporting report, otherwise 0
Reporting language SRLNG Takes a value of 1 if sustainability information is reported in English,
otherwise 0
Leverage LEV Total debts divided by total equity
Financial capacity FCF Free cash flows divided by the total assets
Return on equity ROE Net earnings divided by total equity
Firm age AGE The number of years since the establishment of an entity Table I.
Firm size SIZE The logarithm of the total assets Definition and
Auditor type AUDIT Takes a value 1 if the company is audited by Big Four auditing firms, measurement of
otherwise 0 research variables

We performed the Hausman test to decide whether to rely on the fixed effect (FE) or the
random effect (RE) models. The Hausman specification test shows that the difference
between the FE and RE models is statistically insignificant. Therefore, the RE models
are the most appropriate for longitudinal data analyses such as ours. The estimated results
from the RE models are presented in Table VI.

5. Results and discussion

Table II reports the descriptive statistics on SR practices of Kazakhstani companies by
industry. The frequency analysis shows that the energy industry represents 18.87 percent
of the sampled companies, followed by the manufacturing industry at 43.40 percent and

Freq. Percent SAREP SRLNG ECON ENVI SOCI SPIND

Industry (N) (%) (%) (%) (%) (%) (%) (%)

Energy 10 18.87 10.00 50.00 16.67 9.62 8.46 9.83

Manufacturing 23 43.40 17.39 25.00 25.03 9.49 10.64 11.29
Table II.
Service 20 37.73 5.00 30.00 17.29 6.68 7.35 8.24
Sustainability
Total 53 100.00 21.44 26.78 18.49 8.48 9.05 9.88 reporting of
Notes: ECON, performance score on economic dimension; ENVI, performance score on environmental dimension; Kazakhstani
SOCI, performance score on social dimension; SPIND, a composite score on sustainability performance; SAREP, companies based
separate stand-alone SR; SRLNG, SR language. All SR variables are denoted in percentages on industry
JAEE then by service companies at 37.73 percent. The results for stand-alone reporting and
10,1 reporting language variables indicate that 50 percent of the energy companies disclose
their sustainability information in English and only 5 percent of service companies issue
stand-alone reports. The results for ENVI show that the energy industry has a mean value
of 9.62 percent, followed by manufacturing companies at 9.49 percent and services
companies at 6.67 percent. The results also reveal that manufacturing companies
152 have the highest mean values of 25 percent for economic performance and 10.64 percent
for social performance indicators. The mean values of SPIND are 9.83, 11.29 and
8.24 percent for energy, manufacturing and service companies, respectively. Overall, the
relatively low mean values of ECON, ENVI, SOCI and SPIND indicate that SR practices of
the top companies in Kazakhstan are at an early stage of development. This finding
supports the evidence obtained from the GRI database that only six Kazakhstani
organizations have been officially registered to provide sustainability information in
alignment with the GRI framework.
Table III presents detailed descriptive statistics of SR practices for the years 2013–2015.
The mean values for the economic, environmental and social indicators of SR are 18.49, 8.48
and 9.05 percent, respectively. These results indicate that companies provide more
information on the economic aspects of sustainability. This evidence is similar to the
findings of Yadava and Sinha (2016) that reporting on economic performance was more
comprehensive and better as opposed to reporting on environmental and social performance
indicators in the case of Indian companies. The average SR index is 9.88 percent and varies
between 1.27 and 51.89 percent, with a standard deviation of 9.40 percent. The descriptive
statistics for SAREP and SRLNG show that 10.28 percent of the reporting companies
disclose stand-alone sustainability reports and that approximately 33.55 percent of the
companies present their sustainability information in English. Descriptive statistics on
independent variables are presented in Table IV. The mean value of ROE is 12.32 percent
with a standard deviation of 29.35 percent. The results for AUDIT show that 78.22 percent
of the companies are audited by Big 4 audit firms. The mean firm size is $1.87bn and ranges
between $2.69m and $49.68bn (see Table IV ). The results for AGE display that the average
age of Kazakh firms is about 13 years and varies between 1 and 26 years. This evidence
indicates that after gaining independence in 1991, Kazakhstan has become a relatively new
emerging economy in the Central Asian region.
Table V reports the Pearson correlations among all variables for the years 2013–2015.
SAREP and SRLNG are positively correlated with SPIND at the 1 percent significance
level. These results suggest that companies that disclose stand-alone sustainability
reports and present their sustainability information in English have a higher SR index.
Among all independent variables, the estimated coefficient between SRLNG and SIZE is

Variables Obs Mean SD Min. Max.

ECON 146 18.49 12.55 1.27 67.68

ENVI 146 8.48 12.48 0.00 80.00
SOCI 146 9.05 8.84 1.27 47.51
SPIND 146 9.88 9.40 1.27 51.89
Dichotomous variables Yes (1) No (0)
SAREP (%) 146 10.28 89.74
Table III. SRLNG (%) 146 33.55 66.45
Descriptive statistics Notes: ECON, performance score on economic dimension; ENVI, performance score on environmental dimension;
on sustainability SOCI, performance score on social dimension; SPIND, a composite score on sustainability performance; SAREP,
reporting separate stand-alone SR; SRLNG, SR language. All SR variables are denoted in percentages
Variables Obs Mean SD Min. Max.
Determinants
of GRI-based
ROE 146 12.32 29.35 −116.07 150.60 SR
LEV 146 2.02 3.67 0.10 33.64
FCF 146 9.26 16.78 −79.17 80.79
AGE 146 12.58 6.26 1.00 26.00
SIZE (ln) 146 12.39 2.01 7.90 17.73
SIZE (in US$, thousands) 146 1,871,246 7,162,200 2,694 49,682,417 153
Dichotomous variables Yes (1) No (0)
AUDIT (%) 146 78.22 21.78 Table IV.
Notes: ROE, a return on equity ratio; LEV, a leverage ratio; FCF, free cash flows to total asset ratios; AGE, Descriptive statistics
the number of years since the establishment of the company; SIZE (ln), the logarithm of the total assets; SIZE, on independent
total assets of the company in US$; AUDIT, auditor type (Big Four or others) variables

SPIND SAREP SRLNG ROE LEV FCF AGE SIZE AUDIT

SPIND 1
SAREP 0.697** 1
SRLNG 0.519** 0.381** 1
ROE 0.078 −0.076 0.084 1
LEV −0.128 −0.127 −0.017 0.219** 1
FCF 0.063 −0.033 0.070 0.458** −0.105 1
AGE −0.024 −0.013 0.048 −0.028 −0.151 0.117 1
SIZE 0.517** 0.442** 0.533** 0.132 −0.184* 0.262** 0.088 1 Table V.
AUDIT 0.374** 0.176* 0.369** 0.168* −0.069 0.253** 0.255** 0.529** 1 Pearson correlations
Notes: *,**Correlation is significant at 5 and 1 percent level, respectively (two-tailed) among variables

the highest at 0.535. The correlations among the independent variables indicate that
multicolinearity is not an issue in the analyses because the estimated coefficients are
relatively low. As noted by Pallant (2007), multicolinearity arises only if the correlation
coefficients among the explanatory variables exceed 0.700. As shown in Table V, none of
the correlation coefficients among independent variables exceed this maximum threshold
value, which indicates the absence of multicolinearity issues in our study.
Table VI reports random effect regression estimations of the SR model with ECON
(Model 1) as the measure of economic disclosure, ENVI (Model 2) as the measure of
environmental disclosure, SOCI (Model 3) as the measure of social disclosure, and SPIND as
the measure of the overall sustainability disclosure. The reported coefficients of SAREP are
positive and significant with all individual SR dimensions and the composite SR index.
These results support H1 and indicate that Kazakh companies that issue separate stand-
alone sustainability reports disclose more economic, environmental, and social information.
The findings confirm the signaling role of SR and support those of Dhaliwal et al. (2014),
Gray and Herremans (2012), Mahoney et al. (2013) and Orazalin and Mahmood (2018) that
companies provide more extensive sustainability information by disclosing separate stand-
alone sustainability reports. Similarly, SRLNG is positively related to the ECON, ENVI and
SPIND variables. However, the reported coefficient of SRLNG is statistically insignificant
for explaining the variance in the ECON variable. In general, these findings are consistent
with H2, in which companies presenting their sustainability disclosures in English provide
more information on the environmental and social aspects of SR, which in turn improves
the overall quality of sustainability performance disclosures of Kazakh companies. This
empirical evidence supports the findings of Hales et al. (2011) and Leventis and Weetman
(2004), where reporting sustainability information in English has a positive impact on
JAEE (1) (2) (3) (4)
10,1 ECON ENVI SOCI SPIND

SAREP 17.30*** (2.96) 13.73** (2.55) 10.15*** (3.12) 14.51*** (4.75)

SRLNG 1.795 (0.62) 6.370** (2.14) 4.528*** (3.16) 5.146*** (2.98)
LEV 0.129 (0.80) −0.216* (−1.87) −0.0953 (−1.53) −0.171** (−1.97)
FCF 0.00389 (0.09) −0.0207 (−0.50) −0.00562 (−0.28) −0.00477 (−0.15)
154 ROE 0.0577** (2.48) 0.0624** (2.34) 0.0288** (2.36) 0.0501** (2.86)
AGE 0.214 (1.06) −0.275* (−1.74) 0.00646 (0.06) −0.126 (−1.27)
SIZE 0.821 (1.32) 0.873* (1.60) 0.753* (1.86) 0.569* (1.95)
AUDIT 3.465* (1.77) 2.408 (1.39) 1.612 (1.19) 2.613* (1.88)
Industry effects Included Included Included Included
Constant −4.232 (−0.66) −8.015 (−1.38) −7.363 (−1.60)* −4.707 (−1.44)
n 146 146 146 146
Wald χ2 65.21*** 53.59*** 64.86*** 135.28***
R2 (%) 45.18 46.69 57.42 64.87
Table VI. Notes: This table reports the estimation results from RE regressions of SR variables on independent
Panel regression variables. Definitions and measurements of all variables appear in Table I. The robust z-statistics are in
analysis parentheses. *,**,***Significant at 10, 5 and 1 percent level, respectively

voluntary disclosures in general. Overall, our empirical results indicate that English used for
SR and a disclosure of separate stand-alone sustainability reports are important factors in
the dissemination of SR information in the context of Kazakhstan.
Contrary to our expectations, the estimated coefficients of LEV are negative and do not
support our initial hypothesis regarding the positive impacts of leverage on SR. In
particular, the variable LEV is negatively associated with ENVI and SPIND at the 10 and 5
percent significance levels, respectively. These findings support the evidence provided by
Branco et al. (2014) and Sierra et al. (2013) that highly leveraged companies are reluctant to
provide more sustainability information. One possible explanation for the lack of the
positive relationship is that creditors and lenders pay less attention to the importance of SR
(Liu and Anbumozhi, 2009). Another possible factor that might explain a weak association
between leverage and sustainability disclosures is that highly leveraged firms focus more
on short-term goals rather than long-term strategies (Kuzey and Uyar, 2017). The reported
coefficients of FCF show that financial capacity does not explain the variation in
sustainability performance ratings. These results do not support the signaling theory, and
therefore, are inconsistent with the notion that financial capacity leads to better
dissemination of SR. Thus, H4 is not supported. These findings confirm those of Artiach
et al. (2010) and Kuzey and Uyar (2017) that financial capacity has no impact on the
dissemination of sustainability information.
The variable ROE, representing profitability, is positively associated with all SR
variables including ECON, ENVI, SOCI and SPIND at the 5 percent significance level. These
results indicate that more profitable companies provide more transparent and detailed
information to stakeholders on sustainability, and thus demonstrate higher levels of SR
practices in general. Thus, these findings support H5 in the context of the signaling theory.
Overall, the results are in line with the findings of Waddock and Graves (1997), Liu and
Anbumozhi (2009), Ruhnke and Gabriel (2013) and Kansal et al. (2014), who concluded that
there is a positive link between sustainability disclosure and profitability. The positive
relationship can be explained by the fact that profitable companies disseminate more
information on sustainability performance in order to promote a strong corporate image and
positive impression among stakeholders in the context of Kazakhstan. The estimated
coefficient of AGE is negatively associated with ENVI at the 10 percent significance level.
However, the AGE is not associated with other SR variables. These findings indicate that
firm age has no impact on sustainability performance of Kazakhstani public companies. Determinants
Thus, H6 based on the legitimacy theory is not supported. of GRI-based
With regard to firm size, the SIZE variable is positively related to ENVI, SOCI and SPIND SR
at the 10 percent significance level. These findings suggest that larger companies in
Kazakhstan disclose more transparent and extensive information on the environmental and
social dimensions of SR. Therefore, H7 is partially supported. This empirical evidence is
consistent with the findings of Dissanayake et al. (2016), Kuzey and Uyar (2017), Nazari et al. 155
(2015) and Sumiani et al. (2007), that larger companies provide higher levels of sustainability
information. Finally, we provide some support for H8. In particular, the reported coefficients
show that AUDIT is positively related to ECON and SPIND at the 10 percent significance
level. These findings suggest that companies audited by Big Four auditing firms disclose
more extensive information on economic performance and report higher-quality
sustainability disclosures in general. This positive link between sustainability disclosure
and auditor type is similar to that reported by Haniffa and Cooke (2002) and Orazalin and
Mahmood (2018).

5.1 Analysis extension

Most prior studies have employed OLS regressions to examine possible factors influencing
sustainability information. Therefore, we also used OLS regression estimates to investigate
the relationship between SR and its possible determinants based on robust, firm-clustered
standard errors. The results obtained from the OLS regressions are similar to those reported
in the main analyses. Therefore, we conclude that the relationship between the factors
influencing the extent of sustainability disclosure and the levels of sustainability
information is not sensitive to the use of cross-sectional OLS regressions. The OLS
regression results are reported in Table VII. In addition to the correlation analyses, we also
conducted variance inflation factor (VIF) tests to confirm the absence of multicolinearity
problems in our study. According to Chatterjee et al. (2000), multicolinearity is present if a
VIF value of 10 or above is obtained for each independent variable. The reported VIF values
are less than the recommended value of 10. These results indicate that there is no evidence
of any serious multicolinearity issue in our estimated models.

(1) (2) (3) (4)

ECON ENVI SOCI SPIND

SAREP 25.98*** (4.47) 15.94** (2.42) 15.21*** (3.79) 16.71*** (5.78)

SRLNG 0.0425 (0.01) 6.911* (1.90) 4.946*** (3.34) 5.134*** (2.75)
LEV 0.00307* (1.66) −0.00355** (−2.19) −0.00251** (−2.38) −0.00227* (−2.13)
FCF 0.0374 (0.76) −0.0342 (−0.56) 0.00911 (0.26) −0.00412 (−0.10)
ROE 0.0811*** (3.00) 0.0735** (2.44) 0.0363** (2.43) 0.0555*** (3.03)
AGE 0.224 (1.10) −0.372** (−2.25) −0.0929 (−0.82) −0.163* (−1.68)
SIZE 0.292 (0.49) 0.642 (1.18) 0.186 (0.50) 0.371 (1.42)
AUDIT 4.571** (2.01) 3.130 (1.48) 2.690 (1.52) 3.071** (2.11)
Industry effects Included Included Included Included
Constant −0.849 (−0.14) −5.028 (−0.95) −1.055 (−0.27) −2.540 (−0.88)
n 146 146 146 146
F-stat 8.64*** 5.58*** 6.72*** 17.03***
R2 0.4735 0.4696 0.5979 0.6509
Notes: This table reports the estimation results from OLS regressions of SR variables on independent
variables. Definitions and measurements of all variables appear in Table I. The t-statistics, which are based Table VII.
on robust and firm-clustered standard errors, are in parentheses; *,**,***Significant at 10, 5 and 1 percent OLS regression
level, respectively analysis
JAEE 6. Concluding remarks
10,1 This study explores the extent and quality of sustainability performance disclosures
reported by public companies in Kazakhstan and investigates the relationships between the
underlying factors and sustainability information for the period 2013–2015. The relatively
low mean values of individual dimensions of SR and a composite SR index indicate that SR
practices of the top companies in Kazakhstan are at an early stage of development. The
156 results from the regression analysis reveal that stand-alone reporting is positively
associated with sustainability performance ratings. This evidence is in line with previous
literature (e.g. Dhaliwal et al., 2014; Gray and Herremans, 2012; Mahoney et al., 2013;
Orazalin and Mahmood, 2018), which suggests that stand-alone SR leads to more
transparent and extensive sustainability information. The results also show that
sustainability information in English has a positive impact on sustainability information,
thus indicating that Kazakh companies issuing sustainability disclosures in English provide
more GRI-based sustainability information for stakeholders. These findings support the
notion that disclosing sustainability information in English serves as a signaling tool and
makes corporate disclosures more available for stakeholders (Hales et al., 2011; Leventis and
Weetman, 2004). Firm profitability is also positively related to sustainability information,
thus indicating that profitable companies in Kazakhstan disclose more sustainability
information in accordance with the GRI guidelines. This finding is similar to those reported
by prior studies (e.g. Aksu and Kosedag, 2006; Branco et al., 2014; Kansal et al., 2014; Liu and
Anbumozhi, 2009; Ruhnke and Gabriel, 2013) that more profitable firms disclose more
sustainability information. The results also suggest that larger companies in Kazakhstan
disclose more extensive and transparent information on environmental and social
performance. These findings are consistent with those of prior studies (e.g. Dissanayake
et al., 2016; Kansal et al., 2014; Kuzey and Uyar, 2017; Liu and Anbumozhi, 2009;
Sumiani et al., 2007) that larger firms disclose more transparent information on
environmental and social activities. Furthermore, the findings suggest that companies
audited by Big Four auditing firms disclose more transparent information on economic
performance and report higher-quality sustainability disclosures in general. These results
support the view that external auditors play a crucial role in the dissemination of
transparent and reliable corporate disclosures, including sustainability reports (Haniffa and
Cooke, 2002; Orazalin and Mahmood, 2018; Pucheta-Martínez et al., 2019). Overall, our
results indicate that stand-alone SR, reporting language, profitability, firm size and auditor
type affect the amount and quality of sustainability performance disclosures in an emerging
market such as Kazakhstan, thus supporting the hypotheses of the study.
The study has several important practical implications for policy makers, regulators,
practitioners, investors and business organizations. The findings indicate that GRI-based
stand-alone sustainability reports and sustainability disclosures in English may be critical
factors in the dissemination of SR. Therefore, managers and practitioners wishing to
improve their SR practices should pursue GRI-reporting guidelines, issue sustainability
information in separate sustainability reports and present sustainability disclosures to
stakeholders in English. Overall, these findings are consistent with the notion that
companies that integrate sustainability into their strategies may introduce future directions
for improving SR, which in turn, improves dialogue with stakeholders (Higgins and
Coffey, 2016). These findings also suggest policy makers and regulators to promote the
application of the GRI guidelines, formulate corporate disclosure practices for business
organizations, and improve an overall SR culture. Since sustainability disclosures contribute
to the efficiency of capital markets (Kuzey and Uyar, 2017), the KASE and other market
regulators could take initiatives to introduce the corporate sustainability index in the stock
market of Kazakhstan. Overall, these findings support the notion that policy makers and
regulators should consider the adoption of globally recognized GRI guidelines for long-term
growth and sustainable development of the economy (Domingues et al., 2017). The empirical Determinants
results also suggest that managers who wish to promote the corporate image and convey a of GRI-based
positive image among stakeholders should focus on certain factors influencing the extent SR
and nature of SR practices. Specifically, firm profitability, firm size and auditor type may be
critical factors in the dissemination of SR. The findings are also useful for global investors in
making investment decisions and for firms in designing their SR practices in the context of
emerging markets such as Kazakhstan. The findings also suggest that creditors and lenders 157
should evaluate a firm’s sustainability performance in accordance with the GRI guidelines
when granting loans. This approach would motivate reporting firms to operate in an
environmentally and socially responsible manner and provide more information on
sustainability activities. Finally, the results indicate that the state of SR practices in
Kazakhstan, despite some good examples and valuable relevant disclosures, is still in its
infancy. Therefore, regulators and policy makers should initiate high application levels of
GRI guidelines and consider the necessary conditions for the development of SR practices in
the future in the context of emerging markets such as Kazakhstan.
In addition to its practical implications, the study offers several important theoretical
implications. First, the findings support the signaling theory in terms of stand-alone reports
and English reporting. These results indicate that the reporting firms care about SR
practices by preparing stand-alone reports in accordance with the GRI guidelines and
communicating them to stakeholders in English, which in turn serve as a signaling tool to
attract individual and institutional investors in the context of emerging markets such as
Kazakhstan. Second, the findings support the legitimacy in terms of firm size, thus implying
that legitimating business activities and operating within the boundaries of the society are
driving forces behind SR practices in the context of Kazakhstan. These results indicate that
Kazakh firms are under the scrutiny and pressure of the public and support the notion that
in most developing countries, CSR reporting is heavily influenced by various stakeholders
including foreign investors, international buyers, global media and international regulators
such as the World Bank (Ali et al., 2017). Finally, the findings provide partial support for the
agency theory in terms of auditing. While prior studies that rely on the agency theory
generally assume that leverage has a positive influence on SR, our findings suggest
that leverage can play a negative role in the dissemination of sustainability information, and
that understanding this negative role requires taking into account a country’s specific
characteristics, its regulatory norms, and institutional contexts. This evidence supports the
notion that the agency theory, that could be applicable more to Anglo-American developed
economies, may not be fully applicable to Asian markets due to their unique intuitional
contexts (Chang et al., 2017).
The present study acknowledges several limitations that provide avenues for further
research. First, the study focuses on SR practices of public companies in Kazakhstan.
Although these listed companies are key players in the capital market of Kazakhstan, there
are other forms of business organizations, including financial institutions including banks,
investment companies, pension funds, insurance companies, etc. Hence, further research
considering SR practices of financial institutions would provide new insights regarding the
quality of sustainability performance disclosures. Second, the study data set refers to only
146 firm-year observations from the publicly traded companies in Kazakhstan. Therefore,
extending the study time to beyond 2015 and including samples from other CIS countries
and emerging markets would highlight the important aspects of SR practices across
companies from different markets. Third, the study investigates firm-specific determinants
of sustainability performance disclosures. As noted by Lauwo et al. (2016) and Uddin et al.
(2018), it is important to assess economic, legal, social, political, historical and power
structures that affect CSR activities and reporting practices across different emerging
markets. Therefore, further research should focus on macro-level determinants that shape
JAEE SR practices in the context of emerging markets such as Kazakhstan. Furthermore, the
10,1 study uses GRI 3 standards due to a relatively recent introduction of the latest version of
GRI guidelines, i.e., GRI 4. Thus, further studies following the GRI 4 standards could explore
the extent and nature of SR practices, their determinants and the economic consequences for
sustainability reporters. Finally, while the findings shed some light on the importance of SR
practices based on the essence of agency, signaling and legitimacy theories, future research
158 could focus on other theories such as institutional, political and social contract theories in
exploring the extent and nature of SR practices.

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About the authors

Dr Nurlan Orazalin, DBA, is Assistant Professor of Accounting and Finance at Bang College of
Business, KIMEP University, Kazakhstan. He is Certified Management Accountant (CMA) and
Member of the Institute of Management Accountants of USA. Dr Orazalin earned DBA in Accounting
from KIMEP University, Kazakhstan and MS in accounting from Texas A&M University, USA. His
research and professional interests are primarily focused on corporate finance, financial reporting,
banking and finance, disclosure, corporate governance and fair value accounting. Dr Nurlan Orazalin is
the corresponding author and can be contacted at: orazalin@kimep.kz
Dr Monowar Mahmood, PhD, is Professor of Management, Bang College of Business, KIMEP
University, Almaty, Kazakhstan. He obtained his MBA from Saint Mary’s University, Canada; MA
from the University of Leeds, UK and PhD from the University of Manchester, UK. Dr Mahmood
published on corporate governance, corporate social responsibility, human resource management and
gender, and equal employment policies.

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