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Advances in Accounting, Incorporating Advances in International Accounting
Advances in Accounting, Incorporating Advances in International Accounting
a r t i c l e i n f o a b s t r a c t
Available online xxxx We explore the potential firm and industry characteristics that determine the corporate social responsibility
(CSR) disclosure practises by Bangladeshi listed firms. We use a CSR disclosure checklist to measure the extent
Keywords: of CSR disclosure in the annual reports and a multiple regression analysis to examine the determinants of CSR dis-
Corporate social disclosure closure. Our study finds that CSR disclosure has positive and significant relationships with export-oriented sector,
Legitimacy theory firm size and types of industries. We also find a negative relationship between CSR disclosure and family owner-
Bangladesh
ship. The overall findings of our study provide empirical evidence which suggests that a number of firm and in-
dustry characteristics are important determinants of the extent of CSR disclosures in a developing country like
Bangladesh. Our findings can help the policy makers to adopt necessary regulatory reform to improve the CSR
practises and enhance organisational legitimacy.
© 2014 Elsevier Ltd. All rights reserved.
1. Introduction 1978); Australia (Deegan & Rankin, 1996; Guthrie & Parker, 1989);
and Western Europe (Adams, Hills, & Roberts, 1998; Ray, 1980). The
Over the last few decades people have become more aware about the findings of this study suggest that there is an increased awareness
impact of business in society. In particular, there has been a growing about CSR disclosures among different countries. A limited number of
awareness about some social issues, such as pollution, waste, resource de- studies have also been done in developing economy settings (Andrew,
pletion, product quality and safety, and rights and status of workers Gul, Guthrie, & Teoh, 1989; Belal, 2001; Kuasirikun & Sherer, 2004;
(Deegan & Gordon, 1996; Gray, Kouhy, & Lavers, 1995; Hooghiemstra, Sing & Ahuja, 1983). Studies have shown that despite an awareness
2000; Kolk, 2003). Many of the businesses which are better performers and concern for business to be socially and environmentally responsi-
in terms of economic performance measures have been criticised for ble, businesses in these countries have been slower in responding to
worse social performance. As public concern over social issues has been the CSR agenda.
increasing, business organisations have been facing challenges to give With regard to the research on CSR disclosures most of prior studies
more considerations on social issues. A growing number of companies are of qualitative nature and focus on areas such as nature and content
from different industries have started to give importance to social issues of CSR disclosures and the motivational factors of companies to make
while developing their business strategies (Dentchev, 2004; Hillman & CSR disclosures.2 A few prior studies investigate the determinants of
Keim, 2001; McWilliams & Siegel, 2000). In recent years, however, it CSR disclosures as well. However, all of these studies were carried out
has become apparent that social policies, procedures, and strategies as either in the developed countries or in newly industrialised countries.3
such may not be adequate. Pressure on companies to disseminate infor- Our study aims to add to this research strand by investigating the deter-
mation to the stakeholders about the impact of their activities in society minants of CSR disclosures using data from listed non-financial compa-
is intensifying. Therefore, it is no surprise that the issue of CSR disclosures nies in Bangladesh during the period of 2005–2009.
has become increasingly prominent in the area of disclosure literature. This paper is focused on the Bangladeshi setting for two reasons.
First most of the previous studies are based on developed countries
(Cormier & Magnan, 2003; Gamerschlag, Moller, & Verbeeten, 2011;
2. Prior research
http://dx.doi.org/10.1016/j.adiac.2014.03.005
0882-6110/© 2014 Elsevier Ltd. All rights reserved.
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
2 M.B. Muttakin, A. Khan / Advances in Accounting, incorporating Advances in International Accounting xxx (2014) xxx–xxx
Reverte, 2009) and the evidence should be added from a developing 3. Theoretical framework
country context which has different institutional settings to compare
results with the previous studies.4 For example, prior studies suggest The most frequently cited theory in social and environmental
the presence of family dominance in Bangladesh (Farooque, Zijl, reporting studies is the legitimacy theory. The theory is based on the no-
Dunstan, & Karim, 2007; Sobhan & Werner, 2003). A survey conduct- tion of a ‘social contract’, which limits the activities of an organisation
ed by Sobhan and Werner (2003) found that an overwhelming within the boundaries set by the society (Gray, Owen, & Adams,
majority (73%) of the boards of non-bank listed companies were 1996). In essence, the organisation will gain support from the stake-
heavily dominated by sponsor shareholders. This is consistent holders and continue in existence in so far as its activities give benefits,
with other studies such as Reaz and Arun (2006) and Uddin and or at least are not harmful to society. According to this theory organisa-
Choudhury (2008) that report similar family dominance in the tions continually seek to ensure that they are perceived as operating
board of directors. Since family owners could influence the CSR prac- within the bounds and norms of their respective societies, that is, they
tises it would be interesting to consider the impact of family owner- attempt to ensure that their activities are perceived by outside parties
ship on CSR disclosures. as being ‘legitimate’. Perrow (1970) defines legitimacy as a generalised
The findings of previous Bangladeshi studies (see for example, Islam & perception or assumption that the actions of an entity are desirable,
Deegan, 2008) also suggest that international buyers in the export orient- proper, or appropriate within some socially constructed system of
ed sector, in particular the clothing industry, have influenced the CSR norms, value, beliefs, and definitions. Although firms have discretion
practises and reporting by Bangladeshi companies. In particular, some re- to operate within institutional constraints, failure to conform to critical,
cent incidents in relation to work place safety, violation of human rights, institutionalised norms of acceptability can threaten the firm's legitima-
child labour etc. in the clothing sector, the prime industry of Bangladesh, cy and ultimately its survival (DiMaggio & Powell, 1983; Oliver, 1991;
have brought the attention of foreign buyers, media and the international Scott, 1987). An organisation therefore, through its top management,
community on the issue of CSR practises in Bangladesh. The failure by the seeks congruency between organisational actions and the values of its
Bangladeshi government to observe its own national laws has prompted general and relevant publics (Dowling & Pfeffer, 1975; Lindblom,
international buyers to insist on their own codes of conduct with local 1994) or its stakeholders. Sethi (1979) argues that if an actual or poten-
companies. Pressure has emerged from various agencies for companies tial disparity exists between organisational and social values, then
to act responsibly and be accountable for the impacts they have on the organisational legitimacy will be jeopardised giving rise to a legitimacy
social, political and ecological environments. It would be therefore inter- gap. A widening gap will cause an organisation to lose its legitimacy.
esting to investigate whether a powerful stakeholder group (such as Under such circumstance an organisation can adopt a number of public
international buyers) can influence the level of CSR disclosures in disclosure strategies for its survival (Dowling & Pfeffer, 1975; Lindblom,
Bangladesh. Furthermore, the second reason for conducting this study is 1994).
that there is scant empirical evidence on the determinants of CSR in In social and environmental accounting literature, many researchers
Bangladesh. Previous studies (Belal, 2000, 2001; Belal, Khan, & Alam, concur that social and environmental disclosures can be employed by
1998; Belal & Owen, 2007; Imam, 2000) have mainly focused on the na- an organisation to mitigate legitimacy threat and reduce the legitimacy
ture and extent of CSR disclosures in the annual reports in Bangladesh. gap (see for example Deegan, Rankin, & Tobin, 2002; Deegan, Rankin, &
Empirical studies found that the level of CSR varies across companies, in- Voght, 2000; Hogner, 1982; Patten, 1992). Legitimacy theory therefore
dustries, and time (Gray, Javad, Power, & Sinclair, 2001; Hackston & Milne, implies that it is the top management of an organisation which is
1996; Reverte, 2009). These studies also indicated this behaviour to be responsible to recognise legitimacy gap and carry out necessary social
systematically determined by a variety of firm and industry characteris- practises and disclose that accordingly to stakeholders to ensure
tics such as size, leverage and age that influence the relative costs and accountability.
benefits of disclosing such information (Cormier & Magnan, 2003;
Cormier, Magnan, & Velthoven, 2005; Patten, 2002).
By using a sample of Bangladeshi data during the period of 2005 to 4. Institutional background and CSR practises in Bangladesh
2009 we explore the determinants of CSR disclosures. Our results docu-
ment a number of determinants of CSR disclosure in Bangladesh. In par- Bangladesh is an emerging economy in the South Asian region. It
ticular, we find that family ownership is negatively related to the extent was a British colony for around two hundred years. The institutional en-
of CSR disclosures implying that family owners are less concerned about vironment in Bangladesh differs from that in many developed Western
organisational legitimacy. We also document that larger firms provide economies in several important respects. It is characterised by a less
more CSR disclosures as they receive more attention from the various developed capital market (World Bank, 2009), a ‘weak-efficient’ stock
groups in society to disclose their social activities and legitimise their market (Islam & Khaled, 2005), the absence of active corporate
businesses. Our study further finds that export-oriented industries are control, a passive managerial labour market and poor incentive
disclosing more CSR information than other industries as they are contracts for management (Farooque et al., 2007). The regulatory
under more stakeholder pressure regarding environmental and social environment is also very poor. Although Bangladesh inherited
disclosures. Previous research mainly focuses on extent, content and Common-law from British colonial rule, it is characterised by weak
motivational factors of CSR disclosures. However, our study contrib- and relatively unsophisticated legal and regulatory frameworks.
utes to the literature by exploring a number of firm and industry The poor enforcement of relevant regulations often fails to protect
characteristics that are important determinants of the extent of minority shareholders' rights.
CSR disclosures in a developing country like Bangladesh. The find- Bangladeshi capital market is dominated by a high level of family
ings of our study also provide empirical support to the findings of ownership and management or foreign owners (Imam & Malik, 2007).
Belal and Owen (2007) and Islam and Deegan (2008) who mention The prevalence of family-owned businesses plays a significant role in
that pressures from international buyers are a crucial factor for CSR the economy. Farooque et al. (2007) find that about 78% of CEOs are
disclosures in Bangladesh. shareholders of the firm, either as founder shareholders or as descen-
dants of founding families. The study also finds that the five largest
shareholders hold more than 50% of shares in Bangladeshi companies.
Most of the companies have executive directors, a CEO and a chairman
from the controlling family. In Bangladesh, controlling families hold
4
A limited number of studies have also been done in the context of developing coun- their shares independently in a particular company or group of compa-
tries (Ghazali, 2007; Naser et al., 2006; Rahman, Zain, & Al-Haj, 2011). nies. It is commonly perceived that families are there to protect their
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
M.B. Muttakin, A. Khan / Advances in Accounting, incorporating Advances in International Accounting xxx (2014) xxx–xxx 3
own interests capitalising on the poor market, legal and institutional in press; Ghazali, 2007). We therefore, propose the following
setup at the expense of the minority investors' interest. hypothesis:
Like many other developing countries Bangladesh started to focus on
rapid industrialisation for faster economic development after its H1. Ceteris paribus, there is a negative relationship between family
independence in 1971. To attain this objective a private sector-led ownership and CSR disclosure.
industrial development policy is being aggressively pursued with the
aim of attracting as much foreign investment as possible. Among
different industrial sectors the clothing industry is the most notable 5.2. Firm size
one as the lion's share of the country's foreign exchange earnings
comes from this sector. The export earnings of clothing products Previous studies have indicated that larger firms tend to provide
increased from US$624.16 million in 1990 to US$7900.80 million in more disclosures. Larger firms are more visible and tend to be subject
2006. Bangladesh's garment industry provides employment to more to greater public scrutiny (Watts & Zimmerman, 1986). Large firms do
than 4 million workers with 3.2 million (80%) of the workers being have a bigger effect on the community, and therefore normally have a
women (Pennington, 2013). bigger group of stakeholders that influence the corporation (Hackston
Increased industrialisation and growing foreign investment have & Milne, 1996). Dowling and Pfeffer (1975) argue that larger firms are
implications for corporate accountability and reporting particularly on more politically visible, thus they are expected to engage more heavily
employee and ethical issues. This in turn has led to increasing demands in legitimating behaviour. Previous studies document a positive rela-
for enhanced accountability and transparency in business practises tionship between CSR disclosure and firm size (Adams et al., 1998;
(Belal & Owen, 2007). Most of the investors are very little aware of Cullen & Christopher, 2002; Ghazali, 2007; Haniffa & Cooke, 2005;
the corporate disclosures. Here the culture of disclosure by the corpo- Naser, Al-Hussaini, Al-Kwari, & Nuseibeh, 2006; Reverte, 2009). We
rate body is mainly influenced by the requirements of the Companies therefore, propose the following hypothesis:
Act and the regulations of the Security Exchange Commission. Accord- H2. Ceteris paribus, there is a positive significant relationship between
ing to Ahmed and Nicholls (1994) the level of corporate disclosure is firm size and CSR disclosure.
very poor. The corporate disclosure is characterised by inadequacy,
and the lack of reliability, transparency and accountability. Previous
studies investigating CSR disclosure in Bangladesh have found such 5.3. Export-oriented industry
disclosure levels to be significantly low (for example, Belal (2000))
and of a rather descriptive nature, mostly reporting positive news Bangladesh is currently the second largest exporter of clothing prod-
(Imam, 2000). A significant portion of the CSR-related disclosure in- ucts in the world. It generates more than 80% of the export earnings of
volves employee related information (Belal, 2001). Azim, Ahmed, and the country. The industry and its large foreign buyers (such as Walmart
Islam (2009), in a recent study of CSR disclosures by listed public com- and Nike) sometimes attract criticisms from the international media
panies in Bangladesh in 2007, reveal that only around 16% of companies due to work place safety, poor working conditions and wages, and child
provide voluntary disclosures. Prior studies on CSR disclosures in labour. Accordingly, a number of recent studies (for example, Belal &
Bangladesh suggest that pressures from powerful stakeholders, rather Owen, 2007; Islam & Deegan, 2008) have identified important stake-
than efficiency incentives, are the drivers for such disclosures (Belal holders, such as pressures from international buyers, as a critical factor
& Owen, 2007; Islam & Deegan, 2008). A recent study by Khan, for making CSR disclosures in Bangladesh. For example, Islam and
Muttakin, and Siddiqui (2013) also provides empirical support to this Deegan (2008) report that multinational buyers of the clothing industry
notion and concludes that CSR disclosures are used by managers as a now expect the manufacturers in Bangladesh to attend various social
strategic tool to attain legitimacy. and environmental issues, and failure to meet such expectations may
lead to loss of supply contracts. Belal and Owen (2007) also identify pres-
5. Determinants of CSR disclosure: Development of hypotheses sures from international buyers in the garment industry in Bangladesh as
an ‘extremely potent factor’ influencing CSR disclosure practises (Belal &
5.1. Family ownership Owen, 2007, p. 485). Thus export-oriented industries, particularly the
firms in the clothing sector, may have sufficient incentives to provide
Family owners, who play a dominant role in regard to corporate so- more CSR disclosures in order to allay any potential concerns of their
cial strategies than other investors, are likely to be less concerned about foreign buyers. As such we propose the following hypothesis:
public accountability and organisational legitimacy. Therefore, compa-
nies tend to report less when there is high family ownership. Chau H3. Ceteris paribus, there is a positive significant relationship between
and Gray (2002) document a negative association between family own- export-oriented industries and CSR disclosure.
ership and voluntary disclosures. They argue that family-controlled
firms have little motivation to disclose information in excess of manda-
tory requirements because the demand for public disclosure is relatively 5.4. Industry type
weak in comparison with companies that have wider ownership. An
owner managed company is very common in Bangladesh and in most The findings of Dye and Sridhar (1995) suggest that companies tend
of the cases the owners are family members (Farooque et al., 2007). to disclose information in line with the characteristics of their indus-
The concentrated ownership by the family members enables managers tries. Previous studies document that manufacturing industries which
to dominate the company and decide upon the strategies and policies are environmentally sensitive considerably disclose more environment
about organisational social behaviour. For this type of companies, public related information than corporations from other industries (Adams
accountability may be less of an issue because outsiders' interests may et al., 1998; Deegan & Gordon, 1996; Gray et al., 1995). This is because
be relatively small. In other words, managers of closely held companies their manufacturing processes are likely to have a negative influence
may not invest heavily in socially responsible activities because the on the environment (Reverte, 2009). Haniffa and Cooke (2005) contend
costs of investing in these activities may far outweigh its potential that companies in these industries may provide more information on
benefits. Hence a lesser amount of CSR information can be expected employee related matters as well as they are more likely to be labour in-
in closely held or owner managed companies. The findings of limited tensive. Furthermore consumer oriented industries may provide more
prior evidence also document a negative relationship between fam- social disclosures to improve their image among the consumers. There-
ily ownership and the extent of CSR disclosures (Block & Wagner, fore, CSR practises and disclosures by companies depend on the level of
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
4 M.B. Muttakin, A. Khan / Advances in Accounting, incorporating Advances in International Accounting xxx (2014) xxx–xxx
the impacts of their economic activities on the society. As such we pro- LEV ratio of book value of total debt and assets,
pose the following hypothesis: FAGE natural log of the number of years since the firm's inception,
CEMCER dummy variable equals 1 if the firm belongs to cement or
H4. Ceteris paribus, there is a positive significant relationship between ceramic industry and 0 if otherwise,
the type of industry and CSR disclosure. INDUSTRIAL dummy variable equals 1 if the firm is an engineering firm
and 0 if otherwise,
6. Research design CONSUMER dummy variable equals 1 if the firm belongs to food indus-
try and 0 if otherwise,
6.1. Sample PROCESS dummy variable equals 1 if the firm belongs to jute, paper,
printing and tannery and 0 if otherwise,
The sample selection procedure is reported in Table 1. The sample HEALTH dummy variable equals 1 if the firm belongs to the pharma-
consists of all 135 manufacturing companies listed with the Dhaka ceutical industry and 0 if otherwise, and
Stock Exchange (DSE) in Bangladesh from 2005 to 2009, producing a MISC dummy variable equals 1 if the firm belongs to other indus-
total sample of 675 sample year observations. Due to missing informa- tries and 0 if otherwise.
tion, we then had to exclude 95 firm year observations, yielding a final
sample of 580 firm year observations. We collect the financial and own- The assumptions underlying the regression model are tested for
ership data from the annual reports of the sample companies listed on multicollinearity based on the correlation matrix as well as the variance
the Dhaka Stock Exchange. Social responsibility information was hand inflation factor (VIF).5
collected from the corporate social responsibility disclosure, corporate
governance disclosures, directors' report, Chairman's statement, and 6.3. Dependent variable: Corporate social responsibility disclosure (CSRD)
notes to the financial statement contained in annual reports. indices
The sample consists of various sectors such as: cement (7), ceramics
(4), engineering (19), food (21), jute (3), paper and printing (2), miscel- The CSR disclosure indices represent the dependent variable in this
laneous (11), pharmaceuticals (21), tannery (5) and textile (23). study. To assess the extent of CSR disclosure in annual reports, a check-
list containing 20 items was constructed (see Appendix A). We follow
6.2. Model specification previous studies to construct this checklist. In particular we follow
Haniffa and Cooke (2002, 2005) and Ghazali (2007) and develop a mod-
We use the following regression model to test the relationship ified checklist including the items relevant to Bangladeshi companies. A
between the corporate governance variables and the corporate social dichotomous procedure is applied whereby a company is awarded a 1 if
responsibility disclosure (CSRD). an item included in the checklist is disclosed and 0 if it is not disclosed.
All annual reports have been read twice to ensure consistency in scor-
CSRD ¼ α þ β1 FOWN þ β2 FSIZE þ β3 EXPORT þ β4 ROA þ β5 LEV þ β6 FAGE þ β7
CEMCER þ β8 INDUSTRIAL þ β9 CONSUMER þ β10 PROCESS þ β11 HEALTHþ
ing. The first author has done the coding. Thereafter the second author
β12 MISC þ ε has rechecked the coded data through comparing them with the rele-
ð1Þ vant information. In cases of discrepancies the second author has
reanalysed the information to resolve that. We do not penalise a firm
where for non-disclosure if the item is not relevant to the firm. Such a judge-
ment can be made after reading the entire annual report (Cooke,
CSRD corporate social responsibility disclosure score index, 1992). For such a firm, non-disclosure was treated as non-applicable.
FOWN percentage of shares owned by the families, Consistent with Ghazali (2007) the CSR disclosure index has been de-
FSIZE natural logarithm of total assets, rived by computing the ratio of actual scores awarded to the maximum
EXPORT dummy variable equals 1 if the firm belongs to textile indus- possible score attainable for items appropriate (applicable) to that firm.
try and 0 if otherwise, Following Haniffa and Cooke (2002), the CSRD index is calculated as
ROA profitability (ratio of earnings before interest, taxes and total follows:
assets),
X
nj
X ij
t¼1
CSRDj index ¼ ; ð2Þ
Table 1 nj
Sample description.
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
M.B. Muttakin, A. Khan / Advances in Accounting, incorporating Advances in International Accounting xxx (2014) xxx–xxx 5
index is attenuated due to random error. The coefficient alpha for the Table 2
five information categories in our disclosure index is 0.702. This statistic Descriptive statistics.
provides a good support that the set of items in the disclosure scoring Variable Mean Median Std. dev.
index captures the same underlying construct.6
CSRD 0.223 0.200 0.173
FOWN 0.299 0.342 0.222
FSIZE 8.700 8.705 0.661
6.4. Control variables EXPORT 0.205 0.000 0.404
LEV 0.776 0.626 0.807
We use three control variables in our model. These are leverage, firm ROA 0.075 0.071 0.095
age and profitability. In companies with higher leverage, the manage- FAGE 23.659 24.000 10.709
CEMCER 0.087 0.000 0.281
ment needs to legitimise its actions to creditors as well as shareholders
CONSUMER 0.196 0.000 0.397
(Haniffa & Cooke, 2005). Purushothaman, Tower, Hancock, and Taplin PROCESS 0.085 0.000 0.279
(2000) predict a negative relationship between leverage and CSR disclo- HEALTH 0.202 0.000 0.402
sure in that companies with high leverage may have closer relationships MISC 0.090 0.000 0.286
with their creditors and use other means to disclose social responsibility
information. Company age is a critical factor in determining the level of
corporate social disclosure. An older firm provides more social responsi-
We document a positive and significant coefficient (β = 0.118,
bility disclosure (Roberts, 1992). A more matured firm is concerned
p b 0.01) of firm size (FSIZE). It implies a positive relationship between
about its reputations and hence may disclose more social responsibility
firm size and CSR disclosure thus supporting H2. This result is consistent
information. Profitable companies demonstrate their contribution to
with prior studies in other countries (e.g. Adams et al., 1998; Ghazali,
society's well-being and legitimise their existence through the disclo-
2007; Haniffa & Cooke, 2005). Larger firms are more visible and politi-
sure of more social information (Khan et al., 2013).
cally sensitive, hence disclose more CSR information to manage their
political cost and legitimise their existence (Ghazali, 2007).
7. Results We find a positive and significant coefficient (β = 0.052, p b 0.01) of
export sector (EXPORT) variable. Consistent with H3 this result indi-
Table 2 provides the descriptive statistics for the variables used in cates more CSR disclosure by the clothing industries in Bangladesh.
the study. The average disclosure score is 22.30 (median = 20.00). Firms in the clothing industry provide more CSR disclosures as interna-
The average family ownership (FOWN) is 29.90%. Average 42.70% tional buyers of clothing items now expect the manufacturers in
firms are environmentally sensitive. The average firm age is around Bangladesh to be socially responsible and to comply with various social
24 years. The average ROA of the sample firms is 0.075. and environmental issues. And these firms have strong motivation to
Table 3 presents the correlation matrix among variables. Corporate become socially responsible as failure to meet such expectations may
social responsibility disclosure (CSRD) score is negatively correlated lead to loss of supply contracts. This finding provides further supports
with family ownership (FOWN) (ρ = − 0.182). However, corporate to Belal and Owen (2007) and Islam and Deegan (2008), who identify
social responsibility disclosure (CSRD) score is positively correlated pressures exerted by powerful stakeholder groups as a principal driver
with export-oriented industries (ρ = 0.032), profitability (ROA) (ρ = of CSR reporting in Bangladesh.
0.371), firm size (FSIZE) (ρ = 0.557) and firm age (FAGE) (ρ = 0.231). The findings of our regression also suggest that Bangladeshi firms
Table 4 reports the mean values of the explanatory variables under provide CSR disclosures in line with their industry specific characteris-
analysis across the CSR disclosure ratings for both firms with a rating tics. This is consistent with H4. In particular we document that firms
higher than the median and those with a rating lower than the median. in process and consumer industries provide less CSR disclosures where-
To test the statistical significance of the mean differences in the explan- as other firms that belong to other industries disclose more CSR infor-
atory variables between both groups of firms, we perform a t-test. In mation. Thus our findings provide further support to Dye and Sridhar
panel A we create these two groups using our CSR index (CSRD). It (1995) and Haniffa and Cooke (2005) who suggest industry specific
can be observed that firms with a CSR disclosure rating higher than characteristics to be important determinants of CSR disclosures. Finally,
the median have higher firm age (FAGE) and profitability (ROA), larger our result individuates that profitable and older firms disclose more CSR
firm size (FSIZE) and lower family ownership (FOWN) and leverage information.
(LEV) as compared to those firms with a CSR rating lower than the me- A series of tests were conducted to test the model's robustness. First,
dian. It is also documented that there are more export, miscellaneous we obtain variance inflation factors (VIFs) for the variables to test for
and health oriented firms with a CSR disclosure rating higher than the multicollinearity. There is no indication that there is multicollinearity
median than those with a rating lower than the median. In panel B, among the variables. None of the variables have a VIF value in excess
we redo the analysis using a rank order for each observation based on of 10 which suggests that multicollinearity is not a problem in
their CSR index. The results reported in this panel are qualitatively sim- interpreting the regression results. Second, we take a different measure
ilar to the results reported in the previous panel. of firm size. In particular we take the natural log of market value of eq-
Table 5 reports the results of regressing the explanatory variables on uity to measure firm size and rerun the original model. Consistent with
the CSR disclosure ratings. The coefficient of family ownership (FOWN) our main findings we find a positive significant coefficient of firm size.
is negative and significant (β = −0.102, p b 0.01). In other words fam-
ily ownership has a negative impact on CSR disclosure which implies 8. Conclusions
that family owners are less concerned about public accountability and
organisational legitimacy. This supports H1. Family owners may not This study provides empirical evidence based on Bangladeshi firms
be interested to invest in CSR activities since costs associated with that reveals that number of firm and industry characteristics are poten-
these activities may exceed the benefits. Thus they are relatively less tial determinants of CSR disclosure. Most of prior research on CSR
concerned about social and environmental activities thereby reporting disclosures are of qualitative nature and focus on areas such as nature
a lower extent of CSR disclosures. and content of CSR disclosure and the motivational factors of companies
to make such disclosures. Since CSR disclosure is influenced by a
number of firm and industry characteristics (Gray et al., 1995, 2001;
6
Botosan (1997) obtains a coefficient alpha computed on a standardised data of 0.64. Reverte, 2009), this study therefore empirically investigates the deter-
Gul and Leung (2004) compute a coefficient alpha of 0.51. minants of CSR disclosure in the context of Bangladesh. We adopt
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
6 M.B. Muttakin, A. Khan / Advances in Accounting, incorporating Advances in International Accounting xxx (2014) xxx–xxx
Table 3
Correlation matrix.
CSRD 1.000
FOWN −0.182*** 1.000
EXPORT 0.032* 0.020*** 1.000
ROA 0.371*** 0.111*** 0.003* 1.000
LEV −0.192*** −0.108*** −0.024* −0.401*** 1.000
FAGE 0.231*** −0.198*** −0.011** 0.070* 0.240*** 1.000
FSIZE 0.558*** −0.148*** 0.028*** 0.158*** −0.209*** −0.073* 1.000
*, ** and ***: Statistically significant at less than 0.10, 0.05 and 0.01, respectively.
Table 4
Mean values of explanatory variables for firms with ratings higher and lower than median. We document that family ownership is negatively associate with
Panel A: CSRD CSR disclosures. This implies that family owners are less concerned
about public accountability and organisational legitimacy. We also,
Variables CSRD N median CSRD b median Difference
document that larger firms have positive impacts on the extent of CSR
FOWN 0.290 0.310 0.141 disclosures. Larger firms receive higher attention from the various
EXPORT 0.267 0.138 0.000***
LEV 0.632 0.940 0.000***
groups in society and therefore would be under greater pressure to dis-
FAGE 1.353 1.289 0.000*** close their social activities to legitimise their business. Export-oriented
FSIZE 8.988 8.366 0.000*** industries in Bangladesh make significantly more CSR disclosures. This
ROA 0.102 0.043 0.000** is consistent with the findings by Belal and Owen (2007) and Islam
CEMCER 0.087 0.085 0.956
and Deegan (2008), who suggest that the most potent factor for CSR dis-
INDUSTRIAL 0.177 0.175 0.948
CONSUMER 0.061 0.351 0.000*** closures in export-oriented industries in Bangladesh is the pressure
PROCESS 0.071 0.101 0.200 exerted by important stakeholder groups. Finally we also document
HEALTH 0.228 0.131 0.000*** that profitable and older firms provide more CSR disclosures.
MISC 0.119 0.056 0.007*** The overall findings of our study provide empirical evidence which
Panel B: Rank
suggests that a number of firm and industry characteristics are determi-
nants of extent of CSR disclosures in a developing country like
Variables Rank N median Rank b median Difference
Bangladesh. Our study contributes to the literature by extending the
FOWN 0.264 0.314 0.017** findings of previous research which mainly focus on extent, content
EXPORT 0.226 0.138 0.011***
and motivational factors of CSR disclosures. Our findings can help the
LEV 0.643 0.941 0.000***
FAGE 1.377 1.289 0.000*** regulators to adopt an appropriate balance of legislation, regulatory re-
FSIZE 9.060 8.366 0.000*** form and their enforcement to make improvements in the CSR practises
ROA 0.108 0.043 0.000*** as well as enhancement of organisational legitimacy.
CEMCER 0.110 0.085 0.354 The results of our study are subject to several limitations. Our study
INDUSTRIAL 0.142 0.175 0.309
focuses on only disclosures in corporate annual reports although it is
CONSUMER 0.084 0.351 0.000***
PROCESS 0.075 0.101 0.322 known that the management may use other mass communication
HEALTH 0.314 0.131 0.000*** mechanisms. Therefore, future research may consider disclosures in
MISC 0.097 0.056 0.082* other media such as newspapers and the internet. Additionally, involve-
*, ** and ***: Statistically significant at less than 0.10, 0.05 and 0.01. ment in socially responsible activities may not necessarily translate into
the disclosure of those activities. The CSR disclosure index developed in
legitimacy theory as the premise of our theoretical framework in this this study may not have fully or properly captured the CSR practises.
study since we seek to understand what factors may cause variability Hence it should not be concluded that companies which did not disclose
in CSR disclosures. CSR information were not engaged in any social activities.
Table 5
Multiple regression results using CSRD as dependent variable.
Model 1: CSRD = α + β1 FOWN + β2 FSIZE + β3 EXPORT + β4 ROA + β5 LEV + β6 FAGE + β7 CEMCER + β8 INDUSTRIAL + β9 CONSUMER + β10 PROCESS + β11
HEALTH + β12 MISC + ε
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
M.B. Muttakin, A. Khan / Advances in Accounting, incorporating Advances in International Accounting xxx (2014) xxx–xxx 7
Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005
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Please cite this article as: Muttakin, M.B., & Khan, A., Determinants of corporate social disclosure: Empirical evidence from Bangladesh, Advances in
Accounting, incorporating Advances in International Accounting (2014), http://dx.doi.org/10.1016/j.adiac.2014.03.005