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CSR communications strategies CSR

communications
through social media and strategies

influence on e-reputation
363
An exploratory study
Received 13 January 2015
Vincent Dutot Revised 24 May 2015
Strategy and Management Department, ESG Management School, 1 October 2015
Accepted 20 December 2015
Paris, France
Eva Lacalle Galvez
E-business Department, MBA ESG, Paris, France, and
David W. Versailles
Strategy and Management Department, ESG Management School, Paris, France

Abstract
Purpose – Publics are becoming responsible customers that urge firms to improve society. By using
social media, corporate social responsibility (CSR) actions could influence organization’s commitment
and e-reputation. The purpose of this paper is to look at the influence on e-reputation of communication
strategies (i.e. corporate ability and CSR) on social media.
Design/methodology/approach – Four international companies (Danone, Renault, Orange and BNP
Paribas) were studied and a content analysis was performed: Leximancer for the social media content
(between 25 and 50 pages for each company) on a six-month period; and Social Mention for the
measurement of e-reputation.
Findings – Results show that there is a link between CSR communication strategies and e-reputation.
More precisely, by using a corporate ability strategy (focus on product quality or innovation R&D), a
company can increase its e-reputation better than on a common CSR communication strategy.
Research limitations/implications – This study is based on only four companies (from four
different industries) and would profit from a larger base for analysis. Second, the content the authors
analyzed was generated by the company on their own social media.
Originality/value – This exploratory study is one of the first to look at the influence of CSR
communication strategies on e-reputation and tries to see how companies’ action on social media can
change the way they are perceived by their customers. It completes the current literature by defining
how CSR communications strategies should be declined for in order to influence customers.
Keywords Social media, Corporate social responsibility, Communication strategies, e-Reputation
Paper type Research paper

1. Introduction
Public awareness is increasing concerning social, environmental and humanitarian
causes. Responsible customers are urging firms to behave ethically in society and to all
their stakeholders. To comply with that request and in conjunction with their corporate
social responsibility (hereafter CSR) programs, firms should maintain and expand
communication with customers and keep them informed of initiatives and projects
(Castelló and Ros, 2012). According to Brown and Dacin (1997), customers’ loyalty and
commitment will grow stronger if organizations act sensibly in terms of their Management Decision
environmental and social responsibilities (Safi and Ramay, 2013). Using media can Vol. 54 No. 2, 2016
pp. 363-389
allow CSR actions to demonstrate an organization’s commitment and influence its © Emerald Group Publishing Limited
0025-1747
e-reputation (Kiousis et al., 2007). DOI 10.1108/MD-01-2015-0015
MD The internet has become recognized as a relevant channel for enhancing and fostering
54,2 relations between companies and the public (Waters et al., 2009), and online channels are
becoming an important tool used to manage corporations’ reputations ( Jones, 2009;
Castellano and Dutot, 2013). Academics have suggested that companies’ websites could
provide organizations with numerous opportunities to present and explain their
corporate identity, product sales and management subjects to their stakeholders (Rolland
364 and Bazzoni, 2009). Sharing this sort of information between the brand and its
community through social networks requires a long-term social, environmental and
humanitarian commitment from a company (Castelló and Ros, 2012).
The internet and its channels (e.g. networks and e-mail) have opened the path for
personalization of messages and concrete interaction with both existing and potential
customers that could lead to a better fit between customers’ expectations and firms’
development. According to Madinabeitia (2010), three of the most important
advantages of online social networks are an affinity with the target market, an
ability to increase the brand’s reputation with reduced costs, and the capacity to
segment the public and offer real-time metrics. The relevance of the internet has
increased to such an extent that online actions are now a fundamental pillar in any
brand’s communication strategy (Castelló and Ros, 2012).
Consistently with the abductive method, this paper focusses on several areas of
improvement for the CSR theory, and responds to a lack of research in the marketing,
management and public relations scientific literature concerning CSR, e-reputation and
social media. Through content analysis, we propose a comparative exploratory case
study with four French companies, and focus on how the use of social networks in CSR
communication strategies might influence an organization’s e-reputation. We follow
two objectives.
The paper begins with a literature review of three major concepts: CSR communications
strategies, e-reputation and social media. Subsequent sections introduce the methodology
and the main results. The paper then discusses the results and comments on
recommendations for future research.

2. Literature review
A review of the literature demonstrates that marketing scholars have been researching
subjects related to CSR, social media and e-reputation for many years. They adopt a
variety of perspectives (Brown et al., 2006; Simoes et al., 2005; Jones, 2009). In our
research, we adopt a marketing and public relations perspective.

2.1 CSR communication strategies

2.1.1 CSR and the value of reputation. Since Bowen (1953), who is acknowledged as the
first scholar to define the concept, CSR has become an important research topic in
management science (Lee and Carroll, 2011; Acquier and Aggeri, 2008; Carroll, 1991;
Davis, 1960). It is now understood as a strategic component to achieve economic goals
(Garriga and Melé, 2004), to grow commitment and customer’s loyalty (Safi and Ramay,
2013) or even to influence the reputation of the organization (Carroll and McCombs,
2003; Fombrun and Shanley, 1990).
In the simplest terms, CSR means that a firm must integrate specific concerns such
as environmental, social, human or labor-related issues with its strategy and policy.
More importantly, it must be achieved through a voluntary commitment going beyond
a company’s legal or economic obligations in terms of CSR. Companies need to include
a moral dimension encompassing all areas of the business in their decision-making CSR
processes (Thorne et al., 2011). CSR does not turn a company into a non-profit communications
organization because it still seeks the maximization of profit (De Salas Nestares, 2010),
strategies
but it implies the adaptation of existing management models to new ones. Werther and
Chandler (2006) noted, for example that CSR has become one of the corporate strategy’s
dimensions because of four major issues: increasing influence, changing social
expectations, coping with the globalization of information and working proactively in 365
favor of ecological sustainability.
A distinction must be introduced here between defining a CSR strategy and adding
some CSR engagements within the company. Indeed, although an instance of
responsible behavior may seem to help a brand’s value or reputation capital, it will lead
to financial performance or profitability only when a real commitment is defined and
expressed (Villafañe, 2009). It is therefore more than obvious that one or numerous
social engagements do not constitute a CSR strategy, although they help to recognize or
favor it (Castelló and Ros, 2012). As Pinillos (2009) states, CSR 2.0 should allow firms to
quantify and understand the passage from CSR communication to its management. It
leads to new incomes and positively influences social development (e.g. customer
satisfaction and improving the working environment).
It remains important here to discriminate CSR strategies from “green washing.” We
endorse the conclusion of Lyon and Montgomery (2013) that social media reduce the
incidence of corporate “green wash.” Social media are different from traditional media
because they “[embody] two-way communication with asymmetric response” (Lyon
and Montgomery, 2013, p. 751). Lyon and Montgomery articulate a series of five
propositions with a theoretical model consistent with our research question and
appraise the potential decoupling between CSR and CSR communication strategies
after the advent of Web 2.0. They explain that the number of sources of information
available to stakeholders (incl. consumers) and the variety of social media increase the
degree of scrutiny on CSR strategies. They conclude that this leads to a better detection
of “green wash,” that social media decrease the cost of monitoring corporate behaviors,
and that social media make it easier for activists to call attention to and to mobilize
opposition against “green washing.” In the end, “[f]irms with relatively green
reputations will become less likely to promote their green accomplishments, while firms
with relatively brown reputations will become more likely to disclose their full
environmental impacts” (Lyon and Montgomery, 2013, p. 753).
This multiplication of sources lay also to more authenticity from the company as
pointed out by Liedtka (2008). The author defines it as “the notion of being true to
oneself” (p. 238). Beckman et al. (2009) find that stakeholder perceptions of authenticity
are important to the success and acceptance of CSR programs. They note that
stakeholders use available cues, such as transparency and consistency, to ascertain the
extent to which the organization is true to its self. Consumers respond more positively
to CSR actions that are perceived as driven by the organization’s values (Ellen et al.,
2006). However these studies all agree that their understanding is incomplete
(McShance and Cunningham, 2012, p. 97): there is a need for complementary
approaches that could help stakeholders in their appreciation of CSR strategies. The
authors suggest that individuals should “rely on multiple standards to inform their
authenticity judgements” (p. 97).
Brousseau et al. (2013) reinforce the concept of authenticity as it represents the best
answer to suspicion about CSR activities in their view. They introduce several
MD normative assessments here: companies should promote it at the start of CSR branding.
54,2 Firms should define what they are and then explore ways through which “the ethics of
their role in society can be presented to strengthen brand identity” (p. 62).
2.1.2 Corporate Communication strategies matching CSR strategies. The initial
typology of CSR strategies can be found in Carroll (1991) and is known as the pyramid
of CSR. It is composed of four items (cf. Table I), described as responsibilities of
366 the organization.
In their 2012 review article, Aguinis and Glavas note that predictors of CSR primarily
focus on a short list of concepts (activist group pressure, economic conditions,
stakeholder instrumental, relational and moral motives, and stakeholder psychological
needs). Although most current studies focus on only one or two dimensions introduced in
Table I, in this study, we focus instead on corporate communication strategies in a
direction related to the four dimensions presented by Carroll (1991).
Kim and Rader (2010) proposed two types of communication strategies adopted by
companies based on associations between the firm’s communication strategy and the
customer’s perception:
(1) corporate ability communication strategy (CAS): building the public’s cognitive
associations related to an organization’s expertise and capability in terms of its
products and services; and
(2) corporate social responsibility communication strategy (CSRS): building
corporate associations with stakeholders concerning an organization’s social
responsibility.
The CAS is defined using six dimensions of the company: expertise in product or
service quality, global success, implementation of a quality control program, industry
leadership, market orientation, and efforts in innovation and R&D. It appears that CAS
has a more durable effect than does CSRS in terms of customers’ evaluation because it
focusses on products and services (Kim and Rader, 2010).
Brown and Dacin (1997) suggested that, as mentioned above, CAS associations
have a greater effect on both perception of products and brand evaluation than CSRS.
Brown and Dacin proposed that the main reason for the difference is that when doing
CAS, companies are communicating with a double perspective and therefore are
more effective in influencing the consumer’s point of view. Additionally, because

CSR dimensions Description Example of items to measure it

Economic Business has to be profitable and Book value, profit, market share,
responsibility produces goods and services which are sales profitability, revenue,
desirable in a society market performance
Legal Meeting society’s expectation as Content from a lawsuit, case, suit,
responsibility established by the law settlements, indictment, court
Ethical Following the modes of conduct Special duties, right or wrong,
responsibility considered to be morally right dishonesty, corruption, fraud, damage to
the environment, claims
Philanthropic Involving actively in the betterment Social performance, environmental
responsibility of society performance, human rights, financial
Table I. integrity, charity work, volunteer
CSR dimensions Source: Adapted from Carroll (1991)
companies have multiple products and services, they tend to develop both product CSR
and corporate campaigns. As noted by Sheinin and Biehal (1999), the influence of communications
corporate communication on an individual’s perception or attitude only occurs when
strategies
the corporate brand is linked with the product advertisements, reinforcing the idea of
corporate ability as a more important influencer.
Concerning CSRS, Kim and Rader (2010) also use a six-dimension scale: the
company’s environmental stewardship, philanthropic contribution, educational 367
commitments, employee involvement, public health commitments and sponsorship of
cultural activities.
Engaging in CSR communications strategies with stakeholders is often considered
a means of contributing to public perception of the company. Freeman called this
field within the CSR the stakeholder theory. For the author, companies have no
responsibilities toward society in general but must be focussed by concerned
individuals who can be affected by their activities (Donaldson and Preston, 1995;
Clarkson, 1995). It is interesting that reputation and communication strategies are
mentioned in the survey paper authored by Aguinis and Glavas (2012) in direct relation
to CSR outcomes in the domains of intangible assets elaboration for a brand (brand
impact and reputation) and of relationships with stakeholders. A problem is that
stakeholders reduce here to customers, based on the investigation of several drivers:
customer loyalty, customer choice and evaluation of company/product. We will expand
this perspective.
In this paper, we focus on companies trying to develop their “corporate reputation”
(Rolland and Bazzoni, 2009). This term can be understood as the process of building,
over the long term, a corporation perception or good name through feedback or general
comments from stakeholders (Thorne et al., 2011). According to Rolland and Bazzoni
(2009, p. 254), a positive reputation must be viewed as a “self-interested argument for
CSR or as an extension of the economic argument for CSR.” The authors suggest that
there is a link between a commitment to CSR strategies and corporate reputation.
2.1.3 Measurement of CSR. In the literature, the operationalization of CSR has often
relied on corporate social performance. Igalens and Gond (2003) proposed five levels of
measurement: content of monthly reports of companies; pollution indicators; attitudes
or values extracted from questionnaire surveys; corporate reputation; and behavioral
measures or audits produced by external organizations.
This perspective is completely consistent with the recapitulation introduced by
Aguinis and Glavas (2012). They identify both moderators and predictors but note that
conceptual papers focus on customer information intensity, public perception of CSR,
macro-economic drivers, and cultural and institutional conditions. A problem is that the
academic literature hides behind some sort of “black box” (Aguinis and Glavas, 2012, p.
940) because at an institutional level, Aguinis and Glavas never really examine the
relationship between the predictors and outcomes of CSR. Conversely, they note the
large (“fragmented”) diversity of papers working with field research, each focussing on
very specific aspects. This knowledge gap introduces a specific difficulty concerning
the effect of CSR concepts and the development of multi-level CSR research.
This study adds to the current measurement of CSR by analyzing further the fourth
level and incorporating a social media perspective. In endorsing this perspective, we
expect to develop further the mechanisms linking CSR with outcomes in the domain of
mediation effects (Aguinis and Glavas’ 2nd knowledge gap), and we introduce a tool for
new investigations on the field (4th knowledge gap).
MD 2.1.4 CSR and industrial differences. Many researches have studied CSR strategies
54,2 in different sectors. We highlight here the main contributions within four sectors (bank,
retail, telecommunications and automobile) regarding two links: CSR and performance,
CSR and reputation/image.
The link between CSR strategies and performance is among the most investigated
links in CSR literature, but still no consensus has really emerged on the relation
368 between the two variables. Some scholars (Griffin and Mahon, 1997; Posnikoff, 1997;
Mallin et al., 2014; Arshad et al., 2012; Flammer, 2013) conclude that CSR strategies
positively impact performance; when others (Wright and Ferris, 1997) go for a negative
impact. Finally a third group (Teoh et al., 1999; Fauzi, 2009; Hasen Thuhin, 2014)
advocate CSR strategies have no effect.
Schramm-Klein et al. (2015) show that CSR has positive implications for retailers’ firm
performance and illustrates which CSR dimensions are the most important to focus on. Both
downstream (customer oriented) as well as upstream (suppler oriented) activities count.,
Those who focus about what good a retailer do also conclude that CSR communications is
of high relevance. Kweh et al. (2014) demonstrate that an investment in the social aspects of
CSR will result in better corporate performance. However they explain that less conclusive
findings available in prior studies on the relationship between CSR and corporate
performance could follow the measures and proxies used for corporate performance.
Giannarakis et al. (2011) show that the telecommunications sector is highly sensitive to CSR
issues and most European operators implement CSR initiatives. Wang et al. (2014) show
that corporate efficiency is higher for companies that implement CSR strategies than for
companies that do not. Loureiro et al. (2012) explore the overall importance of CSR for
consumer satisfaction in the automobile industry; they suggest that CSR may not only
contribute to better financial performance by directly reducing costs and increasing
productivity but may also contribute indirectly by increasing consumer satisfaction.
Research on the link between CSR and reputation seems clearer about the influence
of the former. Atakan-Duman and Ozdora-Aksak (2014) have investigated the role of
public relations and CSR practices in constructing organizational identities through a
thematic content analysis of banks’ corporate websites. They show a positive influence
of CSR strategies on corporate reputation. In the retail business, Prieto et al. (2014) say
that multinational organizations (they focus on WalMart), should be concerned with
their reputation, especially given prior results explaining that reputation can influence
the stakeholders’ perceptions (Rindova et al., 2005), the investors’ reactions (Pfarrer
et al., 2010) and long-term profitability (Roberts and Dowling, 2002; Śmigielska, 2013).
These CSR strategies not only help building a positive image for a retail organization
(whose impact on profitability is difficult to measure) but also facilitate the creation of
sustainable competitive edge (as e.g. relations with suppliers or employees), and
constitute the basis for long-term company strategy. For Boyd et al. (2010), reputation
represents an instrument by which companies maintain a sustainable competitive
advantage and endure a long-term relationship with multiple stakeholder groups.
Overall, this review shows that there is no firm consensus on the impact of CSR on
performance, suggesting a need for another approach. As presented here, some have
then focussed their research on a new moderator defined as the corporation reputation
or image. This is the path we adopt. We follow here Cohen et al. (2011) who advocate
for research protocols and results with gain greater significance when relying on
non-financial information.
The following section presents what e-reputation is and how we consider it.
2.2 e-Reputation CSR
2.2.1 From corporate reputation to e-reputation. Identity is one element that appears in communications
most of the literature on corporate reputation. The term should be understood (for a
strategies
company) as its personality (Balmer and Gray, 2000), and it refers to the essential
features that differentiate organizations. Zinkhan et al. (2001, p. 154) say that identity
represents “the ways a company chooses to identify itself to all its publics.” Therefore,
identity must be defined and presented using both internal and external dimensions. 369
Simoes et al. (2005) complete this vision by adding that corporate identity is the mix
between how the company wishes to be perceived (by its publics) and what it wants to
project or say about itself. Based on these two elements, customers or more generally
stakeholders, define a general impression of the company (that could be called the
corporate image).
Ultimately, the image could be either positive or negative (Rolland and Bazzoni,
2009). This overall evaluation reflects the corporate reputation. Companies develop
positive reputation by creating and projecting a set of skills that their constituents
recognize as unique through innovation, operational excellence or closeness to the
customer (Fombrun, 1996). Corporate reputation tends to be affected by communication
strategies that aspire to create certain impressions and to embed a positive attitude
with the public for the company (Pomering and Jonhson, 2009).
Corporate reputation forms one element of Balmer’s corporate marketing mix
(Pomering and Jonhson, 2009): it describes “what we are seen to be.” As presented
earlier, corporate reputation must be understood as a multidimensional construct
composed of stakeholders’ sets of corporate images and corporate identity beliefs
(Dowling, 2004) in which corporate image consists of beliefs about an organization and
answers the question, “what do people think about you?” (Dowling, 2004). The
attributes of a firm’s corporate identity form a key element in the construction of
favorable corporate images, and reputations are developed as companies try to build
up favorable images of them.
2.2.2 Concept of e-reputation. e-Reputation can be defined as a reputation built from
the set of perceptions that stakeholders will create from any element circulating on the
net (Paquerot et al., 2011). The e-reputation could be considered an element of the
reputation itself. Reputation may either specifically arise from digital channels (Chun
and Davies, 2001), or as a concept more comprehensive than e-reputation itself
(Castellano and Dutot, 2013). This approach is reinforced by Frochot and Molinaro
(2008); e-reputation, also coined digital reputation or web reputation, is the image that
stakeholders create of a firm according to the information it transmits on its own
websites and other content available anywhere on the internet.
Few studies have investigated e-reputation (Castellano and Dutot, 2013), and specific
measurement scales are lacking because investigations still focus exclusively on website
information. Data produced by social networks, blogs and forums are not considered,
although they now represent the main contributors of content about any firm. Chun
(2004) proposed a measurement tool for e-reputation composed of three dimensions:
e-character (personality of the firm), e-identity (structure and design of the website) and
e-experience (consistency between online experience and physical experience).
Other approaches or tools are more content-focussed. This is the case, for instance,
with free-online tools such as Social Mention. This software functions as a search and
analysis platform aggregating user-generated content (UGC). It measures e-reputation
based on four items: strength, sentiment, passion and reach.
MD 2.3 Social media
54,2 It is generally accepted within the literature that the new digital channels, also called social
media, which include, for example, social networks, blogs, video platforms, micro-blogging
and websites, favor a business orientation – but not exclusively (Castelló and Ros, 2012).
The channels enable a new customer-oriented approach – defined by Dutot (2013) as social
CRM – based on the segmentation and personalization of messages, viral marketing
370 (Castelló and Ros, 2012), and the launching of an experiential marketing that generates
customer engagement or positive evaluation of a brand through participation (Ho, 2014).
The term “social media” is linked to UGC because it is based on interactions between
many stakeholders including the company itself, customers, prospects and vectors of
influence (Vernuccio, 2014; O’Leary, 2011). By existing online, both customers and
companies can maintain a presence, interact and even co-create (Proulx et al., 2012) with
the different technologies available online (e.g. ratings platforms and forums). Overall,
social media can be defined “as the production, consumption and exchange of
information across platforms for social interaction” (Dutot, 2013, p. 55).
Of course, any generation can be linked with these tools, but it is obvious that companies
currently are attempting to encourage generation Y customers (between 15 and 25 years
old) to interact with them on social media as they would with their friends and families
(Lichy and Kachour, 2014). Customers now have new tools to search for information and
share their thoughts about anything, anywhere and anytime. Consequently, their role has
changed from a passive receiver of controlled messages to an active participant, whereas
the firm’s power has decreased (Divol et al., 2012). The luxury companies had of being able
to monitor and respond to community activity has vanished with the rise of the internet and
social media. Marketing communication has evolved into a two-way interaction between
companies and customers in which both parties influence brand building (Weman, 2011).
All of these new platforms and digital channels become decisive environments for
CSR communication strategies because they translate the digital company’s values to
the stakeholders (Castelló and Ros, 2012). Vernuccio (2014), for example, recently
studied the emerging approaches in communicating a corporate brand through social
media. The results of the study show that most corporate branding strategists are
adopting conversational forms of corporate communication to involve a large range of
stakeholders. The author also acknowledges a lack of studies on online corporate
communication and corporate branding strategy.
Customers are crucial stakeholders, and they expect companies to be present on
social media (Ho, 2014; Nair, 2011). One of the specifics of this exchange is that it can
occur almost 24 hours per day and seven days per week (Divol et al., 2012). By
providing a constant presence and interaction, companies could see a change
concerning their e-reputation. As Stenger (2014) stated, online presence is “considered
to be [a] fantastic tool […] for peer-to-peer recommendation and viral marketing” (p. 52),
but it can also damage a brand image or a reputation.
Based on the literature review, we propose the following:
P1. CSR communications strategies on social media influence the e-reputation of a
company.
P2. CAS will have a stronger effect on e-reputation than CSRS.

3. Method
This paper focusses on specific firms’ presence on social media and on the influence of
this presence on their e-reputation. In this section, we first explain our methodological
orientation and then introduce the rationales for the selection of firms for the study and CSR
the tools used for data collection with two subsections. communications
In this paper, we offer a comparative, exploratory and theory-building case study
(Yin, 2009). We adopt an abductive methodology aligned with the precepts of
strategies
grounded theory (Glaser and Strauss, 1967), and more precisely with Strauss and
Corbin’s (1990) interpretation of the theory. As an inferential strategy defined as the
retrospective process of forming hypotheses (Fylkelnes, 2006), abduction is well 371
suited to dealing with incomplete evidence under conditions of complexity, and to
generating “tentative theories” that suggest hypotheses (Niiniluoto, 1999; Thomas,
2010). Our research is “conceptually driven” (Miles and Huberman, 1994, p. 238, n2).
As Miles and Huberman put it, “we aim to account for events, rather than simply
document their sequence. We look for an individual or a social process, a mechanism,
a structure at the core of events that can be captured to provide a causal description
of the forces at work.” (p. 4, their emphasis). The abductive process becomes obvious
when improving the analysis with more précised assumptions and further steps
of data collection, thus generating greater levels of “explicitness” and “groundness”
(in Corbin and Strauss’ words).

3.1 Selection of the sample of firms

Companies were selected in reference to four criteria:
(1) the company must be valued by its CSR actions;
(2) the company must be international and French based;
(3) the company must be present and active on at least three social media
platforms; and
(4) the company must use the English language in their social media communication.
Firms selected for this investigation do not all follow the same CAS and CSRS
strategies; however, they are all comparable with respect to their clients’ expectations
for the European market. They face the very same constraints and confront the same
cultural patterns. Although they do not belong to the same industry, their sectors have
instantiated specific issues and cases generating CSR-related debates in recent years.
This is why the firms are compared with one another.
Firms selected here obviously follow different CSR strategies, have developed
different trajectories over the years, and currently register discrepant reputations. The
companies selected here installed CSR strategies as differentiating patterns supporting
their respective businesses. The issue at stake therefore does not address the
identification of “green washing” vs actual CSR content, but rather the link with
customers via social media. This research is only ruled by the customers’ perspective,
as stated through social media platforms. The analysis therefore deliberately focusses
on the data available for customers interacting with the companies via social media,
and does not relate to the status of CSR-related information as true or false. P1 and P2
introduced at the end of Section 2 relate to CAS and CSRS, and to the alignment
between communication and the firm’s strategy. From a methodological perspective, it
is here important to use the data available on social media at their face value and to
focus on the appraisal of its impact on individuals. The data introduced by companies
on social media are therefore nothing but claims in the domain of social responsibility.
“Green washing” has obviously been an issue with CSR strategies, but it is not the
question at stake in this perspective. The point links with the interaction between
MD the impact of communication on customers and social media users on the one side, and
54,2 either CAS or CSRS on the other side. In other words, we expect that customers will be
able to go beyond the mirror and appraise the very content of the claims, and link them
with the nature of communication. From the sole perspective of communication, we can
only introduce the assumption that a company will not be able to fool its customers on
the long run: with the volume of data and information available on social media,
372 customers will learn and decode the company’s strategy. This might end with either a
wrong appraisal of the company’s strategy in case of “green washing,” or the mistake
of characterizing a strategy as “green washing” while it is not.
Following that statement, the method adopted here does not focus only on the
companies’ websites. We used websites as references that companies claim for their
respective CSR strategies. We used data published on digital platforms in order to
appraise the link with customers and the customers’ reactions. This is consistent with
Lyon and Montgomery’s model and with the original roles described in their study for
social vs traditional media (cf. Table I; 2013, p. 751). Digital platforms analyzed for this
study include Facebook, Twitter, Google+, YouTube, Instagram, Pinterest, LinkedIn
and Dailymotion. These platforms are the most important in terms of audience and
users’ connectivity. We also included corporate blogs in our investigation.
After inspecting the presence of these companies in the world of Web 2.0, we
performed a qualitative content analysis to identify the corporate communication
strategies they were actually using. Content analysis has been widely employed in CSR
research (Gray et al., 1995) and is the most common method of analyzing social and
environmental reporting, particularly in firms (Milne and Adler, 1999).
Leximancer (Smith and Humphreys, 2006) was the tool used for the examination of
all data collected and for the exploration of communication strategy differences.
Leximancer has already been used for both conceptual and relational analyses of
textual data (Angus-Leppan et al., 2010; Dann, 2010) and proved its effectiveness and
accuracy. Leximancer concept identification has been found to “have close agreement
with expert judgment (face validity) and an ability to handle short and ungrammatical
comments” (Campbell et al., 2011, p. 92). Leximancer is particularly well suited to
exploratory research of comprehensive mental models because it facilitates reliable and
reproducible extraction of concepts and thematic clusters (Smith and Humphreys, 2006;
http://info.leximancer.com/).

3.2 Data collection and measurement: Leximancer™ and social media™

We have used the series of indicators proposed by Kim and Rader (2010): a focus on
corporate communication strategy, influencing firms’ reputation. If the emphasis is on a
company’s product or service quality, its global achievement, its production leadership
or its innovative performance, we link results about the company with a corporate
ability strategy (CAS). Conversely, if the company’s posts document the organization´s
environmental stewardship, its humanitarian involvement, its corporate educational
commitments, employees’ contributions, any public health commitments or support of
social/societal activities, they relate to the company’s corporate social strategy (CSRS).
Leximancer generates themes by aggregating concepts. Aggregation levels vary to
gain greater insight about the interconnection between concepts (Crofts and Bisman,
2010). The program performs the following functions:
• populates a ranked list of terms using indirect and semantic extraction from
the text;
 • uses these terms to propagate a thesaurus builder that intelligently develops CSR
classifications from “iteratively extending the seed word definitions” (Smith, 2006, communications
p. 4) beyond the connections of merely two keywords;
strategies
• portrays weighted term classifications as concepts that constitute a concept
index; and
• generates concept maps that include a third hierarchical classification through 373
the application of co-occurrence matrices and clustering algorithms (from
computational linguistics).
To generate the metrics for online reputation associated with these companies, we have
used a freeware program available online called Social Mention (www.socialmention.
com). Consistent with the conceptual model, Social Mention was set to evaluate four
main indicators: strength, sentiment, passion and reach. Strength refers to the brand’s
likelihood of being discussed in social media. Sentiment is the ratio of mentions that are
generally positive to those that are generally negative. Passion is a measure of the
probability that persons talking about a brand will do so recurrently. Reach is a
measure of the range of influence, in other words, the number of unique authors or
individuals who mention a brand with respect to the total number of mentions (Mathies
and Burford, 2011).
CAS communication strategies were measured in reference to the typology
introduced by Kim and Rader (2010). The research model underlying the present study
is shown in Figure 1.
All the posts written by the companies were collected principally on Facebook and
in the companies’ blogs. The reasons remain technical; the API allowed us to implement
an automatic routine, and the complexity of the task was manageable. We compiled
data over six months, from April to October 2013. It resulted in 25-50 pages of content
for each company.

4. Case description
4.1 Presentation of the companies
Four French companies (Table II) were finally selected for the study: Renault, Danone,
Orange and BNP Paribas. Data computation used both French and English languages.
As presented in Table III, each company is present and active on at least three
digital platforms.
All four companies are present on Facebook. Two of them (Danone and Renault)
have specific Facebook pages for dedicated projects related to CSR. LinkedIn is used by

Social media
Corporate Communication
E-reputation
Strategies
Strength
Ability
communication
Passion

Sentiment
CSR communication
strategy Figure 1.
Reach
Conceptual model
MD Company Description Source
54,2
Renault Vehicle manufacturer established in 1899. It produces Renault Corporation (2013)
cars, vans (and, in the past, trucks)
Danone Food-products multinational firm. The company owns Danone Corporation (2013)
several internationally known brands such as Volvic,
Evian, Badoit, Aqua, etc.
374 Orange Telecommunication, global provider for mobile phone, Orange Corporation (2013)
internet. One of the world leaders in
Table II. telecommunication services
Presentation of BNP Paribas Bank and financial service. In 2012, fourth largest BNP Paribas Corporation (2013)
companies bank in the world

Company Facebook Twitter Google+ Blog YouTube Instagram Pinterest LinkedIn Dailymotion

Renault X X X X X X
Table III. Danone X X X X X X X
Presence on digital Orange X X X X X X X X
platforms BNP Paribas X X X X X X X X

all firms. Three companies in our sample have created and maintain a corporate profile
on Google+. Danone has also created a profile for a specific CSR program called Down
to the Earth. All companies have a corporate presence on the micro-blogging network
Twitter. Finally, all brands have a blog, and most of them open it to comments. Only
the frequency of update varies between them.

4.2 Content analysis with Leximancer™

Leximancer generates results about the frequency of occurrence of common word
clusters. For each company, we introduce maps to show the semantic clusters made
available with the social media presence and to explain how these entities relate to a
series of concepts describing CSR and CAS communications strategies. On Figures 2-5,
the concepts are shown as dots. We have also introduced tentative aggregations of
concepts with a series of themes, pictured here with circles.
Different themes emerge from the posts present on Renault’s Facebook wall and
corporate blog (cf. Figure 2). The most relevant themes include “customer,” “win,”
“experience” and “international.” These themes relate to concepts such as sales,
production, quality and design (and refer to CAS). Globally stated, Renault presents a
larger number of Facebook and Blog posts promoting corporate abilities. A large
number of messages seem to follow another type of strategy: entertaining fans with
actual data about the company and its operations. This occurs with sentences such as
the following: “Today Renault Assistance comprises a fleet of 1,130 Renault Assistance
breakdown vehicles, spread over 400 branches and 730 dealer sites”; “Renault group,
number one in Europe for low CO² emissions”; “Renault has always placed particular
importance on the quality of its vehicles” (CAS once again).
Corporate messages on Danones’s Facebook page and Blog produce a more complex
map that shows four main topics with considerable overlap (cf. Figure 3). Danone is
known as a world leader in CSR implementation and acts most often as a role model.
 Theme Connectivity Relevance
Renault 100%
customer 54%
range 46%
concept 38%
company 15%
experience 12%
world 11%
time 10%
version 09%
win 04%
drivers 03%
international 03%
communications
strategies

Leximancer’ analysis
of Renault
Figure 2.
375
CSR
 MD
54,2

376

of Danone
Figure 3.
Leximancer’ analysis
Theme Connectivity Relevance
sustainable 100%
food 77%
development 72%
social 57%
project 46%
Danone 36%
business 33%
work 31%
world 27%
countries 18%
design 13%
water 11%
local 09%
system 07%
 Theme Connectivity Relevance
projects 100%
countries 86%
training 65%
digital 48%
people 43%
world 40%
sharing 34%
community 34%
need 31%
mobile 25%
development 18%
international 13%
time 12%
ideas 12%
take 10%
involved 10%
raise 07%
communications
strategies

of Orange
Leximancer’ analysis
Figure 4.
377
CSR
 MD
54,2

378

Figure 5.

of BNP Paribas
Leximancer’ analysis
Theme Connectivity Relevance
support 100%
project 87%
services 45%
education 45%
business 41%
children 24%
social 23%
employees 19%
life 12%
initiative 12%
staff 10%
microfinance 07%
time 06%
Bnp Paribas
05%
Fortis
The theme “sustainable” is the most relevant, with 100 percent importance, followed by CSR
“food” with 77 percent relevance, then by “development” and “social” (cf. the ethical communications
responsibility dimension in Carroll, 1991). The vast majority of these concepts refer to
CSR projects and programs: “Danone communities were created to help build and foster
strategies
social businesses”; “Danone’s commitment goes further than supporting these funds:
responsibility is becoming one of the main lines in its business strategy, irrigating all
its activities”; and “the company has a major impact on the nutrition of the youngest 379
members of society and has a responsibility to encourage healthy diets and behavior”
(here in reference to philanthropic responsibility, in Carroll’s, 1991words).
Four key themes were identified for Orange, with the same level of importance:
“projects,” “countries,” “training” and “digital” (cf. Figure 4). The most important has
100 percent relevance and connectivity and is related to other themes such as “social,”
“support,” “health” and “Africa.” “Training” is linked to “young” and “development.”
Most of the messages collected were related to CSR communication strategies. More
specifically, the messages related to the ethical and philanthropic dimensions identified
by Carroll (1991): “the Orange African Social Venture Prize is about to embark on its
third run, with the continuing aim of promoting social innovation to support
development”; “the Orange Foundation has been working hard to make the world more
accessible and facilitate greater social integration for individuals”; and “the Orange
Group operates [and] provides the poorest villages with three essential infrastructures
for everyday life: a water source, a health center and a school.”
Data collected from BNP Paribas’s official Facebook wall and Blog result in a
Leximancer map with six main topics related to Carroll’s (1991) economic and
philanthropic dimensions and to Kim and Rader’s (2010) CAS: “support,” “project,”
“services,” “education,” “business” and “children” (cf. Figure 5). The theme “support” is
the most relevant, with 100 percent connectivity; the main related themes are
“development,” “financial,” “local” and “awareness.” “Project” is connected to
“employees,” “association,” “corporate” and people. “Services” link to “range,”
“organization,” “development,” “training” and “mission.” The content of these
messages relates to corporate responsibility: “Ms. XYZ is an employee at BNP
Paribas (Canada) in Montreal, and has just returned from a humanitarian mission to El
Salvador”; “The Belgian non-profit association Close the Gap will be supplied with over
50,000 devices by BNP Paribas Fortis Foundation, as part of a three-year agreement.”

4.3 Content analysis about online reputation with Social Mention™

In the results provided by Social Mention (Table IV), Renault stands out as the company
with the best scores in terms of “strength,” “sentiment” and “reach” (green). BNP Paribas
best performs in terms of “passion” (green). Orange reached the lowest percentage in
“sentiment” (red). The best scores go to companies with a strong presence and intensive
activity in social media, with the exception of BNP Paribas; in spite of its high activity in
social media networks, this company has low scores in “strength,” “sentiment” and “reach.”

Company Strength (%) Sentiment Passion (%) Reach (%)

Renault 44 66:1 24 59
Danone 30 35:1 34 56
Orange 42 1:1 32 49 Table IV.
BNP Paribas 3 6:1 73 11 e-Reputation scores
MD 5. Case analysis
54,2 5.1 Link between communication strategies on social media and e-reputation
We first clarify that CSR communication affects online reputation positively in three
cases: Danone, Renault and Orange. Indeed, as noted by Leximancer’s variable
“sentiment,” we can see that the majority of the firms have more positive than negative
insights. Similarly, the “strength” of the relation between the companies and their
380 customers is at a high level for three of them, as well as the “reach.”
Danone chooses, for example, to develop specific CSR programs distinct from the
company’s global social media channels: “Down to Earth,” “Danone Communities” and
“Danone Ecosystems” have their own social communities. These channels elaborate the
point that Danone has been using its CSR strategy as an integral part of its corporate
strategy for quite some time. These programs increase the scores generated by Social
Mention. BNP Paribas has the lowest evaluation in Social Mention for three out of four
dimensions. Although we know that the company is active on social networks, it
appears that its CSR communication is not considered relevant by its customers.
The cases show a correlation between companies using social media to present their
CSR communication, and their e-reputation. Establishing a targeted conversation and
communication content adapted to each category of social media user has become
critical to gain attention and to be effective on social media. Our results allow the
further assumption that the CSR effect does not depend on the number of channels used
by each company. Rather, it is much more linked with the number of channels
conveying specific CSR messages. BNP Paribas has, for instance, a high number of
active social networks, but it only posts CSR content on Facebook and on the corporate
blog; consequently, BNP Paribas’ scores in e-reputation are low. The interaction
between a brand, its “followers,” and its (current and potential) customers in the Web
2.0 world is crucial for more proximity with stakeholders and more commitment from
them, particularly in the case of a CSR communication strategy. In other words,
companies anticipate the effect on end-users and tailor CSR messages accordingly. We
know that companies introduce a specific CSR communication strategy for each social
network, targeting specific stakeholders. This specialization strategy makes it possible
to identify indirectly a twofold maturity assessment: in the domain of social media
communication and in the design of affecting CSR strategies.
Results show that the link is positive for three out of four companies. P1 is therefore
accepted and amended for further research with the nuances introduced supra.

5.2 Difference between communication strategies

We elaborate here on indicators proposed by Kim and Rader (2010), and on the
subsequent distinction between CAS and CSRS-related data. Results show that the four
companies enact both social corporate responsibility and ability communication
strategies at the same time, yet with a difference: Danone, Orange and BNP Paribas
focus on their CSR communication strategies while Renault implements a CAS
strategy. As presented in Table II, Renault has a better evaluation from Social Mention
for three out of four criteria. In other words, its e-reputation is better than the
e-reputations of Danone, Orange or BNP Paribas.
We can therefore validate the reference to Kim and Rader (2010) indicators and
our CAS vs CSRS definitions for further research. P2 seems to have a great potential
for generalization.
However, we still have a conceptual problem: does better e-reputation lead to better
performance? Even if the goal of this study was not to investigate a link between these
two notions, we also contextualized our data with the evolution of revenue of the CSR
four firms and their respective market (cf. Table V). For the three companies that communications
choose the CSRS communications strategies, only Orange performs better than the
market (−4.5 percent compare to −6.8 percent). Renault (the only one to implement a
strategies
CAS strategy) not only performs better than the market (+0.4 percent as compared to
−5.7 percent) but also experiences a (positive) growth against contractions for its
competitors. Of course, it is impossible here to correlate the positive growth to CAS 381
strategy only, but this occurrence is important enough to notice considering the issues
at hand with the 2015 Volkswagen experience.
The last point of discussion deals with the differences between the three companies
that mostly use CSRS communications strategies. Kim and Rader (2010) found that the
differences in the use of CSRS vs CAS strategies might relate to company size. As we
analyze only four large international companies, our study is not conclusive in this
respect. In our investigation, the preferences in the use of CSRS vs CAS strategies could
be affected by the actual negative image that food and bank companies have in the
society or by the perception of risks imposed by these activities on customers’ lives.
In these domains, CSR online communications would better support the transmission of
socially desired responsible corporate identity content to the stakeholders (Rolland and
Bazzoni, 2009).

6. Implications and conclusion

Our exploratory study is among the first to investigate the influence of CSR
communication strategies on e-reputation with actual data. It investigates how
companies’ actions on social media can change their perception by their customers.
It also completes the current literature by defining how CSR communications strategies
should be executed to influence customers. From this perspective, we complement the
theoretical model and the subsequent results introduced by Lyon and Montgomery
(2013) with the introduction of further assumptions generated with our exploratory
case study analysis. They generated a model explaining that social media will reduce
the incidence of corporate “green washing.” Our results support their propositions, yet
with some additional precisions.
As presented previously, both strategies (ability and CSR) can be used and have a
direct influence on e-reputation. If a company wants to develop its online reputation, it
should focus its communication on products, services and the quality of its actions
because these items are the ones that customers consider most. This is the domain of
market-related outcomes and capabilities. Our study adds therefore to the five levels of
measurement defined by Igalens and Gond (2003) by adding social media and online
measurement to the list.
It is important to stress here that the companies investigated in this paper appear to
have developed integrated communication plans. Qualitative research should be
implemented to confirm the assessment introduced with our quantitative analysis.
Duncan and Everett (1993, p. 33) described this concept as “the strategic co-ordination

Firm Danone (%) Renault (%) Orange (%) BNP Paribas (%)
Table V.
French Revenue evolution (2013 vs 2012) −2.4 +0.4 −4.5 −5 Evolution of
French Market evolution (2013 vs 2012) +0.6 −5.7 −6.8 +1.1 financial results
MD of all messages and media used by an organization to influence its perceived brand
54,2 value.” For them, defining integrated communications among different channels would
generate synergies and create a consistent perception of the e-reputation of the
organization. These implications are in line with Simoes et al. (2005), for whom an
integrated communication process, guided by the company’s philosophy and mission,
diminishes the probability of inconsistent messages. Careful management of company
382 messages is critical because organization’s publics will integrate these messages and,
from this base, they will create their corporate associations (Simoes et al., 2005).
Here, we can raise the differentiation between “green washing” and extensive
(or integrated) CSR policies again (cf. Lyon and Montgomery, 2013); each category of
stakeholder will appraise the relevance of the CSR communication on its own, each
individual considering social network(s) through his/her specific prism. The global
perspective on the company’s (eventual) effectiveness with CSR communication will
emerge from the consolidation of all local appraisals by different stakeholder categories.
This consolidation process will then eventually divulge loops or inconsistencies in a
company’s CSR strategy (and the associated communication plan), thereby exposing any
eventual “green washing” or other instrumental use of CSR terminology. The subsequent
negative effects on the integrated communication plan should be sufficient to deter any
false or unattainable promises (“Versprechen”) introduced by a company (Blink, 2015).
Another important implication lies in the crucial need for organizations to
understand that they must be prepared to change their strategy. Corporate
communication strategies can change the traditional business of an organization;
moreover, using the Web or any social media platform efficiently (to take advantage of
viral potential) will once again transform the organization. This change is crucial for
the organization, its employees and their commitment to CSR strategies. New behavior
is the key (Gotsi and Wilson, 2001). Here, we confront the necessity of analyzing with
suitable tools and associated metrics the anticipated effects of CSR communication
strategies on stakeholders. This topic requires a specific study; however, we can
already identify a series of perspectives to be investigated further. The most important
are associated with the identification of bridges between social media and content
management to be able to address as many different stakeholders as required for the
business of the company. Each social medium deserves its own criteria and specific
measurements, which must be adapted to its associated uses and practices. The second
aspect addresses the analysis of the internal consistency of the content used for all
these stakeholders to develop a consistent series of messages supplementing one
another and avoiding any feeling that the “promises” or claims of the CSR-related
strategy have been betrayed. A CSR communication plan contributes to the expansion
of trust between a brand and its consumers; there is a huge asymmetry between the
investment in time required for the expansion of trust and the tiny number of seconds
that could potentially destroy it if consumers feel that the company has played false or
engaged in a deceptive strategy. Relevant metrics should cover both the internal
consistency and the issue of trust.
Although our findings prove some valuable insights into CSR communications
strategies on social media, we acknowledge some limits. This study is based on only
four companies (from four different industries) and would profit from a larger base for
analysis. After validating the orientation and refining our hypotheses with the
abductive method and a comparative analysis with exploratory case studies, there is a
need now for a new research protocol with comprehensive statistical analysis. Second,
the content we analyzed was generated by the companies on their own social media;
it would profit from the inclusion of external data. Third, a qualitative investigation CSR
strategy should be implemented to confirm the current data investigation with targeted communications
interviews and strategy surveys. More precisely, as noted in the results and discussion
sections, the study reveals that even with similar characteristics in communication,
strategies
firms have different perceptions and evaluations of e-reputation. It could be relevant to
develop our perspective further in studying the effects/merits of obtaining a greater
e-reputation to focus on the customers’ perception. Focus variables might be greater 383
engagement or satisfaction, for example. No study has investigated this link thus far;
available research focusses on the effect of social media communication on the firms’
reputation (e.g. Floreddu et al., 2014) or on the commitment within social media
platforms (Brodie et al., 2013). A last perspective for further development is associated
with the variety of digital channels investigated. This study only used two digital
channels as content providers for Leximancer, although these were the channels with
the greater volume of data/content. It would be useful to compare more channels in a
next step. Forthcoming field research should also include more companies from
different sectors and compare brands with different histories or ages (historic vs
emerging companies or historic vs emerging markets).

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About the authors

Vincent Dutot is an Associate Professor and Co-Head of Chair D-Cube at the ESG Management
School, Paris, France. He holds a PhD from the Laval University (Québec). His areas of research
are in social media, IT strategy, strategic alignment of information technology, electronic
commerce and knowledge diffusion. He also worked as an IT consultant for SME, government
and in private sector for almost ten years. Vincent is the author of 10+ articles published in
scientific journals and books, 15+ communications to academic conferences, 20+
communications in professional journals and four guest editorships for CNRS journals.
Vincent Dutot is the corresponding author and can be contacted at: v.dutot@psbedu.paris.fr
Eva Lacalle Galvez is an Account Manager SEM at the Keyade (France). She holds a MBA in
e-business from MBA ESG as well as a Master of Communication program at the Business School
of the University of Queensland.
David W. Versailles, an Economist (Dr 1998; Hab 2008), joined ESG Management School in
September 2013 as a Professor in Strategic Management after more than 20 years experience
in universities, in the French Ministry of Defense, and in consulting firms. David has specialized
in the aeronautics and defense domains for more than 15 years now. He is the author of
25+ articles in scientific journals and books, 50+ contributions at academic conferences,
20+ invited conferences, one book and two guest editorships for CNRS journals.

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JAOC
17,3
394
Received 11 January 2020
Revised 31 August 2020
22 December 2020
Accepted 25 December 2020
Journal of Accounting &
Organizational Change
Vol. 17 No. 3, 2021
pp. 394-415
© Emerald Publishing Limited
1832-5912
DOI 10.1108/JAOC-01-2020-0006
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1832-5912.htm
Gender-related discourses in
corporate annual reports: an
exploratory study on the
Bangladeshi companies
Dewan Mahboob Hossain and Md. Saiful Alam
Department of Accounting and Information Systems, University of Dhaka,
Dhaka, Bangladesh
Mohammed Mehadi Masud Mazumder
Northumbria University, Newcastle Upon Tyne, UK, and
Al Amin
Department of Accounting and Information Systems, University of Dhaka,
Dhaka, Bangladesh
Abstract
Purpose – The purpose of this study is to explore the gender-related discourses in the annual reports of the
listed companies in Bangladesh.
Design/methodology/approach – To fulfill this objective, a sociological discourse analysis (SDA) of the
gender-related texts in the annual reports of Bangladeshi companies (listed in the Dhaka Stock Exchange)
was conducted. Sandberg and Holmlund’s (2015) organizational impression management tactics (description,
praise, admission, defense and writing styles) was applied as the analytical framework of SDA. The findings
of the study were interpreted from a triangulation of two different theories: legitimacy theory and impression
management theory.
Findings – The study suggests that the companies in Bangladesh are disclosing gender-related
information to a limited extent. They provide some information in relation to equal opportunities,
business activities targeted to women and corporate contribution to women’s welfare. Most of these
gender-related discourses are rhetorical in nature. The companies used various impression management
tactics such as description, praise, positive writing style, vague writing style and emotional writing
style.
Research limitations/implications – This study is exploratory in nature and focuses on cross-
sectional data. Thus, it does not identify the trend of corporate gender reporting over the years.
Practical implications – At the policy level, the findings revealed a need for reporting guidelines for
gender narratives. Although there is a global gender reporting guideline as proposed under global reporting
initiative, there is no local guideline in Bangladesh. Our findings suggest that in the absence of proper
directives, companies presented facts and figures rhetorically and qualitatively.
Social implications – Our findings provide valuable insights for the companies in assisting the
Government of Bangladesh to deal with the prevailing gender inequality and achieved gender-related
sustainable development goals. It is argued that the government should take more interest in corporate
The authors are grateful to the editor and two anonymous reviewers for their constructive
suggestions which helped to significantly improve this paper.
social responsibility activities (such as promoting gender equality) and introduce legislation and Corporate
guidelines for social accounting.
annual reports
Originality/value – This is one of the very few studies that illustrate the corporate gender reporting of a
developing economy – Bangladesh. To make a unique contribution to corporate gender disclosure, the study has
drawn its analysis from a triangulation of the impression management and the legitimacy perspectives. Also, the
use of SDA for annual report analysis has informed the readers about “how” the corporate narratives are
presented in the annual reports rather than “what” issues are disclosed as commonly done in content analysis.
Keywords Impression management, Corporate social reporting, Corporate gender disclosure, 395
Discourse analysis (DA), Sociological discourse analysis (SDA)
Paper type Research paper

1. Introduction
Gender inequality is one of the major concerns in the corporate sector irrespective of the
contexts and cultures. Though the situation appears to be improving, women’s earnings are
still significantly lower than that of men for comparable work (World Bank, 2019). Even in
the Fortune 500 listed companies, women hold only 6.6% of Chief Executive Officer
positions (Zillman, 2019) and represent an average of 22.5% of global board positions
(Delloitte, 2018). The disparity is further intense among businesses operating in developing
economies (Jayachandran, 2015). Albeit gender diversity can benefit businesses in the form
of improved return, enhanced competitiveness and public image (Warth, 2009), elements of
persisting inequalities still prevail. To address this concern, organizations increasingly
provide gender-related disclosures to demonstrate the status of women within their
workforces and signal their commitments to greater transparency (Bernardi et al., 2002;
Grosser and Moon, 2008). Gender reporting allows the stakeholders to assess how an
organization respects and contributes to gender parity in everything that it does (GRI, 2009).
Considering the growing awareness of gender disparity in the corporate sectors and public
accountability to women, this study explores the gender disclosures of listed companies in
Bangladesh, an emerging economy.
The importance of gender in accounting literature has long been recognized (Hopwood,
1987). Nevertheless, most of the earlier gender-related studies focused on the women’s
position in the accounting profession (Collins, 1993; Haynes, 2017; Komori, 2008) and the
boardroom gender diversity (Ben-Amar et al., 2017; Haque and Jones, 2020; Lewellyn and
Muller-Kahle, 2019). Few studies, mainly in the domain of corporate social responsibility
(CSR), explored the gender-related initiatives by analyzing the contents of corporate
disclosures (Adams and Harte, 1998; Ben-Amar et al., 2020; Benschop and Meihuizen, 2002;
Bernardi et al., 2002; Grosser and Moon, 2008; Kuasirikun, 2011). Drawing from content
analysis, these studies identified the presence of gender-related disclosures, rather than
exploring the tone and sense of such disclosures. Content analyzes are useful to identify
“whether” the companies report gender issues and “what” they report. However, there is a
need to decipher the underlying meaning of languages used in corporate narratives. To this
end, recently, there has been a call to explore further the “how” question and understand the
underlying meaning of gender disclosures (Haji and Hossain, 2016; Hossain et al., 2017a,
2017b; Tregidga et al., 2012). Our study responds to that call and applies sociological
discourse analysis (SDA) on the gender-related disclosures in the annual reports of
Bangladeshi listed companies.
Contextually, Bangladesh represents a society where social inequalities of varied nature
are rampant (Alam et al., 2011; Belal, 2008; Hossain, 2013; Siddiqi, 2003). Among those,
gender inequality is an area of significant concern. Under the progressive leadership of the
JAOC female head of the state in the past 30 years, Bangladesh has made remarkable progress in
17,3 empowering women. However, a recent report on gender equality suggests that women still
have limited access to financial resources, family inheritance, information and technology
(ADB, 2017). Also, very few women occupy leadership roles in the corporate sectors (Ullah
et al., 2019). Therefore, apart from the government, it is the social responsibility of
businesses to address gender inequality by creating more space and privileges for women.
396 One of such initiatives is disclosing gender issues in corporate narratives. Previous CSR
studies on Bangladesh, report none or remain silent on “how” gender-related issues are
addressed in corporate disclosures. Belal and Cooper (2011) report that gender-related
disclosures are one of the under-researched CSR areas in the context of Bangladesh. One of
the primary reasons could be the corporate unwillingness to address gender issues in the
corporate disclosures (Belal, 2008). To explore the present situation, this study examines the
gender-related discourses on corporate annual reports in the context of Bangladesh.
Unlike prior studies on gender disclosures, this study applies SDA, which goes beyond
the textual presentation of any corporate disclosures and uncovers the meaning in a broader
context. This study uses the three-level SDA framework of Ruiz (2009), which explains the
gender disclosures in three perspectives: textual, contextual and sociological. While the
textual perspective describes corporate initiatives on addressing gender inequality and
highlights the main characteristics of the text, the contextual and sociological perspectives
give a more in-depth understanding of why organizations need those disclosures. The study
combines Ruiz’s (2009) framework with the impression management tactics of Sandberg
and Holmlund (2015). Following Sandberg and Holmlund (2015), this article shows how
Bangladeshi listed companies, with the articulate and strategic use of language skills in
their annual reports, manage the impression of the stakeholders and gain legitimacy.
Throughout the analysis, the study follows an interpretive gene.
The contribution of this study is, therefore, threefold. First, this study attempts to
understand and interpret gender disclosures using discourse analysis, an emerging
technique of investigating corporate disclosures. Second, the study theoretically contributes
to the ongoing discussion of organizational legitimacy through impression management. As
such, it conducts an SDA in combination with an impression management framework.
Finally, to the best of our knowledge, this is the first study in the context of an emerging
economy such as Bangladesh that addresses gender issues in corporate communication.
The remaining portion of the article is structured as follows. In Section 2, a review of the
prior literature on gender disclosure is presented with particular reference to gender
inequality, organizations’ CSR practices. The research gap is also identified here. Then, the
theoretical framework of the study is illustrated in Section 3. The methodology of the study
is presented in Section 4. Section 5 elaborates the findings of the study with regard to the
textual, contextual and sociological analysis. In the end, based on the findings and analysis,
the conclusion of the study is drawn in Section 6.

2. Literature review
2.1 Inequality, gender and corporate social responsibility
Inequality is a common social problem in the world (Henslin, 2011; The United Nations,
2013) where discriminations are made on social class, income, race, ethnicity, gender and
some other factors (Newman, 2012). Among existing inequalities, gender inequality has
remained one of the most significant social problems in human history (Macionis, 2012). The
patriarchal nature of different societies explains why women endure misfortune, lower rank
and discriminatory treatment in the world (Abott et al., 2005; Hossain, 2013). Gender roles
are socially constructed (Eitzen et al., 2009) where family, school, peer group, organization,
media, religion and other social institutions play important roles (Witt, 2004). From early Corporate
childhood, children notice different roles of their parents and learn about the gendered annual reports
nature of clothing, toys and games (Hossain, 2013).
Despite women’s increasing participation in the mainstream workforce, they face
diverging nature of discrimination (Cooper and Bosco, 1999). Studies suggest that women
are stereotyped as less capable and less productive (Henslin, 2011) and thereby face
discrimination in recruitment and promotion (Hakim, 1996). In their private lives, women
also suffer from poverty, ignorance, illness, despotism, violence and sexual harassment 397
(UNESCO, 2012). Corporatization of all walks of our life exacerbates women’s position in
society and creates more inequality. Nevertheless, corporations display their awareness and
promise to ensure equal opportunities for women (Grosser and Moon, 2008). Due to the
interdependence of the business and society, business organizations are concerned about
social inequalities and show their commitments through CSR activities (Aberu et al., 2005).
Women empowerment and welfare are one of key CSR activities (Hossain et al., 2016, 2017a).
To communicate corporate value and action to the wider community, companies voluntarily
report on gender-related issues through websites, annual reports and corporate social and
environmental reports. This study focuses on these gender disclosures.

2.2 Gender in accounting: prior literature

Gender is not a new phenomenon in accounting (Hopwood, 1987). Accounting
researchers have explored gender issues in the past few decades (Haynes, 2017;
Lehman, 2012). Most of the prior gender research explored either the women’s
participation in the accounting profession (Collins, 1993; Haynes, 2017; Komori, 2008)
or their representation in the corporate board (Ben-Amar et al., 2017; Haque and Jones,
2020; Lewellyn and Muller-Kahle, 2019). Only a few studies focused on how gender
issues are addressed in corporate disclosures. One of the reasons could be the corporate
reluctance to address gender issues in corporate disclosures. For example, drawing
from major British banking and retail companies, Adams and Harte (1998) document
that companies provide little gender disclosures and mostly focus on policy declaration
rather than their performance achievements. Similarly, Hossain et al. (2016) find that
sustainability reports of selected Fortune 500 companies do not disclose several gender
issues, as suggested by GRI (2009).
Despite this limitation, few studies have managed to explore gender disclosures to
identify not only “what” is disclosed but also “how” it is disclosed by interpreting the tone or
meaning of the disclosures. For example, in the context of The Netherland, Benschop and
Meihuizen (2002) investigated the gender representations in the annual reports by
examining the texts and images. For them, companies have stereotyped women by focusing
on the traditional gendered division of labor and reinforcing male power and domination in
organizations. Bernardi et al. (2002) also suggested that Fortune 500 companies tend to
inform stakeholders about the growing presence of women on board through photo-graphic
disclosures. Another study on the sustainability reports of selected Fortune 500 companies
reports that “discourses on women and gender carry the traditional patriarchal notions and
women were presented as a distressed species and companies tried to portray themselves as
the saviors of women” (Hossain et al., 2017a, p. 262). Exploring the inherently embedded
meaning of texts in the CSR reports of 15 Korean Multinational Enterprise, Lee and Parpart
(2018) note that women’s voices are silenced and marginalized in the CSR reports. Similarly,
Ben-Amar et al. (2020) report that Canadian corporations strategically use “merit” and
“diversity” to obfuscate the exact representation of women on the corporate board. Although
these shreds of evidence are essential to understand the nature and motive of corporate
JAOC gender disclosures, little (Kuasirikun, 2011 is an exception) is known in the emerging
17,3 economy context. Our study aims to fill this gap by drawing evidence from an emerging
economy – Bangladesh.

2.3 Gender inequality and corporate disclosures in Bangladesh

Bangladesh has achieved remarkable progress in various indices of women’s development
398 (World Economic Forum, 2020). Nevertheless, gender inequality prevails such as in many
other emerging economies. Despite their equal constitutional rights, Bangladeshi women
face discrimination in “food sharing, education, work, property, decision-making and
independent thinking” (Hossain, 2013, p. 25). Here, women are considered as “economic
burdens” (Sultana, 2010, p. 31). Families consider sons permanent members as they are the
“providers and perpetrators of family name” (ADB, 2001, p. 4). Daughters, in contrast, are
temporary members as they move to their husband’s house after marriage (Sultana, 2010). In
married life, women also suffer from domestic violence and forced prostitution (ADB, 2001).
Drawing from the garment sector, few studies suggest that women work for long hours at
low wages (Alam et al., 2011), do not get proper maternity leave, have to work in an unsafe
condition and also frequently face sexual harassment (Siddiqi, 2003). In many of these cases,
justice is denied due to the absence of both social and political will (Huq, 2003). However, no
study attempts to explore how companies in Bangladesh are addressing these gender
disparities.
Broadly, CSR researchers in accounting cover voluntary corporate disclosures, including
gender issues. Research on Bangladeshi CSR practices and reporting has started from the
late 90s, but it has become intensive and more engaging in the past two decades (Belal and
Owen, 2007; Deegan and Islam, 2014; Islam and Deegan, 2008; Momin and Parker, 2013).
Most of the prior studies contend that CSR of Bangladeshi companies is insufficient, self-
laudatory and lacks ethical information. Belal and Cooper (2011) also report that gender-
related disclosures are one of the under-researched areas in the context of Bangladesh.
Like Bangladesh, in the context of other emerging economies, there is scant evidence on
how gender issues are addressed in corporate disclosures. To the best of our knowledge,
Kuasirikun (2011) is the single study that examined gender disclosure by analyzing the
photographs in annual reports of Thai companies. The research suggests that Thai
companies tend to present women in a subsidiary role to that of men. More evidence on
gender disclosure is required from an emerging economy context. Therefore, this paper aims
to add evidence on ‘what’ and ‘how’ gender issues are addressed in corporate disclosures in
the context of an emerging economy – Bangladesh.

3. Theoretical framework
In qualitative tradition, corporate narratives and textual disclosures have been explored
through the lens of legitimacy (Adams et al., 1998; Brown and Deegan, 1998; Dumay et al., 2015;
Kuruppu et al., 2019; Lupu and Sandu, 2017), impression management (Edgar et al., 2018;
Higgins and Walker, 2012; Li and Haque, 2019; Neu et al., 1998; Solomon et al., 2013), media
attention (Brown and Deegan, 1998; Deegan and Islam, 2014) and stakeholder orientation
(Adams, 2006; Belal and Owen, 2007; Islam and Deegan, 2008) among many other theories.
Some of these studies have drawn evidence based on theoretical triangulation – combining
constructs of multiple theories while interpreting the narrative disclosures (Dumay et al., 2015;
Edgar et al., 2018; Kuruppu et al., 2019). This paper explores the gender-related corporate
narratives in the context of an emerging economy-Bangladesh through the theoretical
triangulation of impression management and legitimacy.
 In general, business organizations need the mandate of the society and hence, should Corporate
operate within the bounds and norms of the society (Brown and Deegan, 1998). The success annual reports
and existence of the business will be at stake if people in society have a negative perception
about their operations. Business organizations, therefore, perform activities that are
perceived as “legitimate” by people in society (Islam and Deegan, 2008). Any negative
perception of business operation can create a legitimacy gap, which may bring disastrous
effects for organizations. For example, organizations may face lawsuits, customers may stop
399
buying their products/services and the very existence of firms can be at stake. Corporate
narratives are considered as an essential tool to minimize the legitimacy gap (Adams et al.,
1998; Dumay et al., 2015; Kuruppu et al., 2019; Lupu and Sandu, 2017). To illustrate how a
firm gains, maintains and repairs legitimacy, Kuruppu et al. (2019) provide evidence from an
environmentally sensitive firm. The study suggests external reporting features the
legitimacy efforts when the concerned issue is visible to the public, regulators and media.
They also identify the superficial use of several communication strategies in external
reporting to maintain legitimacy. These communication strategies are used to manage the
impression of the stakeholders.
Impression management practices are not new in accounting research. In an early study
of environmental narratives in the annual report, Neu et al. (1998) have raised a concern
about whether environmentally sensitive Canadian public companies emphasize positive
environmental actions while obscuring adverse environmental effects. Moreover, the
perceived benefits of socio-environmental activities induce firms to engage in the symbolic
representation of their CSR performance (Bansal and Kistruck, 2006; Higgins and Walker,
2012). Recently, researchers show the use of impression management to maintain
organizational legitimacy in the context of financial services (Edgar et al., 2018) and
manufacturing services (Li and Haque, 2019). Drawing from the annual report narratives of
the UK private sector private finance initiative (PFI) companies, Edgar et al. (2018) contend
that there are four underlying reasons of the impression management: to legitimize during
volatile periods for PFI public policy, to alleviate concerns, to make the policy credible and to
legitimize the private firms’ involvement in PFI. Similarly, Li and Haque (2019) illustrate
how Taiwanese electronic manufacturing service providers deliberately use the rhetorical
form of impression management both in published and in spoken employee-oriented
corporate narratives to obscure the employee incidents and maintain their legitimacy. While
these studies are important to understand the close link between the impression
management tactics and legitimation process of the firm, they lack to explore one critical
element in corporate narratives – gender disclosures. Our study aims to fill this gap in the
context of an emerging economy – Bangladesh.
While illustrating the legitimation through communication strategies alias impression
management, the extant evidence largely depends on linguistic analysis of corporate
communication. Researchers have used several approaches for linguistic analysis: linguistic
hedging (Li and Haque, 2019), persuasion (Nwagbara and Belal, 2019), intertextuality (Lupu
and Sandu, 2017) and critical discourse analysis (Nwagbara and Belal, 2019). However, some
studies directly refer to the impression management theory (for example, the Goffmanesque
frame used in Solomon et al., 2013). We have done both by conducting an SDA through a
framework of impression management. We use Sandberg and Holmlund’s (2015) impression
management tactics as the analytical framework of discourse analysis (elaborated in the
next section). Therefore, our theoretical contribution is two-fold: first, we contribute to the
ongoing discussion of organizational legitimacy through impression management; and
second, we conduct SDA in combination with an impression management framework.
JAOC 4. Research design
17,3 This study is qualitative in nature and follows an interpretivist perspective. An SDA [1]
(Ruiz, 2009) is conducted on the gender-related disclosures in the annual reports of
Bangladeshi companies. This section delineates the sampling and methodology of the study
in detail.

400 4.1 Sample and data

The annual reports of the companies listed under the Dhaka Stock Exchange (DSE) are
taken for the SDA. Annual reports are considered as a credible source of corporate
narratives in prior studies (Dumay et al., 2015; Edgar et al., 2018; Kuruppu et al., 2019; Li and
Haque, 2019; Lupu and Sandu, 2017; Nwagbara and Belal, 2019). The latest annual reports
(mostly of 2017) are downloaded from official websites of listed companies between 22nd
December and 31st December 2018. As on December 22, 2018, the total number of listed
companies in DSE is 320. Out of 320 companies, the annual reports of 204 companies are
collected from their websites. This sample is 63.75% of the population which is higher than
that of some earlier studies [Ousama et al. (2012) report 20%]. Sample companies cover
different sectors (Table 1):
Gender-related texts are manually collected from the annual reports of sample
companies. Two coders first independently work in the data collection process to ensure that
nothing important is left out (consistent with Haji and Hossain, 2016) and build two corpus –
a collection of relevant texts (Wodak and Krzyzanowski, 2008) by a thorough reading. Each
corpus includes all gender-related extracts from the annual reports. The two coders then
meet and prepare the final corpus through comparison, discussion and consensus.

4.2 Data analysis: sociological discourse analysis

The term discourse can be defined as the “text in context” (Dijk, 1990, p. 164). Ruiz (2009)
defines discourse as an exercise in which people permeate with reality and meaning. We can
find texts in both verbal and written form. Discourse is the social activity that deconstructs

Sector No. of companies

Bank 28
Cement 5
Ceramic 5
Engineering 23
Financial institutions 21
Food and allied 7
Fuel and power 15
Insurance 31
Information technology 5
Jute 1
Miscellaneous 10
Pharmaceuticals and chemical 21
Printing 1
Services and real estate 3
Tannery 3
Table 1. Telecommunication 2
Sector wise number Textiles 21
of companies in the Travel and leisure 2
sample Total 204
the language (Lemke, 1995). Unlike content analysis, discourse analysis focus on “how” Corporate
voluntary issues are reported in corporate narratives (Higgins and Walker, 2012; Hossain annual reports
et al., 2017a, 2017b; Lupu and Sandu, 2017; Nwagbara and Belal, 2019). However, none of
these studies (except Hossain et al., 2017a) highlight gender disclosures. This paper analyzes
the language of annual reports from a sociological perspective.
Data are analyzed through the three-level SDA framework of Ruiz (2009): the textual
level, the contextual level and the sociological level. At the textual level, the discourse analyst
focuses on what the discourse is conveying. At the contextual level, discourse is considered to
401
be produced in the milieu of subjects who have their specific discursive intentions. At the
sociological level, discourse is an ideology or social product and hence should be analyzed
from the social context in which it is created. This study has analyzed discourses in the
context of gender issues in Bangladeshi society. For textual analysis, this study has used the
impression management categories of Sandberg and Holmlund (2015), who have identified
two categories of impression management tactics: presenting actions and writing style. In
total, there are eight organizational impression management strategies that are potentially
used in sustainability reports. These strategies are summarized in Table 2.

5. Findings and analysis

In this section, gender-related corporate disclosures are viewed through the lens of
impression management strategies as identified by Sandberg and Holmlund (2015) and
analyzed using the three-level SDA framework (textual, contextual and sociological) of Ruiz
(2009).

5.1 Text analysis

In this sub-section, the main characteristics [in relation to Sandberg and Holmlund’s (2015)
impression management tactics] of the text produced by the companies on women and
gender-related issues were identified. This is the first stage of the SDA proposed by Ruiz

Impression management strategy Description

Presenting actions
Description Providing information about the activities performed. The companies
can report facts, give examples or describe a procedure/program that
is in place
Praise Presenting the actions in an overly favorable manner. The companies
try to put themselves in a successful light. They highlight the
importance of their existence in society. They portray themselves as
noble with high morals
Admission Admitting the failure of any action that was not performed in an
expected manner
Defense Justifying the actions in which the company did not perform well
Writing style
Subjective writing style Opinionated one-sided writing style
Positive style Using positively charged vocabulary and attempting to create an
imbalance between positive and negative facts. Emphasizing on
favorable issues. Make unfavorable aspects less negative
Vague writing style Writing in a rhetorical manner with unspecific information
Table 2.
Emotional style Using feeling-provoking writing style Impression
management
Source: Sandberg and Holmlund (2015) strategies
JAOC (2009). Only 65 (31.86%) of the 204 sample companies, mostly banks and financial
17,3 institutions, disclosed some information on gender issues and women.
Table 3 presents the various gender-related issues disclosed by the sample companies
through corporate narratives. The most common gender-related disclosures include the
male-female ratio in the workplace (13.73% of the sample size), products/services
specifically designed for women (12.75%), policy related to equal opportunity and gender
402 diversity in the workplace (10.78%) and corporate giving activities such as helping women
through education and health-care facilities (10.78%). Companies also provided disclosures
on issues of women empowerment and women’s welfare (6.37%), special rights and facilities
(e.g. maternity leave, protection against sexual harassment, etc.) provided to women in the
workplace (6.37%) and special programs arranged for women such as celebrating women’s
day (4.41%). Some companies also provided information about initiatives for the career
development of the female employees (0.98%) and their salary structure (0.49%). The overall
findings clearly show an improvement from earlier Bangladeshi evidence of the complete
absence of gender disclosures ( Belal, 2008; Belal and Cooper, 2011). The findings reported in
this sub-section adequately summaries the “what” question, i.e. what gender-related issues
are highlighted. We further focus on the “how” question, i.e. the way companies presented
these issues.
5.1.1 Concern for women empowerment and women’s welfare. Companies, in general,
showed their concern about women empowerment and women’s welfare. They emphasized
the need for women’s development in society without much description of their activities.
Here are two examples:
Example 1:
SJIBL is very much conscious about the prevailing conditions of the women in our society. Keeping
this in view it takes various programs for empowering the women like awareness building,
training, financing etc. [Shahjalal Islami Bank Limited, Annual Report 2017, p. 161] (Author’s
emphasis)
Example 2:
Despite almost 50% of the population of Bangladesh comprising women, the participation of
women in economic activity is minuscule. In this context, gender equality is not only important
for ensuring the fair representation of women in all aspects of life but also in unleashing economic
potential and growth. At Green Delta Insurance, we are among the strongest proponents of
gender equality. [Green Delta Insurance Company Ltd., Annual Report 2017, p. 50] (Author’s
emphasis)

No. of companies
disclosing the issue
Issues (sample size = 204) (%)

Concern for women empowerment and women’s welfare 13 6.37

Policy related to gender diversity in the workplace 22 10.78
Male–female ratio in the workplace 28 13.73
Products/services designed for women’s welfare 26 12.75
Special rights of and facilities provided to women in the workplace 13 6.37
Table 3. Special programs or arrangements focusing on women 9 4.41
Issues disclosed by Corporate giving for welfare of the women in the society 22 10.78
the sample Initiatives for career development of the female employees 2 0.98
companies Issues related to the salaries of the female employees 1 0.49
Both examples identified the distresses of women through the negatively charged words Corporate
such as “prevailing condition” and “minuscule.” These are the evidence of “positive” and annual reports
“emotional style” of writing, which trigger the sentiments and sympathy of the readers
toward gender inequality in society (Higgins and Walker, 2012). They also pointed out their
eagerness to work for this social problem and create a positive impression in the minds of
the readers. As such, they used the “positively charged” words such as “empowering” the
women and “strongest proponents” of gender equality. This portrayed the organizations as
socially responsible and put them in the “best possible light” (Brennan et al., 2009).
403
Moreover, some companies noted the concern of their Board members about the welfare
of women. For instance:
Example 3:
Ms. Shireen Scheik Mainuddin joined as a Director of AB Bank Limited on January 4, 2018 . . . She
has been a founder Member of “Shakti Foundation for Disadvantaged Women”, an urban micro
Finance Institution. [AB Bank, Annual Report 2017, p. 21] (Author’s emphasis).
Example 4:
He is equally compassionate about social responsibility and contribution in philanthropic services
for the underprivileged children and women. [Dhaka Bank Limited, Annual Report 2017, p. 22].
(Author’s emphasis).
While example 3 exhibits the “description” of the social welfare-related activities of one
director, Example 4 provides unspecific information through a “vague” writing style. For
description, the company presented “Shakti foundation” and its microfinance operation.
Presentation of specific facts enhances the clarity and integrity of the statement (Higgins
and Walker, 2012; Hossain et al., 2017b). Alternately, Example 4 is mostly rhetorical in
nature (Hossain et al., 2017b). It only focused on a Director’s philanthropic contribution to
the less privileged women in society. This is an “impressive” statement without much
“tangible” information (Sandberg and Holmlund, 2015). In both cases, we see the use of the
“emotional style” of writing which showcased directors’ contribution for “disadvantaged”
and “underprivileged” women to trigger the emotion and sympathy of the readers (Higgins
and Walker, 2012).
5.1.2 Policy related to gender diversity in the workplace. Most of the policy statements on
gender diversity are highly “rhetorical” and written in a “vague” style without specific
details. The companies attempted to manage the impression with these rhetorical policy
statements. Here is an example of an impression management tactic called “praise”:
Example 5:
HRMD champions the diversity and inclusiveness in the Bank by having processes in place by
which all individuals irrespective of their gender get equal opportunity in terms of recruitment,
positions and career progression. [AB Bank, Annual Report 2017, p. 86] (Author’s emphasis).
Here, the company is praising itself as the “champion” in maintaining diversity and
inclusiveness in terms of gender. Self-proclaimed supremacy is communicated in an “overly
favorable manner” (Sandberg and Holmlund, 2015, p. 682). Some companies included other
diversity issues as well:
Example 6:
Uttara Finance and Investments Limited believes in equal opportunity in workplace irrespective
of race, religion, sex and age [. . .] UFIL is one of the leading companies in the country that takes
good care of a comfortable working environment for the female employees. [Uttara Finance and
Investments Limited, Annual Report 2017, p. 61] (Author’s emphasis).
JAOC The company uses the tactic of “praise” through a “positive style” of writing. Several
17,3 “positively charged” words (Sandberg and Holmlund, 2015, p. 684) (such as “leading,”
“comfortable” and “good care”) were used to create a positive impression among the readers.
Moreover, the company is “presenting its actions in a successful light” (p. 682) and claims
them as a “leading” Bangladeshi firm in taking care of the female employees.
5.1.3 Male-female ratio in the workplace. The companies used different techniques such
404 as narratives, graphs, tables and charts (mostly pie charts) to present the ratio of male and
female employees in the workplace. The following is an example of narrative presentation:
Example 7:
There are 1,195 posts of officers and 2,448 of staff against the approved total manpower of 3719.
987 officers among, which 877 male and 110 female and 1,265 staff among, which 1,139 male and
72 female that is a total number of 2,252 persons were employed as on 30 June 2017. [Titas Gas
Transmission and Distribution Company Limited, Annual Report, 2016–17, p. 84] (Author’s
emphasis).
It is an application of “description” where the company presents facts in terms of the
number of men and women in both “staff” and “officer” levels. Bansal and Kistruck (2006)
termed this kind of presentation with quantitative data as a “demonstrative” impression
management technique. Presentation of facts improves the integrity and clarity of the report
(Higgins and Walker, 2012). Although the statement shows a huge difference in gender-mix
in the workplace, the company did not apply the tactics of “admission” (admitting that it
failed to act in a desired manner) or “defense” (putting excuse for this failure) in this case.
The following is a similar example:
Example 8:
GDICL has been maintaining a very balanced male and female ratio, which was not only reflected in
the board of directors but also in the organization’s management at different levels. Among our female
colleagues 1 is in top level management, 13 in upper mid level, 38 in Lower mid level and 86 in Others.
[Green Delta Insurance Company Limited, Annual Report 2017, p. 167] (Author’s emphasis)
Just after this narrative disclosure, the company presented a detailed table (p. 167) which
shows that there are 496 men employees and 138 women employees. Though an
“imbalance” is conspicuous in the table, the company did not admit this failure through
“admission” or “defense.” Instead, the company applied a “positive style” of writing and
presented the situation in an “overly favorable manner” (Sandberg and Holmlund, 2015,
p. 682) by claiming that they are maintaining “a very balanced male and female ratio.”
Here is another example:
Example 9:
ICB always believes in gender equality and women empowerment. At present the participation of
female employees (grade-9 and above) is 17.51% and ICB has a plan to increase this percentage to
25% by 2020. It is further mentionable that 2 (two) female executives have been promoted to the
post of General Manager (grade-2) in FY 2016–17. [Investment Corporation of Bangladesh,
Annual Report 2016–17, p. 57] (Author’s emphasis).
Here the company not only applied the “description” tactic but also gave a “futuristic”
target to increase the percentage of female workers. However, this was an “incomplete
description” as the number of male employees who got promoted was not mentioned.
The readers will not understand whether “equality” was practiced or not from this “one-
sided” writing style.
5.1.4 Products/services designed for women’s welfare. Only three categories of
companies reported on their products or services designed for women’s welfare:
 (1) Banks; Corporate
(2) Financial Institutions; and annual reports
(3) Insurance.

The following is an example:

Example 10:
It is now globally accepted that empowering women facilitates economic growth. We are a great 405
believer of women empowerment. We have special products for women entrepreneurs at special
discounted loan pricing to provide growth support. Women clients can avail EBL Mukti loan up-to
BDT 25 Lac without any collateral and up-to BDT 50 lac with collateral. EBL not only provides
financing but also guides women clients on various business issues such as financial record
keeping/accounting, sales routing through bank account, trade license, taxation, marketing,
insurance etc. [Eastern Bank Limited (EBL), Annual Report 2017, p. 148] (Author’s emphasis).
The company presented them as a “great believer of women empowerment” and portrayed
them as “noble with high morals” (Sandberg and Holmlund, 2015, p. 682). Thus, by using the
“praise” tactic, the company pointed that it is “existence somehow benefits society” and
contributed to the “economic development of the society or local community” (p. 683).
Moreover, the company used “description” of the loan and other assistance to women.
However, the description of a “discounted” loan is an “incomplete description” as the
discount rate is not mentioned. The company followed a “positive” and descriptive’ style of
writing to create a favorable impression of its operations. For instance, loan products were
named “Mukti” which means freedom. As if, the company is working for the “emancipation”
of women in society. The following example illustrated an insurance policy for women:
Example 11:
To cater to this customer base, we have created an exclusive product, Nibedita, which represents a
holistic platform to provide holistic risk protection with a number of beneficial side benefits. Nibedita
has been extremely well-received in the market and as on 31 December 2017, we had a total of
5840 Nibedita customers in the country. [p. 16]

Nibedita- A personal accident insurance scheme which provides economic security to women
irrespective of their income, occupation or vocation. This product is exclusively designed for
women as today’s women’s are exposed various hazards related to the occupations and social
issues. An Insurance like this might give women to think independently in terms financial
protection or revive the business if she encounters any accident. [p. 18]

At Green Delta Insurance, we are among the strongest proponents of gender equality. Our most
visible manifestation of this is the fact that we launched South Asia’s first customized insurance
scheme exclusively for women under Nibedita. [p. 50] [Green Delta Insurance Company Limited,
Annual Report, 2017] (Author’s emphasis).
Here the company used both “description” and “praise” tactics. The company described the
women-centered “personal accident insurance scheme” called “Nibedita.” Facts and numbers
were presented about the customers of this scheme and a unique app – Nibedita app. These
“demonstrative” disclosures (Bansal and Kistruck, 2006) may enhance the integrity and
credibility (Higgins and Walker, 2012) of the reports. Moreover, the company “praised” itself by
claiming them as a “pioneer” of this initiative in the South-Asia and “strongest proponents” of
gender equality. The scheme, as the company claimed, is “extremely well-received” in the
market and was evidence of “successful light” (Sandberg and Holmlund, 2015, p. 682) for them.
All of these depicted the firm as “noble with high morals” (Sandberg and Holmlund, 2015). The
JAOC emotional style of writing is also visible here. The identification of women’s exposure “to
17,3 various hazards related to occupations and social issues” and the introduction of a women-only
insurance scheme presents the firm as a “feeling-being” (Sandberg and Holmlund, 2015) and
draws the attention of the readers (Higgins and Walker, 2012).

5.1.5 Special rights of and facilities provided to women in the workplace. Regarding
406 special rights and facilities available for women, companies reported policies on sexual
harassment, maternity leave, transport facilities, daycare centers and gender designated
washrooms. Here is an example of sexual harassment-related company policy:
Example 12:
Equality in employment can be seriously impaired when women are subjected to gender specific
harassment such as sexual harassment at workplace. [. . .] The following rules are therefore
applicable, regarding this matter.

Company should provide a procedure for resolution, settlement or prosecution for acts of sexual
harassment, by taking all steps required. For this purpose, sexual harassment includes such
unwelcome sexually determined behavior as [. . .]

All managers or persons in-charge of work place are required to take appropriate steps, to prevent
sexual harassment. [Shahjibazar Power Company Limited, Annual Report 2016–17, p. 7]
(Author’s emphasis)
Here the company portrayed itself as “moral” and “feeling being” through the “emotional”
style of writing. It not only identified the harms caused by sexual harassment but also
applied the “description” tactic to delineate the harassment management “procedure” in
place. Here is another example:
Example 13:
Any harassment or discriminatory behavior directed at female employees in the form of derogatory
or provocative comments, physical violence, horseplay/inappropriate jokes, unwanted physical
contact, use of epithet, comments or innuendo, obscene or harassing telephone calls, e-mails,
letters, notes or other forms of communication and any other conduct that may create a hostile
working environment is strictly prohibited. IPDC exercises zero tolerance in this regard. [IPDC
Finance, Annual Report 2017, p. 123] (Author’s emphasis)
Here, the company provided a detailed “description” of the acts that represent harassment or
discriminatory behavior. However, the company used a “vague” writing style through
unspecific, rhetorical statements (Hossain et al., 2017b) and empty phrases that “sound
impressive but have little meaning” (Sandberg and Holmlund, 2015, p. 685). Without
specifying their actions for sexual harassment, they used empty phrases such as “strictly
prohibited” and “zero tolerance” policy.
The following example illustrated company’s maternity leave policy:
Example 14:
Time to time, the Bank conducts a variety of safety and wellness activities. The Bank also
extended the maternity leave from 03 months to 06 months for its female employees. [p. 159]

Maternity leave: As per bank’s policy, any female employee who has been in the continuous
service of the bank is entitled to get 6 months maternity leave with regular salary and allowances
[. . .] The annual performances, increment, promotion of respective employee are not affected for
this long term leave. [p. . 163] [Mercantile Bank, Annual Report 2017] (Author’s emphasis).
The company expressed its concern about employee safety and wellness, which portrayed Corporate
them as a “noble” company with “high moral.” The company not only “described” the annual reports
procedure of existing maternity leave but also pointed out the extension of the maternity by
three months which would not affect annual performances, increments and promotion. This
is a clear representation of “feeling being.”
The following example reported the day-care services for female employees:
Example 15:
407
In present days, country’s women folks are coming out in the social and professional circle in
increasing number and playing commendable role in nation building activities. Both the educated
and illiterates of this segment of the population are aspiring to be self reliant in their struggle to
cope up with the rapid changing social and economic world. Women having babies, particularly
bank employees are sometimes faced with serious difficulties in looking after them during working
hours. In order to find a solution, as per directives of Bangladesh Bank, we have established a Day
Care Center in Motijheel Commercial Area in association with five other banks. Now the female
employees of these banks can keep their babies at this Centre and work carefree in their
workplaces. This has also helped in enhancing their skill and efficiency level. [NCC Bank, Annual
Report 2017, p. 53] (Author’s emphasis)
An “emotional style” of writing is followed to identify the problem of work-care balance of
female employees. Women, as addressed here, are going through a “struggle” to cope with
the rapid socio-economic changes and thereby facing “serious difficulties” in taking care of
their babies. This caring attitude creates sympathy among readers (Higgins and Walker,
2012; Hossain et al., 2017b; Sandberg and Holmlund, 2015). The company also portrayed
them as a “savior” of this problem as they, along with five other banks, established a
daycare center for ensuring women’s “carefree” work. However, we see the use of a
“rhetorical” statement (Hossain et al., 2017b) when it claimed that the introduction of the
daycare facility had enhanced the skill and efficiency of women. This “vague” statement
sounds impressive but lacks evidence of whether the increased skill and efficiency is a result
of the daycare center.
5.1.6 Special programs or arrangement focusing women. Companies arranged special
program to celebrate International Women’s Day. A company reported:
Example 16:
Every year, we celebrate womanhood on the occasion of the International Women’s Day through
real life experience sharing by inspirational women across boundaries. We also present greeting
cards and goodies to all the women across the organization to make our female colleagues feel
energized and celebrated. Our initiatives and endeavors for encouraging a gender-diverse
organization have recognized us with many National and International awards. We have been
awarded with the “Diversity Impact Award” at the Asia Best Employer Award 2017. [. . .]. These
are the true testament of BAT Bangladesh’s agenda in developing and empowering female
managers for leadership. The female leaders of BATB are creating positive impacts in the society by
leaving their footprints of success in the national and international arena. [British American
Tobacco Bangladesh (BATB), Annual Report 2017, p. 151] (Author’s emphasis)
The company provided a “description” of facts on its arrangement of the International
Women’s Day program. This “demonstrative” disclosure (Bansal and Kistruck, 2006) enhanced
the clarity and integrity (Higgins and Walker, 2012; Hossain et al., 2017b) of the report. Overall,
the company followed a positive style of writing. It created a positive impression of its
operations by using “positively” charged vocabulary such as “energized and celebrated,”
“positive impacts in the society” and “footprints of success.” The use of the “praise” tactic is
also evident as it noted the achievement of the “Diversity Impact Award” as evidence of the
company being “superior to other actors” (Sandberg and Holmlund, 2015, p. 683).
JAOC 5.1.7 Corporate giving for welfare of the women in the society. Companies reported on
17,3 “corporate giving” (Hossain et al., 2017a) particularly toward women’s health, education,
sports and others. The following example shows a company’s contribution to women
emancipation:
Example 17:
In 2017, Southeast Bank spent total BDT 241.77 million for education, sports, art, culture,
408 promotion of national heritage, improvement of the condition of autistic children, women
emancipation, health-care, financial assistance to disadvantaged people, donation for national
disaster-victims, help for poor peoples’ medical treatment of serious diseases, community
development, relief operation, winter-clothes for the cold-hit poor people, etc. [Southeast Bank
Limited, Annual Report 2017, p. 209] (Author’s emphasis)
Through facts and numbers, the company reported its contribution to various CSR
activities. However, the statement lacks individual quantitative figures for activities
including “women emancipation.” Moreover, it is unspecific “what” activities the company
performed and “how” they spent the money. Thus, even after reporting with quantitative
figures, the statement mostly remains “unspecific” and “vague.” Further, the company
combined women’s issues with other “distressed” groups in society to trigger the emotion
and feelings of the readers. This is another example of “emotional” writing to present the
company as a “feeling being.” The following example demonstrates the contribution to
women’s education:
Example 18:
Rajdhani Mohila College, Mirpur, Dhaka had been built under the leadership of some courageous
sponsors to provide quality education to the female students of lower income families in the area.
Since beginning it is doing well for developing the society with quality education. To develop the
College lab facilities further, DBH took an initiative and provided them Tk. 3.50 lac during the
year. [Delta Brac Housing (DBH) Finance Corporation Ltd., Annual Report 2017, p. 84] (Author’s
emphasis).
The company used positively charged words such as “courageous sponsors” and “quality
education” to create a positive impression among the readers. Also, the statement claimed
that many female students of this college came from “lower-income families” which not only
depicted the firm as socially responsible but also elicited emotions and feelings of the
readers (Higgins and Walker, 2012).
5.1.8 Initiatives for career development of the female employees. On the career
development, companies mainly identified the training facilities available for female
employees. For example, Bank Asia, in their Annual Integrated Report 2017, provides a
“demonstrative” disclosure of its “Training by Gender” (p. 178). The company presented the
number of men and women who were trained in 2016 and 2017 along with the data of total
training hours for both genders. The company used “numbers” to describe the “action” (the
training). Here is another example:
Example 19:
Women in BAT Bangladesh receive many trainings and development programmes such as
“WILL TO LEAD”, “WOMEN IN LEADERSHIP”, etc. [. . .] These platforms also allow them to
experience a development opportunity and network with female colleagues across different
regions. As a part of developing the future potential leaders within BATB, female managers also
receive mentoring from senior managers and top team members. The mentorships are extended
beyond day-to-day work and into fulfilling their potential, which has a very positive impact for
both the mentor and the mentee. [British American Tobacco Bangladesh (BATB), Annual Report
2017, p. 151] (Author’s emphasis)
Despite the company’s claim of running “many” career development training programs, Corporate
they “described” only two: “WILL TO LEAD” and “WOMEN IN LEADERSHIP.” It also annual reports
demonstrated the importance of mentor-mentee interaction in network building and skill
development of female workers. The use of unspecific expressions such as “many,” “etc.”
demonstrated the “vague” style of writing. The interesting matter is the whole statement
was written with “positively” charged vocabularies such as “developing opportunity,”
“fulfilling their potential” and “very positive impact,” which would create a positive
impression of its operations (Sandberg and Holmlund, 2015, p. 684). 409
5.1.9 Issues related to the salaries of the female employees. Though the issue of women’s
remuneration and the gender pay gap has become a burning question in today’s world
(Hossain et al., 2016), only one company addressed this in the report:
Example 20:
We target a fair human resources management by using a performance based system [. . .] There
is no incident of discrimination has been occurred in terms of remuneration provided to male and
female employees. [Al Arafah Islami Bank, Annual Report 2017, p. 149] (Author’s emphasis)
The statement was written in a “positive” style with a phrase like “fair human resources
management” aiming to create a positive impression among the readers. However, the
absence of “description” about the company’s “fair” policy made the claim “unspecific,”
“vague” and “rhetorical.”

5.2 Contextual analysis

The contextual analysis contains both situational and intertextual analysis (Ruiz, 2009).
While the situational analysis considers the circumstances of discourse production, the
intertextual analysis recognizes texts as a symptom of ideological domination (Fairclough,
1995). The situation of both the producer and the consumer of texts is considered here. In our
study, Bangladeshi companies are the producers of texts and different stakeholder groups
are the consumers. Thus, the communication is happening in a “situation” where the
consumers of the texts are seeking “accountability” from the producers. In this
circumstance, the “intention” of the producers is to discharge accountability and gain
legitimacy by managing the stakeholders’ impression through corporate reports.
The text analysis has already shown that the sample companies applied various
impression management tactics of Sandberg and Holmlund (2015). Among the tactics,
companies applied “description,” “praise” in the presentation through “positive,” “vague”
and “emotional” writing styles. However, the tactics of “admission,” “defense” and
“subjective” writing style were not used. The absence of “negative” news in gender
narratives demonstrates the “selective” (Brennan et al., 2009) presentation of companies
highlighting “positive” news. Favorable aspects were predominantly used to create a
positive impression of their actions in the minds of the stakeholders. In some cases, though
the disclosures were about “good news,” these were rhetorical, unspecific and vague. Even
these “vague” narratives were used to create a positive impression among the readers.
Therefore, the sample companies applied various tactics to signify their existence for the
benefit of society and “legitimize” their activities.
From an intertextual perspective, gender disclosures also pinpointed some common ideas
prevailing in the society. First, the companies identified women as a “vulnerable” group who
need help. Second, they portrayed the CSR activities of the companies as a panacea to social
problems. The companies presented their actions in a successful light. They “praised”
themselves while describing their actions. Most of these narratives were highly “self-
laudatory” (Frost et al., 2005). For example, they established an impression of creating an
JAOC “equal opportunity” environment in their organizations. They also recognized that their
17,3 initiatives encouraged women in building a successful career and their charitable acts
moved women from the vulnerable position. All of these initiatives are attempted to present
themselves as responsible corporate citizens with high morals (Sandberg and Holmlund,
2015) that ultimately legitimize their activities.
Companies represented women as a “distressed” group in society through “emotional”
410 writing. The distresses of women in the society were identified through “emotive symbols”
(Pellegrino and Lodhia, 2012, p. 75) to trigger the emotions and feelings (Higgins and
Walker, 2012) of the stakeholders. Moreover, they showed social consciousness by
illustrating their assistance to these distressed women. This is further evidence of
organizations’ “social license to operate” (Pellegrino and Lodhia, 2012, p. 74). Additionally,
this legitimacy seeking activity demonstrated the positive impact created by the
organizations in the community (Sandberg and Holmlund, 2015). Therefore, through gender
disclosures, Bangladeshi companies have attempted to manage the stakeholder impression
and justified their actions as legitimate.

5.3 Sociological analysis

As discourse is a social practice (Lemke, 1995), Ruiz (2009) recognizes the need to analyze
the textual narratives from the perspective of the society in which they were produced. This
study has explored the gender-related disclosures of the Bangladeshi companies and thus
Bangladeshi society comes into the focal point. Bangladeshi women face discrimination in
both public (workplace) and private (family) lives. Moreover, they confront the challenges in
gaining access to economic resources, education and health-care facilities.
Women are usually depicted as a vulnerable group in society, who have gone through
several discriminations and sufferings. The study shows a general concern among companies
about gender inequality and discrimination. The companies not only demonstrated the policy
support for gender equality but also illustrated their actions regarding employment of women,
sexual harassment, maternity leave, career development and transportation facilities for
women. Some financial institutions highlighted the issue of economic empowerment and
reported on women-centric products/services. Companies further reported on their “corporate
giving” activities aimed at women’s education, health, sports and other welfare. Thus, the
gender narratives of companies represented them as “paternal benefactors” (Higgins and
Walker, 2012) who care about social problems. Moreover, such disclosures render the reporting
firm as “noble with high morals” (Sandberg and Holmlund, 2015) and is a strategy of
legitimizing the companies’ operations and existence (Pellegrino and Lodhia, 2012).
Companies predominantly applied some impression management tactics (Sandberg and
Holmlund, 2015) over others. For example, sample companies did not “admit” and “defend”
for “failure” to perform as per social expectation. Like, companies reported on female
workers but did not substantiate the “inequality” in employment with further argument.
Companies instead represented themselves as “pro-social,” “noble,” “moral” and “feeling-
beings” with “positive” statements. According to Nwagbara and Belal (2019, p. 2412):
[. . .] word choice is a vehicle that carries people’s feeling, ideology, thoughts and intentions, it can
help in understanding the purpose behind language in CSR reports about what it signifies in
relation to a communicator’s position, intention and ideology.
Through positive reporting, companies put their actions in a successful light and show their
existence as beneficial for the women in society. This is further evidence of impressing the
stakeholders and gain legitimacy.
6. Conclusion Corporate
This study has explored the gender-related discourses in the annual reports of Bangladeshi annual reports
companies. To fulfill this objective, we conducted an SDA (as suggested by Ruiz, 2009) and
interpreted the results from two interrelated perspectives: impression management (through
the lens of the tactics suggested by Sandberg and Holmlund, 2015) and legitimacy. We have
identified the gender-related issues that were highlighted by the sample companies and
examined how impression management tactics were applied in the corporate narratives to
seek legitimacy. 411
In general, companies report on their policies and actions relating to women
empowerment, gender equality, women’s participation, etc. This is an improvement from the
earlier state of “complete absence” of gender issues in corporate reports (Belal, 2008; Belal
and Cooper, 2011). Nevertheless, the disclosures could have been much improved. Only 65
out of 204 sample companies reported at least one gender issue. Moreover, the reporting has
not been consistent and hence not comparable across the firms. Due to the “absence” of
regulatory guidelines for voluntary gender disclosures, the divergence of reporting was
explicit and companies had an incentive to apply various impression management strategies
in those narratives.
The study has implications in both practice and policy levels. At the policy level, the
findings revealed a need for reporting guidelines for gender narratives. Although there is a
global global reporting initiative (GRI) proposed gender reporting guideline, there is no local
guideline in Bangladesh. Our findings suggest that in the absence of proper directives,
companies presented facts and figures rhetorically and qualitatively. Bangladesh Securities
and Exchange Commission could come forward and propose a guideline for gender narratives
to lessen gender inequality. Moreover, our findings provide practical insights for the companies
in assisting the Government of Bangladesh to deal with the prevailing gender inequality and
achieved gender-related sustainable development goals. Through a balanced, comparable and
specific corporate reporting on the various social problems (including gender issues), the
government can get a clear picture of the corporate initiatives (Hossain et al., 2017b).
This study contributed to the limited number of existing literature on corporate gender
reporting, especially in the context of emerging economies. Moreover, this study is
methodologically novel as it used SDA to explore gender disclosures. Theoretically, the
study triangulates through an SDA framework with impression management tactics to
reveal how texts are strategically used to induce stakeholders and portray the company as a
responsible organization. Going beyond the extant evidence on “what” is disclosed in the
annual reports, the study demonstrated a more “meaning oriented” analysis. This study
provides further evidence of how organizations achieved legitimacy and manage
stakeholders’ impressions through the strategic use of language. Overall, the study opens
the theoretical and methodological possibilities in this field.
However, the study is not free from limitations. This is an exploratory study focusing on
cross-sectional data. Future researchers can work with longitudinal data to see the changes
and developments in gender reporting practices over the period. Researchers can compare
the reporting practices of other developing and underdeveloped economies, where gender
inequality is severe. Future research can undertake in-depth interviews of stakeholders to
get better insights into the problems and prospects of corporate gender disclosure.

Note
1. SDA has several advantages. First, it uses three levels of analysis to understand the social
reality. Second, it identifies the diverse linguistic representation of the phenomenon. Finally, it
JAOC discovers deeply held social-constructionist views of (corporate) narratives. Nevertheless, SDA
suffers from few limitations. First, subjectivity exists as the analysis depends heavily on the
17,3 interpretation of researchers. Second, the contextual diversity and the subjectivity hinder the
generalizability of the research findings. Finally, it requires a large amount of time and effort.

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Corresponding author
Md. Saiful Alam can be contacted at: s.alam@du.ac.bd

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 Accounting & Finance

Is better banking performance associated with financial

inclusion and mandated CSR expenditure in a
developing country?

Asit Bhattacharyyaa , Sue Wrightb , Md Lutfur Rahmana

a
Accounting and Finance Discipline, University of Newcastle, Callaghan,
b
UTS Business School, UTS, Sydney, NSW, Australia

Abstract

Motivated by legislation mandating CSR expenditure to improve social

equality and economic development in India, we examine the association of
CSR expenditure and financial inclusion with the performance of banking firms
in the period after introduction of the legislation. We study whether mandated
CSR expenditure and/or financial inclusion measures are associated with better
financial performance, using both accounting and stock market measures of
performance, for Indian banks during 2015–2017. Our results demonstrate that
level of CSR expenditure and degree of financial inclusion is not associated
with banks’ financial performance when performance is measured in account-
ing terms. However, a significant negative association is found when perfor-
mance is measured by stock market return. These results suggest that the
current design of the legislation is unlikely to achieve its purpose. This is the
first study to present clear evidence on the associations of mandatory CSR
spending and firm-level financial inclusion with accounting-based and market-
based bank performance.

Key words: Mandated CSR spending; Financial inclusion; Performance; Bank

JEL classification: M14, M40, M41, M48

doi: 10.1111/acfi.12560

The authors acknowledge the financial support of AFAANZ research grant, 2017
(No. G1701094) of $5000.

Please address correspondence to Sue Wright via email: sue.wright@uts.edu.au

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2 A. Bhattacharyya et al./Accounting & Finance

1. Introduction

In emerging countries, poverty, poor working conditions and abuse of

human rights are critical issues. In 2013, the Indian government introduced a
novel approach to improving social conditions by mandating corporate social
responsibility (CSR) expenditure by companies over a certain threshold size.
Businesses in India are now expected to contribute to sustainable economic
development and the establishment of an equitable society. However, the
legislation provides firms with the option of avoiding the mandated CSR
expenditure by disclosing in their annual reports why it has not been spent.
Therefore, the government’s approach will only be successful if firms choose to
undertake CSR activities, a choice that will largely depend on how those
activities impact their financial performance.
For banks in India, a strategic growth initiative that also achieves the desired
social goals of reduced inequality and poverty is greater financial inclusion,
which is defined as a course of action that allows access, availability and usage
of formal financial services to all individuals and firms in an economy (World
Bank, 2014). Focusing on financial inclusion in order to comply with the
mandated CSR legislation may be a win-win strategy for Indian banks, because
an increase in financial inclusion activities could lead to an improvement in
their financial performance via improved reputation and improved legitimacy.
Despite its growing importance, however, research on financial inclusion has
been limited largely to measuring and investigating the country-level institu-
tional factors that influence the level of financial inclusion (Burgess and Pande,
2005; Beck et al., 2007; Sarma and Pais, 2011). The literature typically ignores
the context of firm-level research, although firm-level engagement can play a
pioneering role in augmenting country-level financial inclusion (Bose et al.,
2016). Further, prior studies (Kempson et al., 2004; Sarma and Pais, 2011; Bose
et al., 2016) argue that because financial inclusion is multi-dimensional,
country-level and institutional indicators have limited ability to fully measure
overall financial inclusion. By examining the association between the firm-level
financial inclusion factors of banks and their performance, in the context of
legislation designed to increase CSR expenditure by banks, our study addresses
this methodological problem. In this study, we examine the association of CSR
spending mandated by the legislation and financial inclusion activities with
banking performance in the period after its introduction. Our findings will
inform legislators and regulators in emerging countries about the link between
mandatory CSR expenditure and bank performance as they argue for similar
legislation designed to involve the corporate sector in sustainable economic and
social development.
Our study is able to examine the effects of both mandatory CSR expenditure
and bank-level financial inclusion on bank performance because of the
availability of relevant data in India following the introduction of the
mandatory CSR expenditure regulation. The Indian government has embraced

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 A. Bhattacharyya et al./Accounting & Finance 3

the global vision of the United Nation’s Millennium Development Goals

(MDGs) (United Nations Conference on Trade and Development, 2014), and
is the first national government to mandate CSR expenditure and financial
inclusion activities, through section 135 of the Indian Companies Act, 2013.
This legislation requires that in any financial year, a company with an annual
turnover of at least $US180 million, or a net worth of $US90 million, or a net
profit in excess of $US900,000, must spend at least 2 percent of its net profit
(averaged over the previous 3 years) on prescribed CSR activities.1
This study addresses the question: are mandated CSR expenditure and
financial inclusion associated with better bank performance in the context of a
developing country? Using two measures of financial performance for Indian
banks listed on two major stock exchanges in India, the Indian National Stock
Exchange and the Bombay Stock Exchange, we examine their associations with
mandated CSR expenditure and with (firm-level) financial inclusion. Our key
findings are that the level of CSR expenditure and the degree of financial
inclusion are not associated with banks’ performance when measured in
accounting terms (return on assets). However, a significant negative association
is present when performance is measured as stock market return, and when the
performance–financial inclusion relation is moderated by the mandated CSR
expenditure. The results indicate that CSR expenditure and financial inclusion
are not associated with higher financial performance by banks, which may be
attributed to investors’ negative perception towards mandatory CSR expen-
diture and financial inclusion.
The study is located in India because it is the only country that has legislated
CSR spending, and because the impact of financial inclusion is expected to be
more apparent in emerging and developing economies (World Bank, 2014;
Park and Mercado, 2015). We study the banking industry because of the role of
financial inclusion in the relation between CSR spending and performance in
that industry, and because the lack of available data in the past has excluded it
from previous capital market studies.
The primary contribution of this research is the presentation of clear evidence
on the association of mandatory CSR spending and firm-level financial
inclusion with accounting-based and market-based bank performance. The
future actions of regulators, banks and accountants and auditors will be
impacted by the findings of this study. Our findings contribute to the wider
policy debate on voluntary versus mandatory CSR expenditure. Regulators of
other emerging countries may be able to use our findings to better design
mandated CSR spending legislation or regulations to encourage financial
inclusion activities. The results of our study will be of interest to all country-
level regulators and various international organisations (e.g., the International
Monetary Fund (IMF), the Alliance for Financial Inclusion (AFI) and the

1
Firms have the alternative of disclosing in their annual reports why the stipulated 2
percent has not been spent on the prescribed schedule VII CSR activities.

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4 A. Bhattacharyya et al./Accounting & Finance

World Bank). We demonstrate that performance improvements and gains in

market share for banks that are considering investing in financial inclusion
activities and CSR activities are unlikely. Our findings will also be useful to
accountants and auditors who need to assess the adequacy or otherwise of a
company’s CSR practices (International Auditing and Assurance Standards
Board, 2007; Association of Chartered Certified Accountants, 2008).
Our study extends the existing literature in four important ways. First, we
explore the association between CSR expenditure and firm performance in a
mandatory setting, whereas prior studies have been limited to voluntary
settings. Second, we are the first to examine this relation using actual CSR
spending rather than a CSR proxy score for voluntary CSR spending (see
Servaes and Tamayo, 2013; Lys et al., 2015), and the first to address the
association of firm-level financial inclusion activities and banks’ performance.
Previous studies have used voluntary CSR expenditure, and have assumed that,
on average, banks’ financial inclusion, CSR expenditure and activities are at
their optimum level (Himmelberg et al., 1999; Servaes and Tamayo, 2013).
Third, we address methodological issues such as model misspecification and the
omitted variable bias, which may affect the existing empirical evidence on
whether firm-level financial inclusion factors, CSR expenditure and disclosures
improve a bank’s financial performance (Margolis et al., 2009; Servaes and
Tamayo, 2013). Fourth, we control for a bank’s ownership structure (see Shane
and Spicer, 1983; McWilliams and Siegel, 2001), a factor that has been largely
ignored by previous studies.
The rest of the paper advances as follows. Section 2 presents the theory,
literature and hypotheses. Methodological aspects are described in Section 3.
Section 4 outlines the data and descriptive statistics. Empirical results and
analyses are presented in Section 5. This section also includes robustness
checks. Section 6 concludes by providing a summary of the paper.

2. Theory, literature and hypotheses

According to Freeman’s stakeholder theory, a firm should consider the

interests of all stakeholders who significantly affect or are affected by its
operations. Therefore, stakeholders’ social, environmental and ethical perfor-
mances can encourage overall CSR activities (Baron, 2001; McWilliams and
Siegel, 2001). As strategically motivated CSR activities can be cost effective, the
management literature describes stakeholder theory as ‘doing well by doing
good’. CSR activities are expected to be profitable because they reduce
transaction costs related to dealings with stakeholders, and the net benefits are
channelled to the business. The theory of the firm, progressed by Coase (1937)
and Jensen and Meckling (1976), interprets a business as a network of explicit
and implicit agreements between shareholders and other stakeholders. Critical
resources of the firm have been supplied by each group of stakeholders due to

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 A. Bhattacharyya et al./Accounting & Finance 5

these contracts. Through CSR activities, firms intend to create and maintain a
standing for their obligations related to implicit contracts.
Supporting this theoretical concept, there is a stream of literature demon-
strating how CSR increases firms’ performance and stakeholder value. The
studies of Servaes and Tamayo (2013) and Fombrun (2005) in general find a
positive relation between CSR and firms’ stakeholder value. Barnett (2007) also
advocates that CSR spending has an effect on firm value that is determined by
the ability of CSR to influence the stakeholders of the firms. Further, several
studies document an explicit linkage between CSR expenditure and financial
performance. For example, higher levels of CSR initiatives and spending on
strategic CSR activities help firms to (i) attract and retain high quality skilled
employees (Greening and Turban, 2000), (ii) improve product and service
promotion efficiency (Fombrun, 2005), providing them with greater rights to
use scarce resources (Cochran and Wood, 1984), (iii) increase demand for
goods and services (Navarro, 1998) and (iv) create goodwill that can restore
performance in the event of a violation of a legal requirement by reducing
penalties (Godfrey, 2005). In contrast, a negative relation between increased
CSR undertakings or ratings with a firm’s return on assets (ROA) and stock
return is reported by Di Giuli and Kostovetsky (2014).
In addition, the impact of CSR spending may extend beyond firms’ financial
performance measures (Lys et al., 2015). For example, higher institutional
investor ownership, broader analyst coverage and reductions in firms’ cost of
capital may be achieved by voluntary CSR activities (Dhaliwal et al., 2011).
Firms with higher consumer responsiveness document a positive association
between spending on CSR activities and their financial performance although
firms with lower consumer responsiveness show no association (Servaes and
Tamayo, 2013). A firm’s legitimacy and reputation may be maintained through
CSR expenditure (Peloza, 2006) and possible legislative action or negative
regulatory views may be moderated (Hillman and Keim, 2001).
In contrast, Lys et al. (2015) assert that CSR activity may be undertaken by a
firm because it anticipates sustainable positive financial performance, rather
than the CSR activity itself causing this positive performance. The methods
used in prior studies do not allow for conclusions to be drawn about the direct
effect of CSR expenditure on firms’ current financial performance. A further
limitation of this literature is its mixed findings. Reviewing the literature on the
association between CSR activities and firms’ financial performance, Margolis
et al. (2009) note that a few studies report significant positive relations between
CSR activities and firm performance, while others report negative associations.
The context of this study is mandatory CSR expenditure in India, which may
have a detrimental effect on shareholders’ wealth rather than a beneficial one,
for a number of reasons. Consistent with Friedman (1970), if firms choose not
to spend on CSR, then mandating CSR activities and spending will reduce their
value. Furthermore, by directing CSR spending in a particular way, business
choices over the type of CSR activity they undertake are restricted. Karnani

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6 A. Bhattacharyya et al./Accounting & Finance

(2003) argues that section 135 basically imposes an additional 2 percent tax on
companies, which may make India less attractive to foreign investors and large
multinational companies. If they take the option of disclosing why the
stipulated 2 percent has not been spent as directed, firms are likely to
implement a number of costly face-saving strategies in order to avoid any
potential adverse legal consequences. Associated compliance costs also are an
integral part of a mandated CSR policy.
Although mandated CSR expenditure regulations may impose certain costs on
shareholders, there may also be some benefits. A firm’s CSR policies become
more formalised and visible under a mandatory CSR expenditure rule, providing
a stronger signal to shareholders. Strategic CSR reporting and spending involves
more transparent CSR and financial disclosures, which have the potential to
improve a company’s reputation both locally and nationally. The literature
reports enhanced firm values resulting from the 1999 Korean governance reforms
(Black and Kim, 2012), significant increases in CSR performance after the
introduction of section 299(1)(f) of the Australian Corporations Act 2001 (Frost,
2007), and a positive stock market reaction to Indian governance reforms
(Clause 49, adopted in early 2000) (Black and Khanna, 2007).
In summary, the majority of the literature reports that CSR can have a
positive effect on firm performance. Thus we hypothesise for banks:
H1: In a mandatory setting, CSR expenditure is positively associated with financial
and market performance.
In developing countries, only a small proportion of the population can afford
banking products and services, thus excluding the majority who do not have
access to them. However, the unbanked population has the same entitlement to
banking services as those who can afford them, and banking services and
products could have a significant impact on their lives. Using the argument of
Brown and Deegan (1998) that there is an implicit contract between the firm
and those who are affected by its operations, we recognise that there is a social
contract between banks and the unbanked population. Hawkins (2006) and
Jamali (2008) find that the success of catering for the needs of primary
stakeholders depends on whether firms are fulfilling the needs of other
stakeholders. Following stakeholder theory, Freeman (2010) and Jo et al.
(2015) point out that a firm can enhance its reputation and performance
positively by attending to the implicit rights of all stakeholders. Financial
inclusion activities widen the financial system’s resource base by engaging with
all of the country’s populace, thus playing a pivotal role in the process of
economic development.
The literature uses well-established country-level supply side measures of
financial inclusion, such as branch density, the number of ATMs, market
penetration of mobile phones, or the share of households or firms with access
to financial services. In addition, international organisations regularly survey
financial inclusion (IMF Financial Access survey, Fidex database).

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 A. Bhattacharyya et al./Accounting & Finance 7

There is substantial evidence on the benefits of greater financial inclusion at

the country level. Beck et al. (2005) argue that in low-income countries,
financial inclusion provides a critical stimulus for competition, industrial
structure and performance through the distribution of credit across segments.
A more inclusive financial system diminishes informal avenues for credit, thus
improving the distribution of resources (Sarma and Pais, 2011). Recent
empirical evidence (Dupas and Robinson, 2009; Ardic et al., 2011) reports that
financial inclusion can substantially improve the underprivileged’s living
standards. Measuring access to finance by the density of branches, Abdmoulah
and Jelili (2013) explain the indirect relation between growth and financial
development. Cross-country studies show that by reducing individual income
inequality and other poverty indicators, financial development contributes to
economic development (Beck et al., 2007). In low-income countries, financial
inclusion is a critical factor needed to accelerate the growth of the poorest
segments of the population (Burgess and Pande, 2005). Based on this type of
evidence, policy makers and global development organisations place financial
inclusion at the centre of international development programs (Ardic et al.,
2011). For example, Burgess and Pande (2005) examine the consequence of
financial inclusion on rural poverty reduction. Beck et al. (2007) explore the
determinants of the financial sector’s outreach, and Sarma and Pais (2011)
examine the relation between the level of financial inclusion and country-
specific factors such as human development, literacy, income inequality and
infrastructure for connectivity.
This substantial body of research focuses on country-level measures and,
with the exception of Bose et al. (2016), does not investigate financial inclusion
from the firm perspective. In addition, these prior studies use a single indicator
to measure financial inclusion, which may not be able to adequately capture the
nature and extent of financial inclusion. For example, it is not enough to have a
bank account to be included in the financial system; banking services must be
used effectively (Kempson et al., 2004). Drawing on the positive association
between financial inclusion and various economic measures, and extending this
literature by using a firm-level measure that captures different aspects of
financial inclusion, we hypothesise the following in the context of Indian banks:
H2: Firm-level financial inclusion activities are positively associated with financial
and market performance.
Various stakeholders, including governments, expect that firms will engage in
financial inclusion activities to discharge their corporate social responsibility.
Firms’ social contributions signal that their corporate leaders are genuinely
engaging with their stakeholders, and their performance can be significantly
impacted by activities that satisfy their powerful stakeholders, including
government (Frooman, 1999; Wang and Qian, 2011). However, it is also
argued that ‘socio-political’ legitimacy has no explicit effect on the performance
implications of financial inclusion as neither key stakeholders nor the

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8 A. Bhattacharyya et al./Accounting & Finance

government controls the resources that are vital for the firms’ sustained
operations and success (Pfeffer and Salancik, 1978). As a firm’s engagement
with financial inclusion activities and mandated CSR both fulfil the govern-
ment’s inclusive growth and poverty reduction goals and satisfy the demands of
all stakeholders, we argue that mandated CSR activity and spending will
moderate the association of financial inclusion with financial performance.
Therefore, we hypothesise that:
H3: Mandated CSR spending moderates the association of financial inclusion with
market performance.
The relations between the three hypotheses proposed in this study are shown
in Figure 1.

3. Method

3.1. Models

We examine whether the levels of financial inclusion and CSR expenditure

are contemporaneously related to bank performance. Three sets of regression
models are estimated whereby measures of bank performance are regressed on
three sets of explanatory variables: (i) CSR expenditure, (ii) financial inclusion
measures and (iii) both CSR expenditure and financial inclusion measures. In
order to examine if the levels of financial inclusion and CSR expenditure can
explain bank performance, we estimate the following models:
X
Performancet ¼ aa þ b1a CSRt þ li;a Control variablesi;t þ e ð1Þ
X
Performancet ¼ ab þ b2a FIt þ li;b Control variablesi;t þ e ð2Þ

CSR
Expenditure

H1

Financial H3 Firm
Inclusion H2
Performance

Figure 1 Summary of hypotheses tested.

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 A. Bhattacharyya et al./Accounting & Finance 9

X
Performancet ¼ ac þ b1b CSRt þ b2b FIt þ li;c Control variablesi;t þ e
ð3Þ

The above regression models are estimated using ordinary least squares
(OLS) as it is the most commonly used approach for examining a causal
inference in the case of a repeated cross-section sample (see, for example, Bose
et al., 2017; Chauvet and Jacolin, 2017; Alhaj-Ismail et al., 2019). The literature
also uses two-stage least squares (2SLS) to examine causal inference between
financial variables, particularly to address reverse causality and endogeneity
problems (Richardson et al., 2016; Ahmed and Ali, 2017; Ahmed et al., 2017).
Moreover, in order to address endogeneity, simultaneity and unobserved
heterogeneity, researchers also use generalised method of moment (GMM)
estimation in the corporate finance/governance literature (Sufian and Habibul-
lah, 2010; Ahmed et al., 2017; Safiullah and Shamsuddin, 2018). Since our
initial estimation shows that CSR expenditure or financial inclusion activities
have an insignificant (negative and significant) association with the accounting
performance (stock return) measure, we consider that our regression modelling
is unlikely to be characterised by reverse causality or endogeneity problems.
Although we do not address them in our baseline analysis,2 as a robustness
check, we estimate the above-mentioned regression models using both 2SLS
and GMM approaches.
Statistical inference with regard to CSR expenditure’s and financial inclusion’s
causal relation with firm performance is derived from both standard t-statistics
and heteroscedasticity-consistent robust t-statistics following the Huber–White
procedure. Since we find qualitatively similar results, only regression estimates
based on standard t-statistics are reported. However, we present our main results
based on Huber–White robust t-statistics in Appendix Table A1. We also
examine potential multicollinearity by calculating the variance inflation factor
(VIF) of each independent variable. Both the centred and uncentred VIFs are
below 5, indicating the absence of a high degree of multicollinearity (Wooldridge,
2015). In estimating the regression models, we include year-fixed effects to
remove the potential impact of any time trend.
Our entire analysis concentrates on the relation of banking firm performance
with CSR expenditure and financial inclusion after the introduction of the
mandatory CSR legislation. We are unable to examine the causal relation in
both the pre- and post-legislation periods because actual CSR expenditure data
before the introduction of the mandatory CSR legislation is mostly unavailable
for banking firms in India. Additionally, because the number of banking firms
listed on the Indian stock exchanges is not very large, segregating them into
treatment and control groups does not provide a statistically valid sample to
conduct a difference-in-difference analysis.

2
This issue is further discussed in Section 5.2.3.

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10 A. Bhattacharyya et al./Accounting & Finance

3.2. Variables

Two measures of firm performance, return on assets (ROA) and stock return
(SR) are used. The former is an accounting-based measure that captures
historical financial performance whereas the latter is a market-based measure
that represents the market perception of future performance. ROA is the most
widely used indicator of firm performance with regard to accounting profit.
Stock returns are expected to capture all possible ways that the level of CSR
expenditure and financial inclusion can influence firm performance. According
to the semi-strong interpretation of the efficient markets hypothesis, stock
prices reflect all publicly available information, thereby providing a more
comprehensive picture of firm performance relative to the accounting-based
measures. These measures are also used in the literature. For example, Lys et al.
(2015) use ROA, cash flow from operations (CFO) and SR while Cheng et al.
(2015) use ROA and SR as indicators of firm performance.
To measure financial inclusion at the firm level, we consider five financial
inclusion indicators. They are the number of bank branches, the number of
ATMs, the number of accounts, the amount of bank credit and the amount of
bank deposits. The choice of these financial inclusion variables is consistent
with the previous literature (see, for example, Beck et al., 2007; Sarma and Pais,
2011).
To mitigate the omitted variable problem, we include several control
variables in the regression models. We include control variables that capture
board independence because the Companies Act 2013 includes several key
provisions on corporate governance. However, prior studies by Lys et al.
(2015), Chauvet and Jacolin (2017), Manchiraju and Rajgopal (2017) and
Mukherjee et al. (2018) used only firm-related control variables, ignoring board
independence. We control for firm-related effects for size, risk and profit
margin. Larger firms may have additional resources for CSR spending and,
therefore, may be subject to more pressure to engage in CSR-related activities.
In general, firms with lower risk are more likely to spend on CSR activities
(Orlitzky and Benjamin, 2001).
Variable definitions for measures used in this study are provided in Table 1.

4. Data and descriptive statistics

4.1. Sample

Banking firms and their industry groupings are chosen from Thompson
Reuters DataStream. The main source of data used in this paper is Prowess,
which is the largest database of financial performance of Indian business
entities. This database is maintained by the Centre for Monitoring Indian
Economy (CMIE), an independent Indian think-tank and business

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 A. Bhattacharyya et al./Accounting & Finance 11

Table 1
Variable description

Variable Description

Panel A: Firm performance measures

ROA Profit before tax scaled by total assets at the end of financial year t
SR Annual stock return

Panel B: CSR expenditure variable

CSR Natural logarithm of actual CSR expenditure

Panel C: Financial inclusion variables

BRANCH Natural logarithm of number of branches

ATM Natural logarithm of number of ATMs
ACCOUNT Natural logarithm of number of accounts
CREDIT Natural logarithm of total loan advances
DEPOSIT Natural logarithm of total deposits accepted by commercial backs
FI This is a composite financial inclusion variable that captures the common
components of individual financial inclusion variables. This variable is
estimated from first principal component analysis of five proxies of financial
inclusion

Panel D: Control variables

SIZE Natural logarithm of total assets at the end of a given financial year t
LEVERAGE Total liabilities scaled by total assets at the end of a financial year t. Total
liability is calculated as the sum of current liabilities and non-current
liabilities
ATO Interest income scaled by total assets at the end of a given financial year t
PM Profit before tax scaled by interest income for the financial year t
DIRECTOR Number of independent directors as a proportion of total directors

information company.3 The studies of Gupta (2005), Gopalan et al. (2007),

Vig (2013), and Manchiraju and Rajgopal (2017), among others, have used
this database in their firm-level analysis of Indian companies. By necessity,
data related to firm-level financial inclusion factors is hand-collected from
annual reports and relevant websites.
The data were collected for a sample of 149 banking firm-years over the
period 2015–2017. Our data set is cross-sectional with variables obtained from
(almost) the same set of firms over the sample period. The choice of the sample
period is dictated by the availability of CSR expenditure data. Compliance with
Section 135 of the Indian Companies Act 2013 was made mandatory in 2014,
so CSR expenditure data is mostly available from 2015.

3
More information about this database can be obtained from https://www.cmie.com/
kommon/bin/sr.php?kall=wapps&tabno=7030&page=about_us

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12 A. Bhattacharyya et al./Accounting & Finance

To address the concern that a three-year sample period may not be enough to
capture the impact of CSR expenditure and financial inclusion on firm
performance, we conduct a robustness check. In addition to estimating the
models (Eqns 1–3) for the whole sample period (2015–2017) that generates our
main results, we also estimate the models for yearly sub-periods. We find that
the cross-sectional relation between mandatory CSR expenditure and financial
inclusion with firm performance is remarkably similar across the years and with
the whole sample period. Additionally, we observe that CSR expenditure as a
proportion of income, financial inclusion variables and our measures of firm
performance do not vary significantly across the years (t-statistics for mean
difference of the variables across the years are statistically insignificant). The
stability of our results through our sample period implies that our baseline
results are not sensitive to the length of sample period.4
Our initial sample includes 61 banking firms publicly listed on the Indian
stock exchanges across the sample period. However, we exclude those banks for
which none of the required variables are available. The number of excluded
banks due to data omission is not the same across the years. Therefore,
although our initial sample remains the same (61 banking firms) over the
sample period, in the final sample, the number of sample firms differs in
different years. More specifically, the final sample is 149 banking firm-years and
comprises 49, 52 and 48 banks, respectively, in the years 2015, 2016 and 2017.5

4.2. Descriptive statistics and correlation matrix

Descriptive statistics are presented in Table 2. Panels A, B, C and D,

respectively, display bank performance measures, CSR expenditure variable,
financial inclusion (FI) variables, and control variables.6 Panel A shows that
annualised average ROA and SR are, respectively, 0.87 and 0.74 percent. SR
appears to be a more volatile measure than ROA, as indicated by SR’s higher
standard deviation. The 25th percentile of SR is negative while that of ROA is
marginally positive. The average amount spent on CSR activities by the banks

4
The results pertaining to these analyses are available from the corresponding author on
request.
5
However, we have also undertaken a robustness test of the results on a uniform sample
(44 firms over the period 2015–2017, total 132 firm-year observations). A few
observations were missing from our workable sample that we have imputed using
Markov Chain Monte Carlo assuming a multivariate normal distribution. This data
imputation process is particularly suitable in the case of a non-monotonous data pattern
which matches our case.
6
Although we take the natural logarithm of the actual amount of the CSR expenditure
variable (CSR), FI variables (BRANCH, ATM, ACCOUNT, CREDIT and DEPOSIT)
and one of the control variables (SIZE) for our empirical analysis, descriptive statistics
(reported in Table 2) are based on actual data before taking their natural log.

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 A. Bhattacharyya et al./Accounting & Finance 13

Table 2
Descriptive statistics

Mean Median Standard deviation 25th percentile 75th percentile

Panel A: Firm performance measures

ROA (%) 0.87 0.73 1.59 0.14 1.40

SR (%) 0.74 0.54 2.21 0.56 1.60

Panel B: CSR expenditure variable

CSR 192 27 449 5 133

Panel C: Financial inclusion variables

BRANCH 2,258 1,457 2,734 505 3,210

ATM 3,938 1,667 7,365 820 3,725
ACCOUNTS 5,332,143 1,219,000 11,151,827 167,760 4,940,000
CREDIT 1,490,156 786,420 2,261,194 237,289 1,664,379
DEPOSIT 1,932,349 1,117,195 2,832,681 301,157 2,245,143

Panel D: Control variables

SIZE 2,440,283 1,315,684 3,734,358 353,184 2,744,731

LEVERAGE (%) 6.43 2.93 14.61 2.33 4.37
ATO (%) 8.54 8.24 2.14 7.63 8.83
PM (%) 8.88 8.58 14.73 1.72 15.60
DIRECTOR (%) 29.69 28.57 23.50 6.25 50.00

ROA, return on assets; SR, stock return; CSR, actual amount spent on CSR activities during
the year; BRANCH, number of bank branches; ATM, number of ATMs; ACCOUNTS,
number of accounts; CREDIT, amount of credit provided by each bank; DEPOSIT, amount
of deposit received by each bank; SIZE, firm size; LEVERAGE, level of debt in capital
structure; ATO, asset turnover; PM, profit margin; DIRECTOR, proportion of independent
directors. All variables are explained in Table 1.

is INR192 million or $US2.86 million (Panel B). However, this may be affected
by outliers as we can see that the 25th and 75th percentiles of CSR expenditure
are, respectively, INR5 million ($US0.075 million) and INR133 million
($US1.98 million). From Panel C, it is observed that in general, the banks
have large networks of branches and ATMs. The average number of branches
and ATMs is 2,258 and 3,938, respectively. This large network of branches has
enabled the banks to access a large customer base as indicated by the number of
accounts (an average of 5,332,143), and the amount of credit provided (an
average of 1,490,156) and deposits received (an average of 1,932,349). With
regard to the control variables (Panel D), it can be seen that banks are more
reliant on equity than debt, as on average only 6.43 percent of total capital
comes from debt. Average ATO and PM are about 8 percent each. The
governance variable (DIRECTOR) implies that on average about 30 percent of
the directors on the banks’ boards are independent.

© 2019 Accounting and Finance Association of Australia and New Zealand

 14

Table 3
Correlation matrix

ROA SR CSR BRANCH ATM CREDIT DEPOSIT ACCOUNTS SIZE LEVERAGE ATO PM DIRECTOR

Measures of firm performance

ROA 1.00
SR 0.11 1.00
CSR expenditure
CSR 0.05 0.50*** 1.00
Financial inclusion variables
BRANCH 0.32*** 0.45*** 0.57*** 1.00
ATM 0.22*** 0.49*** 0.71*** 0.93*** 1.00
CREDIT 0.29*** 0.52*** 0.75*** 0.93*** 0.92*** 1.00
DEPOSIT 0.27*** 0.47*** 0.68*** 0.93*** 0.95*** 0.96*** 1.00
ACCOUNTS 0.21** 0.35*** 0.52*** 0.83*** 0.88*** 0.78*** 0.91*** 1.00
Control variables
SIZE 0.33*** 0.50*** 0.73*** 0.92*** 0.91*** 0.99*** 0.95*** 0.78*** 1.00
LEVERAGE 0.64*** 0.18** 0.34*** 0.28*** 0.29*** 0.37*** 0.30*** 0.18* 0.44*** 1.00
ATO 0.58*** 0.26*** 0.38*** 0.41*** 0.39*** 0.48*** 0.40*** 0.23*** 0.53*** 0.68*** 1.00
PM 0.94*** 0.05 0.09 0.27*** 0.14* 0.19** 0.20** 0.19** 0.22** 0.43*** 0.37*** 1.00
DIRECTOR 0.23*** 0.08 0.20** 0.24*** 0.08 0.10 0.12 0.14 0.11 0.04 0.00 0.31*** 1.00

Entries are the Pearson’s bivariate correlation between variables. ROA, return on assets; SR, stock return; CSR, actual amount spent on CSR
A. Bhattacharyya et al./Accounting & Finance

activities during the year; BRANCH, number of bank branches; ATM, number of ATMs; ACCOUNTS, number of accounts; CREDIT, amount
of credit provided by each bank; DEPOSIT, amount of deposit received by each bank; SIZE, firm size; LEVERAGE, level of debt in capital
structure; ATO, asset turnover; PM, profit margin; DIRECTOR, proportion of independent directors. All variables are explained in Table 1. ***,
** and * indicate statistical significance at the 1, 5 and 10 percent level, respectively.

© 2019 Accounting and Finance Association of Australia and New Zealand

 A. Bhattacharyya et al./Accounting & Finance 15

Table 3 presents bivariate correlations between the variables considered in

this study. We observe that the firm performance variables are not highly
correlated, with the correlation coefficient being statistically insignificant at the
conventional level. This result firstly indicates the heterogeneous aspects of
performance captured by these variables, and secondly justifies the use of
multiple performance measures. CSR’s relation to SR (r7 = 0.50) is negative
and statistically significant. However, no statistically significant relation is
found between CSR and ROA. All the FI variables are negatively correlated
with ROA (r ranges between 0.21 to 0.32) and SR (r varies between 0.35 to
0.52). However, CSR is positively correlated with FI variables. All these
correlation coefficients are statistically significant. As expected, FI variables are
highly positively correlated to each other. For example, BRANCH’s correlation
coefficient with ATM, CREDIT and DEPOSIT is 0.93, while with
ACCOUNTS, it is 0.83. We find similar results for other pairs of the FI
variables. Control variables are moderately correlated with each other and also
with FI variables and CSR except for SIZE. SIZE is highly correlated with
CSR (r = 0.73) and FI variables (r ranges from 0.78 to 0.99).

5. Empirical results

5.1. CSR expenditure and firm performance

We first examine the association between firm performance and mandated

CSR expenditure. The results are reported in Table 4. Columns 1 and 2 show
results derived from models with dependent variables of ROA and SR,
respectively. Because of the high correlation of SIZE with CSR, and to avoid
multicollinearity concerns, we orthogonalize the SIZE variable. Specifically, we
regress SIZE on CSR, using the resulting residual as a proxy for SIZE.
We find that ROA is invariant to the level of CSR expenditure, whereas CSR has
a statistically significant (at the 1 percent level) negative association with
contemporaneous SR. This indicates that mandated CSR expenditure is perceived
negatively by investors, a result that is consistent with Manchiraju and Rajgopal
(2017) who find a negative relation between stock prices and mandated spending
on CSR activities. However, our results are somewhat at odds with Lys et al.
(2015) who find an insignificant association between CSR expenditure and future
firm performance. Overall, our result implies that mandated CSR expenditure
does not contribute to improving the operating performance of the banks (as
measured by ROA), and is not favoured by shareholders.
With regard to the control variables, we find that LEVERAGE, ATO and
PM have positive associations with ROA, while SIZE’s coefficient is not
statistically significant. SR is found to be insensitive to all the control variables
except SIZE, which exhibits a negative coefficient that is marginally significant.

7
The term r represents bivariate correlation.

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16 A. Bhattacharyya et al./Accounting & Finance

Table 4
CSR expenditure and firm performance

(1) (2)
Variable ROA SR

C 0.01*** 1.28
(6.94) (1.38)
CSR 0.00 0.38***
(0.23) (6.64)
SIZE 0.00 0.27*
(1.53) (1.71)
LEVERAGE 0.02*** 1.48
(8.89) (0.99)
ATO 0.13*** 10.78
(7.74) (1.03)
PM 0.09*** 0.66
(43.56) (0.51)
DIRECTOR 0.00 0.83
(0.31) (1.15)
Adjusted R2 0.97 0.33
Year fixed effect Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses derived from estimating Equation
(1) using the OLS method. The sample includes 149 banking firm-years over the period 2015–
2017. CSR, actual amount spent on CSR activities during the year; ROA, return on assets;
SR, stock return; SIZE, firm size; LEVERAGE, level of debt in capital structure; ATO, asset
turnover; PM, profit margin; DIRECTOR, proportion of independent directors. All variables
are explained in Table 1. ***, ** and * indicate statistical significance at the 1, 5 and 10
percent level, respectively.

Next, we investigate the relation between financial inclusion and firm

performance. In line with our previous analysis, we use an indicator of financial
inclusion to explain the cross-sectional variation in bank performance as
measured by ROA and SR. We consider five indicators of financial inclusion:
the numbers of branches, ATMs, bank accounts, and the amounts of credit
provided and deposits received. Since these variables are highly correlated, we
do not include them in the same regression model. Instead, the first principal
component analysis is used to isolate the common component among the
variables, and a composite financial inclusion variable (FI) is formed to capture
the common components among the five indicators.8 We observe that FI’s
correlation with individual financial inclusion variables is 0.95 or above,

8
A similar approach is used by Baker and Wurgler (2006). While the principal
components of a list of variables are derived from estimating the eigenvalue
decomposition of observed variance, the first principal component is the original
variables’ unit-length linear combination with maximum variance (for more details, see
Johnson and Wichern, 2013).

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 A. Bhattacharyya et al./Accounting & Finance 17

Table 5
Financial inclusion and firm performance

(1) (2)
Variable ROA SR

C 0.01*** 0.55
(7.44) (0.62)
FI 0.00 0.56***
(0.33) (5.56)
SIZE 0.00 0.48***
(1.00) (2.33)
LEVERAGE 0.02*** 0.00
(9.00) (0.00)
ATO 0.13*** 18.81*
(7.91) (1.77)
PM 0.09*** 0.39
(44.46) (0.30)
DIRECTOR 0.00 0.75
(0.32) (1.00)
Adjusted R2 0.97 0.28
Year fixed effect Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses derived from estimating Equation
(2) using the OLS method. The sample includes 149 banking firm-years over the period 2015–
2017. ROA, return on assets; SR, stock return; FI, financial inclusion; SIZE, firm size;
LEVERAGE, level of debt in capital structure; ATO, asset turnover; PM, profit margin;
DIRECTOR, proportion of independent directors. All variables are explained in Table 1. ***,
** and * indicate statistical significance at the 1, 5 and 10 percent level, respectively.

indicating that very little information is lost in the aggregating process.9

Relevant results are presented in Table 5. Columns 1 and 2 display results for
the models with dependent variables ROA and SR, respectively. We find that
SR has a statistically significant negative association with FI, but we do not find
any statistically significant relation between ROA and FI. These results are
economically rational, because our sample is dominated by government banks.
The government banks’ financial inclusion programs are driven less by a profit
motive and more to extend financial services to the large underprivileged
section of the population. Despite increasing the banking network, financial
inclusion is not associated with increased bank profitability (measured by
ROA). This result indicates that FI mostly achieves social and political
outcomes rather than economic ones. This view is consistent with the investors’
negative interpretation of financial inclusion, as shown by our results.

9
The results pertaining to these analyses are available from the corresponding author on
request.

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18 A. Bhattacharyya et al./Accounting & Finance

Table 6
CSR expenditure, financial inclusion and firm performance

(1) (2)
Variable ROA SR

C 0.01*** 1.75
(5.70) (1.59)
CSR 0.00 0.49***
(0.18) (3.38)
FI 0.00 0.20
(0.30) (0.81)
SIZE 0.00 0.53
(0.40) (1.47)
LEVERAGE 0.02*** 1.88
(8.33) (1.19)
ATO 0.13*** 9.29
(7.55) (0.87)
PM 0.09*** 0.88
(42.54) (0.66)
DIRECTOR 0.00 0.83
(0.31) (1.14)
Adjusted R2 0.97 0.33
Year fixed effect Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses derived from estimating Equation
(3) using the OLS method. The sample includes 149 banking firm-years over the period 2015–
2017. ROA, return on assets; SR, stock return; CSR, actual amount spent on CSR activities
during the year; FI, financial inclusion; SIZE, firm size; LEVERAGE, level of debt in capital
structure; ATO, asset turnover; PM, profit margin; DIRECTOR, proportion of independent
directors. All variables are explained in Table 1. ***, ** and * indicate statistical significance
at the 1, 5 and 10 percent level, respectively.

The associations of control variables with firm performance in the presence

of financial inclusion are somewhat consistent with those presented in Table 4
for CSR. ROA has a positive association with LEVERAGE, ATO and PM.
Although SIZE has a statistically insignificant relation to ROA, its coefficient is
highly significant when SR is the dependent variable. ATO has a positive (but
marginally significant) association with SR. The governance variable (DIREC-
TOR) has a statistically insignificant coefficient across both the measures of
firm performance.
In the next stage, we analyse the cross-sectional variation in firm performance
using both CSR and FI as explanatory variables in the same regression model.
Results are presented in Table 6. In line with our previous results presented in Tables
4 and 5, Column 1 shows that neither CSR nor FI has any statistically significant
relation with the operating performance (measured by ROA) of the commercial
banks in India. The coefficient of neither variable is statistically different from zero.
This result supports our findings that CSR expenditure, being mandated by

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 A. Bhattacharyya et al./Accounting & Finance 19

legislation rather than being voluntarily chosen by the firms, is not associated with
better firm performance, and that FI inclusion, being more a strategy for societal
benefit than corporate profit, also is not associated with better firm performance.
Column 2 shows that CSR expenditure has a statistically significant negative
association with SR, the market-based measure of firm performance. This
result is consistent with our previous findings presented in Table 4, and
supports the interpretation that investors perceive mandatory CSR to be an
additional and unwelcome cost imposed by legislation. In contrast to our
previous findings of a statistically significant negative relation between SR and
FI presented in Table 5, we observe that SR is not associated with FI. This
result indicates that mandated CSR expenditure has a moderating effect on the
relation between SR and FI.10
As indicated earlier, relevant results in the previous literature may be subject to
model misspecification bias. This bias may arise from several sources, such as (i)
the true functional form of the relation between economic and financial variables
being generally unknown, (ii) a single econometric model being unable to
incorporate all the relevant explanatory variables, and (iii) variables themselves
being subject to measurement error. We address the model misspecification bias in
several ways. First, as indicated already, the causal inference of CSR expenditure
and financial inclusion with firm performance is measured by running three
separate regression models (Eqns 1, 2 and 3) with different model specifications.
Second, in estimating each regression model (Eqns 1, 2 and 3), we check the
robustness of results derived from different model specifications such as (i)
including only point-of-interest variable(s) (for example, CSR, FI or both), (ii)
including both point-of-interest and control variables, and (iii) incorporating/
ignoring year-fixed effects.11 As we find consistent results across the models, it may
indicate the absence of model misspecification bias. Third, we use a set of control
variables supported by economic arguments and the previous literature. Fourth,
we use different definitions of the explanatory variables. For example, financial
inclusion is represented by five individual measures and a composite measure of
them. Moreover, although SIZE and LEVERAGE are, respectively, defined as
natural logarithm of total assets and total liabilities scaled by total assets, we also
measure them as the natural logarithm of market capitalisation and non-current
liabilities scaled by non-current assets.12 Finally, to check the general functional

10
While our baseline results are derived from a sample of 149 banking firms (49, 52 and
48 banks respectively in the years 2015, 2016 and 2017), we also estimate our baseline
regression models using a common sample of 44 banking firms each year. We find
remarkably similar results for these two samples. The regression results based on
common samples are presented in Appendix Table A2.
11
Results relating to all these model specifications are presented in Appendix Table A3.
12
Results pertaining to these alternative measures of SIZE and LEVERAGE are not
collated in this paper. However, they can be obtained from the corresponding author on
request.

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20 A. Bhattacharyya et al./Accounting & Finance

form of misspecification, we conduct the regression specification error test

(RESET) of Ramsey (1969). In the case of Equations (1), (2) and (3), the F-statistics
(p-values) are, respectively, 0.05 (0.83), 1.3 (0.25) and 0.10 (0.76) indicating that the
null hypothesis (the model is correctly specified) cannot be rejected.13

5.2. Robustness checks

5.2.1. Individual financial inclusion variables

In the previous subsection, we reported the association between FI and firm

performance where FI is a composite indicator of financial inclusion variables
derived from first principal component analysis of five financial inclusion
indicators. In this subsection, as a robustness check, we report the relation
between firm performance and individual financial inclusion indicators. In
Table 7, only financial inclusion variables are included, while Table 8 includes
both CSR expenditure and financial inclusion measures as explanatory
variables in the regression models.
Panels A and B of Table 7 show the results from a model with dependent
variables of ROA and SR, respectively. In Panel A, we observe that none of the
individual financial inclusion measures (BRANCH, ATM, CREDIT,
DEPOSIT and ACCOUNTS) has a statistically significant positive association
with firm performance as measured by ROA. In Panel B, we show that financial
inclusion variables have a statistically significant (at the 1 percent level)
negative association with firm performance as measured by SR. These results
are consistent with our previous findings presented in Table 5. The signs and
magnitudes of the control variables’ coefficients are also consistent across the
financial inclusion variables and with our previous results.
In Table 8, we observe that the relations of firm performance with CSR
expenditure and individual financial inclusion indicators are less clear.
However, on the whole, they are not inconsistent with our previous results.
In Panel A, we find a statistically significant coefficient for CREDIT, indicating
a negative relation between ROA and CREDIT. However, the coefficient is
estimated to be 0.00, indicating little (if any) economic significance in this
result. In Panel B, we find that CSR has a negative association with SR only
when financial inclusion is measured as BRANCH, DEPOSIT and
ACCOUNTS.

13
The RESET test, a general specification test, examines whether the response variables
can be explained by non-linear combinations of the fitted values. This test is particularly
applicable for the linear regression model and based on the notion that a model is mis-
specified when non-linear combinations of explanatory variables exhibit explanatory
power with regard to the response variable. Under this circumstance, a polynomial or
other non-linear functional form may better explain the data-generating process.

© 2019 Accounting and Finance Association of Australia and New Zealand

 A. Bhattacharyya et al./Accounting & Finance 21

Table 7
Financial inclusion and firm performance

Model 1 Model 2 Model 3 Model 4 Model 5

Panel A: Dependent variable: ROA

C 0.01*** 0.01*** 0.01** 0.01*** 0.01

(4.54) (5.70) (2.74) (3.33) (6.32)
BRANCH 0.00
(0.59)
ATM 0.00
(0.59)
CREDIT 0.00
(0.32)
DEPOSIT 0.00
(0.08)
ACCOUNTS 0.00
(0.75)
Control variables
SIZE 0.00 0.00 0.00 0.00 0.00
(0.76) (1.00) (1.41) (1.25) (0.87)
LEVERAGE 0.02*** 0.02*** 0.02*** 0.02*** 0.02***
(8.99) (9.02) (8.94) (8.98) (9.01)
ATO 0.13*** 0.13*** 0.12*** 0.13*** 0.13***
(7.94) (7.95) (7.63) (7.83) (8.01)
PM 0.09*** 0.09*** 0.09*** 0.09*** 0.09***
(44.74) (44.23) (44.18) (44.41) (44.92)
DIRECTOR 0.00 0.00 0.00 0.00 0.00
(0.29) (0.35) (0.26) (0.28) (0.36)
Adjusted R2 0.97 0.97 0.97 0.97 0.97
Year fixed effect Included Included Included Included Included

Panel B: Dependent variable: SR

C 6.08*** 3.77*** 11.34*** 8.20*** 1.39

(3.69) (3.03) (5.39) (4.21) (1.16)
BRANCH 0.91***
(5.23)
ATM 0.60***
(5.62)
CREDIT 0.86***
(6.51)
DEPOSIT 0.65***
(5.40)
ACCOUNTS 0.20***
(3.44)
Control variables
SIZE 0.53** 0.34* 0.55 0.47** 0.17
(2.44) (1.78) (2.78) (2.26) (0.81)
LEVERAGE 0.40 0.13 0.51 0.07 0.30
(0.26) (0.08) (0.34) (0.05) (0.18)

(continued)

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22 A. Bhattacharyya et al./Accounting & Finance

Table 7 (continued)

Model 1 Model 2 Model 3 Model 4 Model 5

ATO 18.12 18.08* 12.18 19.07* 28.40**

(1.68) (1.70) (1.16) (1.78) (2.560
PM 0.78 0.16 0.18 0.32 1.17
(0.59) (0.12) (0.14) (0.24) (0.85)
DIRECTOR 0.38 0.81 0.88 0.82 0.64
(0.50) (1.07) (1.20) (1.07) (0.80)
Adjusted R2 0.26 0.28 0.32 0.27 0.19
Year fixed effect Included Included Included Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses derived from estimating Equation
(2) using the OLS method. The sample includes 149 banking firm-years over the period 2015–
2017. Models 1, 2, 3, 4 and 5, respectively, include BRANCH, ATM, CREDIT, DEPOSIT
and ACCOUNTS as financial inclusion measures. ROA, return on assets; SR, stock return;
BRANCH, number of bank branches, ATM, number of ATMs; CREDIT, amount of credit
provided by each bank; DEPOSIT, amount of deposit received by each bank; ACCOUNTS,
number of accounts; SIZE, firm size; LEVERAGE, level of debt in capital structure; ATO,
asset turnover; PM, profit margin; DIRECTOR, proportion of independent directors. All
variables are explained in Table 1. ***, ** and * indicate statistical significance at the 1, 5 and
10 percent level, respectively.

5.2.2. CSR expenditure, financial inclusion and subsequent firm performance

Thus far, we have examined CSR expenditure and financial inclusion’s

contemporaneous association with banking firm performance. This analysis
reveals that current CSR expenditure and financial inclusion are unlikely to
drive banks’ current financial performance. However, the studies of Navarro,
(1998), Greening and Turban (2000), Fombrun (2005) and Margolis et al.
(2009), among others, report that current CSR expenditure may lead to
improved future financial performance of firms due to improved legitimacy and
improved acceptability of the firms to their stakeholders. In this subsection, we
empirically verify this conjecture by explaining variation in firm performance
using lagged CSR expenditure and financial inclusion variables. In particular,
we estimate the following regression models:
X
Performancet ¼ aa þ b1a CSRt1 þ li;a Control variablesi;t1 þ e ð4Þ
X
Performancet ¼ ab þ b2a FIt1 þ li;b Control variablesi;t1 þ e ð5Þ

Performancet ¼ ac þ b1b CSRt1 þ b2b FIt1

X ð6Þ
þ li;c Control variablesi;t1 þ e

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 A. Bhattacharyya et al./Accounting & Finance 23

Table 8
CSR expenditure, financial inclusion and firm performance

Model 1 Model 2 Model 3 Model 4 Model 5

Panel A: Dependent variable: ROA

C 0.01*** 0.01*** 0.02* 0.01 0.01

(3.62) (5.15) (1.92) (1.12) (6.30)
CSR 0.00 0.00 0.00** 0.00 0.00
(0.54) (0.53) (2.78) (0.77) (0.41)
BRANCH 0.00
(0.76)
ATM 0.00
(0.75)
CREDIT 0.00**
(2.79)
DEPOSIT 0.00
(0.74)
ACCOUNTS 0.00
(0.82)
Control variables
SIZE 0.00 0.00 0.00*** 0.00 0.00
(0.07) (0.35) (3.09) (1.33) (0.54)
LEVERAGE 0.02*** 0.02*** 0.02*** 0.02*** 0.02***
(8.19) (8.53) (9.43) (8.70) (8.60)
ATO 0.13*** 0.13*** 0.13*** 0.13*** 0.12***
(7.66) (7.64) (8.07) (7.74) (7.36)
PM 0.09*** 0.09*** 0.09*** 0.09*** 0.09***
(42.51) (43.41) (42.78) (42.66) (43.03)
DIRECTOR 0.00 0.00 0.00 0.00 0.00
(0.19) (0.34) (0.14) (0.27) (0.35)
Adjusted R2 0.97 0.97 0.97 0.97 0.97
Year fixed effect Included Included Included Included Included

Panel B: Dependent variable: SR

C 0.31 1.47 2.43 2.84 0.55

(0.14) (1.04) (0.31) (0.81) (0.50)
CSR 0.43*** 0.37 0.34 0.55*** 0.46***
(3.76) (3.19) (1.19) (3.74) 5.61)
BRANCH 0.16
(0.49)
ATM 0.04
(0.18)
CREDIT 0.10
(0.15)
DEPOSIT 0.36
(1.22)
ACCOUNTS 0.09
(1.25)

(continued)

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24 A. Bhattacharyya et al./Accounting & Finance

Table 8 (continued)

Model 1 Model 2 Model 3 Model 4 Model 5

Control variables
SIZE 0.41 0.23 0.18 0.67* 0.46**
(1.25) (0.90) (0.27) (1.84) (2.10)
LEVERAGE 1.73 1.43 1.38 2.05 1.82
(1.09) (0.93) (0.83) (1.31) (1.20)
ATO 10.43 10.94 10.86 8.48 7.82
(0.99) (1.04) (1.03) (0.80) (0.73)
PM 0.80 0.64 0.61 0.94 0.93
(0.61) (0.49) (0.46) (0.72) (0.71)
DIRECTOR 0.89 0.84 0.84 0.79 0.80
(1.21) (1.15) (1.15) (1.09) (1.10)
Adjusted R2 0.32 0.32 0.32 0.33 0.33
Year fixed effect Included Included Included Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses derived from estimating Equation
(3) using the OLS method. The sample includes 149 banking firm-years over the period 2015–
2017. Models 1, 2, 3, 4 and 5, respectively, include BRANCH, ATM, CREDIT, DEPOSIT
and ACCOUNTS as financial inclusion measures. CSR, actual amount spent on CSR
activities during the year; ROA, return on assets; SR, stock return; BRANCH, number of
bank branches, ATM, number of ATMs; CREDIT, amount of credit provided by each bank;
DEPOSIT, amount of deposit received by each bank; ACCOUNTS, number of accounts;
SIZE, firm size; LEVERAGE, level of debt in capital structure; ATO, asset turnover; PM,
profit margin; DIRECTOR, proportion of independent directors. All variables are explained
in Table 1. ***, ** and * indicate statistical significance at the 1, 5 and 10 percent level,
respectively.

Relevant results are reported in Table 9. Panels A and B show the results
from a model with dependent variables of ROA and SR, respectively. We find
that although lagged CSR expenditure does not have a statistically significant
association with firm performance when performance is measured as ROA
(Panel A), it has a significant negative association with market-based firm
performance (SR) (Panel B). This result implies that mandatory CSR
expenditure is not associated with firms’ one-year ahead performance, but is
associated with lower subsequent performance (when stock return is a measure
of firm performance). This is consistent with the results from the contempo-
raneous regressions. Overall, this result supports the idea that financial
inclusion programs are driven more by social and political motives than
economic ones. As such, financial inclusion activities are negatively perceived
by shareholders. Nonetheless, we find evidence of a moderating effect of CSR
expenditure and financial inclusion on firm performance. Neither CSR
expenditure nor financial inclusion has a statistically significant association
with future firm performance when they are combined in a model (column 3 in
Panels A and B).

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 A. Bhattacharyya et al./Accounting & Finance 25

Table 9
CSR expenditure, financial inclusion and firm performance

Variable Model 1 Model 2 Model 3

Panel A: Dependent variable ROA

C 0.01 0.00 0.01

(0.59) (0.44) (0.99)
CSR 0.00 0.00
(0.07) (1.22)
FI 0.00 0.00
(0.32) (1.26)
SIZE 0.00 0.00 0.01
(0.95) (0.95) (1.49)
LEVERAGE 0.06*** 0.06*** 0.05***
(5.12) (4.98) (3.57)
ATO 0.09 0.07 0.08
(0.75) (0.55) (0.67)
PM 0.06*** 0.06*** 0.07***
(5.68) (5.86) (5.71)
DIRECTOR 0.00 0.00 0.00
(0.58) (0.55) (0.64)
Adjusted R2 0.67 0.67 0.68
Year fixed effect Included Included Included

Panel B: Dependent variable SR

C 4.06 2.85 3.73

(1.77) (1.34) (2.46)
CSR 0.40*** 0.26
(3.56) (0.37)
FI 0.72*** 0.27
(3.50) (0.67)
SIZE 0.69** 0.12 0.39
(2.87) (0.41) (0.79)
LEVERAGE 0.35 2.17 1.02
(0.14) (0.85) (3.02)
ATO 18.52 17.49 19.17
(0.75) (0.71) (24.90)
PM 1.95 3.23 2.36
(0.88) (1.52) (2.46)
DIRECTOR 0.25 0.17 0.22
(0.23 (0.16) (1.08)
Adjusted R2 0.21 0.21 0.21
Year fixed effect Included Included Included

Dependent variable: Firm performance measured by ROAt+1 and SRt+1. Entries are the
regression coefficients and t-statistics (standard) within parentheses. Models 1, 2 and 3 are,
respectively, estimated based on Equations (4), (5), and (6) using the OLS method. The
sample includes 149 banking firm-years over the period 2015–2017. CSR, actual amount
spent on CSR activities during the year; FI, financial inclusion; ROA, return on assets; SR,
stock return; SIZE, firm size; LEVERAGE, level of debt in capital structure; ATO, asset
turnover; PM, profit margin; DIRECTOR, proportion of independent directors. All variables
are explained in Table 1. ***, ** and * indicate statistical significance at the 1, 5 and 10
percent level, respectively.

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26 A. Bhattacharyya et al./Accounting & Finance

5.2.3. Alternative model estimation

Since we have used two measures of firm performance, an accounting-based

measure and a market-based measure, our results may not be free from
endogeneity concerns. As noted in the previous subsections, our results do not
indicate an association between CSR expenditure or financial inclusion
activities and the accounting performance measure, but they show negative
associations between stock return and both CSR expenditure and financial
inclusion activities. It is unlikely that poor (good) market performance is a
determinant of high (low) CSR spending, because it is a manifestation of
investors’ reaction to CSR expenditure and it is forward looking. However,
Masulis and Reza (2014) and Bose et al. (2017) among others argue that
accounting-based firm performance may be a determinant of firms’ voluntary
expenditure on social activities. So, in this subsection, we check the sensitivity
of our results (presented in Section 5.1) to alternative model estimations to
consider possible reverse causality or endogeneity. More specifically, while the
regression models (Eqns 1, 2 and 3) were previously estimated using OLS, we
now estimate the models using two-stage least squares (2SLS) and generalised
method of moments (GMM) approaches.
We use the instrumental variable (IV) approach to estimate the 2SLS
regression. To implement the IV approach, we select firm age as a variable that
is correlated with CSR expenditure and financial inclusion but not with ROA.
This follows the prior literature, such as Jo and Harjoto (2011, 2012).
Theoretically, older firms have a higher capacity to be engaged in CSR and
financial inclusion activities. However, firm age is unlikely to be associated with
better firm performance. We use the Durbin–Wu–Hausman test to check if
CSR expenditure and financial inclusion are endogenous. We find that the
coefficient for CSR expenditure is marginally significant, implying that the
relation between CSR expenditure and ROA might be endogenous, but there is
no indication of endogeneity between financial inclusion and ROA.
The 2SLS regression is estimated in two steps. In the first step, the
endogenous variable (for example, CSR expenditure) is regressed on the
instrumental variable (for example, firm age). In the second stage regression,
the residual derived from the first stage is used as a proxy for CSR expenditure
and included as an independent variable in estimating the regression models.
This process addresses the potential endogeneity bias as residuals are
determined exogenously rather than by firm-specific variables (Gul et al.,
2011). A two-step system GMM estimator is also used as an alternative model
estimation. In particular, Wintoki et al.’s (2012) approach is used to derive
system GMM estimates. As indicated earlier, GMM estimation addresses
biases associated with dynamic endogeneity, unobserved heterogeneity and
simultaneity by incorporating instruments in the estimation process (Wintoki
et al., 2012). Moreover, estimation bias arising from persistence is controlled by
the system GMM approach (Sufian and Habibullah, 2010). The relevant results

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 A. Bhattacharyya et al./Accounting & Finance 27

Table 10
CSR expenditure, financial inclusion and firm performance

2SLS GMM

Panel A: Dependent variable: ROA

C 0.01*** 0.01**
(5.16) (3.26)
CSR 0.00 0.00
(0.48) (0.43)
FI 0.00 0.00
(0.11) (0.07)
SIZE 0.00 0.00
(0.38) (0.23)
LEVERAGE 0.02*** 0.02**
(6.62) (2.82)
ATO 0.13*** 0.13***
(5.14) (3.21)
PM 0.09*** 0.09***
(39.32) (18.62)
DIRECTOR 0.00 0.00
(0.64) (0.55)
Adjusted R2 0.97 0.97
Year fixed effect Included Included

Panel B: Dependent variable: SR

C 3.50** 3.50**
(2.41) (2.23)
CSR 0.50** 0.50*
(2.54) (2.27)
FI 0.07 0.06
(0.18) (0.20)
SIZE 0.50 0.50
(1.11) (1.24)
LEVERAGE 0.66 0.66
(0.30) (0.37)
ATO 9.90 9.89
(0.57) (0.70)
PM 0.89 0.89
(0.61) (0.81)
DIRECTOR 0.39 0.39
(0.49) (0.46)
Adjusted R2 0.33 0.46
Year fixed effect Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses. The models are alternatively
estimated using 2SLS and GMM approaches. The sample includes 132 banking firm-years
over the period 2015–2017 (44 banks each year). CSR, actual amount spent on CSR activities
during the year; FI, financial inclusion; ROA, return on assets; SR, stock return; SIZE, firm
size; LEVERAGE, level of debt in capital structure; ATO, asset turnover; PM, profit margin;
DIRECTOR, proportion of independent directors. All variables are explained in Table 1. ***,
** and * indicate statistical significance at the 1, 5 and 10 percent level, respectively.

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28 A. Bhattacharyya et al./Accounting & Finance

are presented in Table 10. Panels A and B display results derived from the
models with ROA and SR as alternative dependent variables.14
We find that results from both 2SLS and GMM approaches are consistent in
terms of direction and strength of the relation of CSR expenditure and financial
inclusion with firm performance. ROA is found to be invariant to the level of
CSR expenditure and financial inclusion while SR responds negatively to CSR
expenditure. The sign, magnitude and statistical significance of the regression
coefficients are in line with the results derived from the OLS estimation
presented in Section 5.1. Overall, this result indicates that our key findings
remain robust to the use of these alternative model estimation approaches.

6. Conclusion

In this paper, we have examined the effects of both mandatory CSR

expenditure and bank-level financial inclusion on bank performance in India,
using both accounting-based and stock market-based measures of financial
performance. While the existing literature only considers voluntary CSR
expenditure as proxied by CSR index scores, the novelty of our paper is the use
of actual CSR expenditure data. We find that when they are assessed
individually, neither CSR expenditure nor financial inclusion is associated with
banks’ operating performance, but both have a negative association with
banks’ stock return. When both are assessed together, neither CSR expenditure
nor financial inclusion has any relation with operating performance and only
CSR expenditure has a negative relation to stock return. This result remains
robust to different model specifications. To some extent, CSR expenditure has a
moderating effect on the relation between financial inclusion and stock return.
Overall, our findings clearly show that mandated CSR expenditure and
financial inclusion are not associated with better financial performance by
banks; rather they are perceived negatively by investors. Although the
legislation is designed to improve social equality and economic development
in India, its success will depend on banks’ willingness to engage with this goal in
the expectation of improved financial performance and/or improved stock
return. Because engagement with the goal and compliance with the legislation
can be avoided simply by providing an explanation for non-compliance, it is
unlikely to occur.
Our findings contribute to the wider policy debate on voluntary versus
mandatory CSR expenditure. Our primary contribution is to present clear
evidence of (i) an insignificant association of mandated CSR spending and
financial inclusion with accounting-based performance, and (ii) a significant
negative association when performance is measured by stock market return.
Additionally, our findings add to the literature on (i) the association of CSR
expenditure and performance, (ii) financial inclusion’s association with banks’

14
These results are based on a common sample of 44 banking firms each year.

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 A. Bhattacharyya et al./Accounting & Finance 29

performance at the firm level, (iii) the function of firm-specific variables in

determining performance, (iv) the economic consequences of mandated CSR
expenditure, and (v) industry-specific CSR.
He et al. (2012) report that voluntary CSR spending leads to positive
economic values in countries with strong law enforcement mechanisms.
However, this relation has not been examined in the context of a weak law
enforcement country using mandated CSR expenditure. Our study provides
empirical evidence that mandated CSR spending is perceived negatively by
investors in India, a country that is generally considered to be a weak law
enforcement country. Moreover, van Beurden and Gossling (2008) called for
industry-specific investigations of organisational social activities to improve the
effectiveness of CSR research. We add to the industry-specific CSR literature
by investigating a critical social aspect of banking firms’ operations: financial
inclusion activities.
Therefore, our study will be particularly valuable to government authorities of
developing and weak law enforcement countries that are considering mandated
CSR expenditure and activities. Additionally, our findings are critical to the
financial institutions that are spending on financial inclusion activities and
considering the incorporation of financial inclusion activities in their operational
activities. Furthermore, our findings are valuable to country-level regulators and
various international organisations that promote financial inclusion activities.
Our study is limited by the relatively small number of banks listed on the
Indian stock exchanges. Our sample period is also constrained from 2015 to
2017. Compliance with Section 135 of the Indian Companies Act 2013 was
made mandatory in 2014. Therefore, CSR expenditure data is mostly available
from 2015. We used banking firms that are listed on the stock exchanges.
Future research could include both listed and non-listed banks and financial
institutions to examine the relations between financial inclusion, CSR
expenditure and performance, as they are equally important to both types of
organisations. Beyond economic performance, financial inclusion and manda-
tory CSR expenditure’s impact on firm productivity and firm export perfor-
mance could be an interesting research area to explore.

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Appendix

Table A1
CSR expenditure, financial inclusion and firm performance

Variable Model 1 Model 2 Model 3

Panel A: Dependent variable ROA

C 0.01*** 0.01 0.01

(4.35) (4.17***) (3.81***)
CSR 0.00 0.00
(0.18) 0.16)
FI 0.00 0.00
(0.21) (0.21)
SIZE 0.00 0.00 0.00
(1.21) (0.61) (0.26)
LEVERAGE 0.02*** 0.02*** 0.02***
(3.12) (3.19) (3.20)
ATO 0.13*** 0.13*** 0.13***
(4.46) (4.39) (4.38)
PM 0.09*** 0.09*** 0.09***
(19.48) (19.30) (18.91)
DIRECTOR 0.00 0.00 0.00
(0.27) (0.28) (0.27)
Adjusted R2 0.97 0.97 0.97
Year fixed effect Included Included Included

Panel B: Dependent variable SR

C 1.28 0.55 1.75

(1.24) (0.55) (1.31)
CSR 0.38*** 0.49***
(6.56) (2.81)
FI 0.56*** 0.20
(5.45) (0.71)
SIZE 0.27** 0.48*** 0.53
(2.15) (2.71) (1.47)
LEVERAGE 1.48 0.00 1.88
(1.17) (0.00) (1.27)
ATO 10.78 18.81 9.29
(1.07) (1.56) (0.96)
PM 0.66 0.39 0.88
(0.79) (0.46) 0.94)
DIRECTOR 0.83 0.75 0.83
(1.06) (0.93) (1.05)

(continued)

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 A. Bhattacharyya et al./Accounting & Finance 35

Table A1 (continued)

Variable Model 1 Model 2 Model 3

2
Adjusted R 0.33 0.28 0.33
Year fixed effect Included Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (Huber-White) within parentheses derived from estimating the
models using the OLS method. The sample includes 149 banking firm-years over the period
2015–2017. Models 1, 2 and 3 are, respectively, estimated based on Equations (1), (2) and (3).
CSR, actual amount spent on CSR activities during the year; FI, financial inclusion; ROA,
return on assets; SR, stock return; SIZE, firm size; LEVERAGE, level of debt in capital
structure; ATO, asset turnover; PM, profit margin; DIRECTOR, proportion of independent
directors. All variables are explained in Table 1. ***, ** and * indicate statistical significance
at the 1, 5 and 10 percent level, respectively.

Table A2
CSR expenditure, financial inclusion and firm performance (common sample)

Variable Model 1 Model 2 Model 3

Panel A: Dependent variable ROA

C 0.01*** 0.01*** 0.01***

(5.18) (5.19) (5.16)
CSR 0.00 0.00
(1.52) (0.48)
FI 0.00 0.00
(1.44) (0.11)
SIZE 0.00 0.00 0.00
(1.20) (0.07) (0.38)
LEVERAGE 0.02*** 0.02*** 0.02***
(8.65) (7.87) (6.62)
ATO 0.13*** 0.14*** 0.13***
(5.60) (5.37) (5.14)
PM 0.09*** 0.09*** 0.09***
(40.85) (42.51) (39.32)
DIRECTOR 0.00 0.00 0.00
(0.65) (0.63) (0.65)
Adjusted R2 0.97 0.97 0.97
Year fixed effect Included Included Included

Panel B: Dependent variable SR

C 3.51** 2.70* 3.50**

(2.42) (1.86) (2.41)
CSR 0.47*** 0.50**
(6.16) (2.54)
FI 0.80*** 0.07
(5.47) (0.18)

(continued)

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36 A. Bhattacharyya et al./Accounting & Finance

Table A2 (continued)

Variable Model 1 Model 2 Model 3

SIZE 0.42** 0.49** 0.50

(2.32) (2.16) (1.11)
LEVERAGE 0.41 2.64 0.66
(0.24) (1.45) (0.30)
ATO 11.18 18.97 9.90
(0.71) (1.09) (0.57)
PM 0.83 0.46 0.89
(0.58) (0.33) (0.61)
DIRECTOR 0.39 0.33 0.39
(0.49) (0.41) (0.49)
Adjusted R2 0.34 0.30 0.33
Year fixed effect Included Included Included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics within parentheses derived from estimating the models using the
OLS method. The results are based on a common sample of 44 firms over a period 2015–2017
(132 firm-year observations). Models 1, 2 and 3 are, respectively, estimated based on
Equations (1), (2) and (3). CSR, actual amount spent on CSR activities during the year; FI,
financial inclusion; ROA, return on assets; SR, stock return; SIZE, firm size; LEVERAGE,
level of debt in capital structure; ATO, asset turnover; PM, profit margin; DIRECTOR,
proportion of independent directors. All variables are explained in Table 1. ***, ** and *
indicate statistical significance at the 1, 5 and 10 percent level, respectively.

Table A3
CSR expenditure, financial inclusion and firm performance

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Panel A: Dependent variable: ROA

C 0.01*** 0.01*** 0.01*** 0.01*** 0.01*** 0.01***

(3.47) (3.68) (6.94) (7.44) (5.70) (6.01)
CSR 0.00 0.00 0.00 0.00
(0.63) (0.23) (0.18) (0.31)
FI 0.00*** 0.00 0.00 0.00
(3.48) (0.33) (0.30) (0.32)
SIZE 0.00 0.00 0.00 0.00
(1.53) (1.00) (0.40) (0.85)
LEVERAGE 0.02*** 0.02*** 0.02*** 0.02***
(8.89) (9.00) (8.33) (8.52)
ATO 0.13*** 0.13*** 0.13*** 0.12***
(7.74) (7.91) (7.55) (6.82)
PM 0.09*** 0.09*** 0.09*** 0.09***

(continued)

© 2019 Accounting and Finance Association of Australia and New Zealand

 A. Bhattacharyya et al./Accounting & Finance 37

Table A3 (continued)

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

(43.56) (44.46) (42.54) (41.11)

DIRECTOR 0.00 0.00 0.00 0.00
(0.31) (0.32) (0.31) (0.11)
Adjusted R2 0.01 0.07 0.97 0.97 0.97 0.96
Year fixed effect Included Included Included Included Included Not included

Panel B: Dependent variable: SR

C 2.37*** 1.16*** 1.28 0.55 1.75 1.26

(7.62) (4.20) (1.38) (0.62 (1.59) (1.12)
CSR 0.37*** 0.38*** 0.49*** 0.42**
(7.28) (6.64) (3.38) (2.79)
FI 0.47*** 0.56*** 0.20 0.04
(6.49) (5.56) (0.81) (0.17)
SIZE 0.27* 0.48** 0.53 0.35
(1.71) (2.33) (1.47) (0.94)
LEVERAGE 1.48 0.00 1.88 1.15
(0.99) (0.00) (1.19) (0.71)
ATO 10.78 18.81* 9.29 4.62
(1.03) (1.77) (0.87) (0.42)
PM 0.66 0.39 0.88 0.17
(0.51) (0.30) (0.66) (0.13)
DIRECTOR 0.83 0.75 0.83 1.17
(1.15) (1.00) (1.14) (1.56)
Adjusted R2 0.30 0.25 0.33 0.28 0.33 0.27
Year fixed effect Included Included Included Included Included Not included

Dependent variable: Firm performance measured by ROA and SR. Entries are the regression
coefficients and t-statistics (standard) within parentheses derived from estimating the models
using the OLS method. The sample includes 149 banking firm-years over the period 2015–
2017. Models 1 and 2, respectively, include CSR expenditure and financial inclusion as
explanatory variables; models 3 and 4, respectively, include CSR expenditure and financial
inclusion along with the control variables; and models 5 and 6, respectively, include and
exclude year fixed effects incorporating CSR expenditure, financial inclusion and control
variables. CSR, actual amount spent on CSR activities during the year; FI, financial
inclusion; ROA, return on assets; SR, stock return; SIZE, firm size; LEVERAGE, level of
debt in capital structure; ATO, asset turnover; PM, profit margin; DIRECTOR, proportion
of independent directors. All variables are explained in Table 1. ***, ** and * indicate
statistical significance at the 1, 5 and 10 percent level, respectively.

© 2019 Accounting and Finance Association of Australia and New Zealand

Edith Cowan University
Research Online

ECU Publications Post 2013

2016

Corporate governance and environmental disclosure in the

Indonesian mining industry
Terri Trireksani

Hadrian Geri Djajadikerta

Edith Cowan University

Follow this and additional works at: https://ro.ecu.edu.au/ecuworkspost2013

Part of the Accounting Commons

10.14453/aabfj.v10i1.3
This is an Author's Accepted Manuscript of: Trireksani, T., & Djajadikerta, H. G. (2016). Corporate Governance and
Environmental Disclosure in the Indonesian Mining Industry. Australasian Accounting, Business and Finance
Journal, 10(1), 18. Available here.
This Journal Article is posted at Research Online.
https://ro.ecu.edu.au/ecuworkspost2013/1996
 Australasian Accounting, Business and Finance
Journal
Volume 10 | Issue 1 Article 3

Corporate Governance and Environmental

Disclosure in the Indonesian Mining Industry
Terri Trireksani
Murdoch University, Australia, T.Trireksani@murdoch.edu.au

Hadrian Geri Djajadikerta

Edith Cowan University, Australia, h.djajadikerta@ecu.edu.au

Follow this and additional works at: http://ro.uow.edu.au/aabfj

Copyright ©2016 Australasian Accounting Business and Finance Journal and Authors.

Recommended Citation
Trireksani, Terri and Djajadikerta, Hadrian Geri, Corporate Governance and Environmental
Disclosure in the Indonesian Mining Industry, Australasian Accounting, Business and Finance Journal,
10(1), 2016, 18.
Available at:http://ro.uow.edu.au/aabfj/vol10/iss1/3

Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library:
research-pubs@uow.edu.au
Corporate Governance and Environmental Disclosure in the Indonesian
Mining Industry
Abstract
Sustainability and corporate governance issues are now considered to be important and integral aspects of
company performance. Both have established themselves as well-studied topics in the organisational and
accountability areas. While there has been a growing interest to study the relationship between these two
areas, research publication in this topic is still mainly focused on the Western societies. This study focuses on
the corporate governance and sustainability disclosure practices in one of the emerging economies, Indonesia,
and assesses the relationships between corporate governance variables and the extent of environmental
disclosures made by the mining companies listed in the Indonesia Stock Exchange (IDX) in their annual
reports. The main findings of this study show that the extent of environmental disclosure made by these
companies was moderate, and that there is a significant positive relationship between the size of board of
directors and the extent of environmental disclosure.

Keywords
Corporate governance, Environmental disclosure, Mining industry, Indonesia

This article is available in Australasian Accounting, Business and Finance Journal: http://ro.uow.edu.au/aabfj/vol10/iss1/3
 Corporate Governance and
Environmental Disclosure in the
Indonesian Mining Industry
Terri Trireksani1 and Hadrian Geri Djajadikerta2,

Abstract
Sustainability and corporate governance issues are now considered to be important and
integral aspects of company performance. Both have established themselves as well-
studied topics in the organisational and accountability areas. While there has been a
growing interest to study the relationship between these two areas, research publication
in this topic is still mainly focused on the Western societies. This study focuses on the
corporate governance and sustainability disclosure practices in one of the emerging
economies, Indonesia, and assesses the relationships between corporate governance
variables and the extent of environmental disclosures made by the mining companies
listed in the Indonesia Stock Exchange (IDX) in their annual reports. The main findings
of this study show that the extent of environmental disclosure made by these companies
was moderate, and that there is a significant positive relationship between the size of
board of directors and the extent of environmental disclosure.

JEL Classification: L71, M40

Keywords: Corporate governance, Environmental disclosure, Mining industry,

Indonesia

                                                            
1
 Murdoch University, Australia 
t.trireksani@murdoch.edu.au 
2
 Edith Cowan University, Australia 
h.djajadikerta@ecu.edu.au 
 Trireksani & Djajadikerta | Corporate governance and environmental disclosure in the Indonesian mining industry

1. Introduction

There has been a growing interest in the issue of corporate governance and its integration
within the concept of sustainability in recent years (see e.g., Cuesta and Valor 2013;
Galbreath 2013; Kolk and Pinkse 2009). Environmental, social and corporate governance
issues are now considered to be important and integral aspects of company performance.
However, the body of literature on the impact of corporate governance aspects on
sustainability disclosure is still relatively small and has so far focused largely on developed
countries (Jo and Harjoto 2012; Michelon and Parbonetti 2012; Rao, Tilt and Lester 2012).
It has been suggested that emerging markets have a tendency to show weaker
measures of corporate governance and sustainability (Peters, Miller and Kusyk 2011).
However, it is difficult to evaluate the interaction between corporate governance
characteristics and the extent of sustainability disclosure in emerging economies since little
has been published on this issue. In response to this state, this study focuses on the corporate
governance and sustainability disclosure practices in one of the emerging economies,
Indonesia. Indonesia is the biggest country in the South East Asia region. Indonesia, together
with the BRIC countries (Brazil, Russia, India and China), Mexico, South Korea and Turkey,
are currently considered the largest eight emerging economies. It is a highly pluralistic multi-
religion emerging country with dozens of present ethnicities and hundreds of different local
dialects (Djanali, n.d.). It also has quite high disparity in social, economic, technological
infrastructure and natural resources.
Gunawan, Djajadikerta and Smith (2009) examined corporate sustainability
disclosures in the annual reports of listed companies in Indonesia during the period of 2003-
2006 and found that companies in the environmentally sensitive industries, such as mining,
tended to disclose more environmental information compared to companies in the other
industries. The current data shows that listed Indonesian mining industry’s market
capitalization at the end of 2012 was 321,167 billion rupiah (approximately 32.8 billion US
dollars), which represented 7.8% of the total market capitalization of all listed Indonesian
companies (Indonesia Stock Exchange, 2013). PwC Indonesia (2013) in its annual review of
trends in the Indonesian mining industry reported that the mining sector in 2012 accounted
for approximately 6% of Indonesian GDP, and more than 17% of export revenues.
Taking the above discussion on board, this study focuses on corporate governance
characteristics and disclosures of environmental activities of the mining companies listed in
the Indonesia Stock Exchange (IDX), and aims to assess the relationships between corporate
governance variables and the extent of environmental disclosures made by these companies
in their 2012 annual reports.
The remainder of this paper is organised as follows. The second section provides a
discussion on corporate environmental disclosure and corporate governance, and develops
three research propositions. The third section describes the research methods. This is
followed by discussion of the findings. The paper ends with conclusions and suggestions for
future research.

2. Conceptual discussion and research propositions

The area of sustainability reporting, which includes the issue of environmental disclosure, has
established itself as a well-studied topic in accounting and accountability areas (see e.g.,
Clarkson et al. 2008; Clarkson, Overell and Chapple 2011; van Staden and Hooks 2007).
Similarly, the area of corporate governance has attracted much attention since three decades
ago and it has become one of the most studied areas in the organisational field (see e.g.,
Walls, Berrone and Phan 2012). While there has been a growing interest to study the link

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AABFJ | Volume 10, no. 1, 2016 

between the areas of corporate governance and sustainability reporting (see e.g., De Graff and
Stoelhorst 2013; Morgan, Ryu and Mirvis 2009; Kolk and Pinkse 2009), research publication
in this topic is still relatively scant. Among the existing studies in this topic, most of them
have been conducted in Western societies (e.g., Aras and Crowther 2008; Kolk 2008;
Michelon and Parbonetti 2012; Shrivastava and Addas 2014).
Corporate environmental performance relates to the effects of actions performed or
measures taken by companies on natural resources. Positive environmental performance
relates to actions or measures that show respect to the earth and its ecosystems (Kommadath,
Sarkar and Rath 2012; Radu 2012). For mining companies, these include measures that
minimise harm to the ecosystems such as clean excavation technologies and land remediation.
In terms of disclosing environmental activities, mining companies in general have become a
pioneer in the provision of environmental reports. In 2002, for example, eight of the ten
biggest global mining companies published annual stand-alone sustainability reports (Jenkins
and Yakovleva 2006). In Indonesia, mining has been found to be one of the industries that
provided the most environmental information in their annual reports compared to the other
industries (Gunawan et al. 2009).
Many studies on corporate governance in relation to sustainability issues have
considered the role of the board in the form of size, diversity and independence (e.g., Al-
Shammari and Al-Sultan 2010; Barros, Boubaker and Hamrouni 2013; Rao et al., 2012;
Rupley, Brown and Marshall 2012; Samaha et al. 2012; Said, Zainuddin and Haron 2009).
Board size refers to the number of directors on a company’s board. There have been
conflicting opinions regarding the appropriate size for a company’s board. One side of the
argument suggests that larger boards can increase the quality of collective control and
decision-making by utilising the diversities of knowledge and expertise in the board (e.g.,
Bonn 2004; Laksmana 2008). The other side of the argument claims in favour of smaller
sized boards since they are considered more effective in achieving a collective decision and
in monitoring management’s actions (Cheng 2008; Lakhal 2005).
With regard to the effect of board size on the level of sustainability disclosure, some
recent studies have found a significant positive relationship between board size and the level
of sustainability disclosure (e.g., Rao et al. 2012; Said et al. 2009). This study follows these
findings and develops a tentative proposition namely:
P1. There is a positive relationship between board of directors size of listed mining
companies in Indonesia and the extent of environmental disclosure made by these
companies.

It has been suggested that gender diversity on the board of directors generates a
positive effect on companies’ decision-making process and performance since female
directors are diligent, committed and involved (e.g., Bonn 2004; Huse and Solberg 2006; Rao
et al. 2012; Webb 2004). Consequently, it has been suggested that gender diversity on the
board would be positively associated with level of environmental disclosure (Rupley et al.
2012).
Some recent studies have found a significant positive relationship between the
proportion of female directors on the board and the level of environmental disclosure (e.g.,
Rao et al. 2012; Rupley et al. 2012). Therefore, this study follows these findings and
develops a tentative proposition namely:
P2. There is a positive relationship between the proportion of female directors on the boards
of listed mining companies in Indonesia and the extent of environmental disclosure made
by these companies.

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 Trireksani & Djajadikerta | Corporate governance and environmental disclosure in the Indonesian mining industry

The presence of independent directors on the board of a company is important to

ensure an adequate degree of independence from shareholders, therefore allowing the
company to pursue the interests of both the shareholders and the stakeholders (Haniffa and
Cooke 2005). Previous findings regarding the relationship between proportion of independent
directors and the level of sustainability disclosure have been varied. Some studies found a
positive relationship between the two variables (e.g., Rao et al. 2012; Webb 2004; Rupley et
al. 2012), while some others found no relationship between the two variables (e.g., Brammer
and Pavelin 2006; Said et al. 2009).
The samples used in most of these studies were the largest or the most active
companies listed in the stock exchange. Rao et al. (2012), for example, used the largest 100
Australian firms listed in the Australian Stock Exchange (ASX) in 2008. Said et al. (2009)
applied a stratified sampling method to select 150 companies from the main board of
Malaysian listed companies for the year ended 2006. Brammer and Pavelin (2006) used 447
companies drawn from the FTSE All-Share Index.
Rupley et al. (2012), however, employed a sample of 361 US companies listed in the
Dow Jones Global Index, drawn from five industries: (i) chemical, (ii) oil and gas, (iii)
electrical utilities, (iv) pharmaceutical and biotech, and (v) food and beverage. These
industries have been categorised as sensitive industries in previous studies (e.g., Gunawan et
al. 2009; Hackston and Milne 1996; Raar 2002; Roberts 1992). Deegan and Gordon (1996)
described the sensitive industries as those which are perceived as more environmentally
damaging than those which operate in environmentally non-sensitive industries. Since the
sample used in this study is the mining industry, which is a sensitive industry, we follow
Rupley et al.’s (2012) finding, and set the following proposition.
P3. There is a positive relationship between the proportion of independent directors on the
boards of listed mining companies in Indonesia and the extent of environmental
disclosure made by these companies.

3. Research methods

3.1. Sample and data collection

The sample used in this study was all mining companies listed in the Indonesia Stock
Exchange (IDX) at the end of 2012. The list of the companies was collected from the IDX
Fact Book 2013 (Indonesia Stock Exchange, 2013) and the Indonesia Stock Exchange
website (www.idx.co.id). 38 listed mining companies were found from this directory. The
mining industry includes companies that operate in coal mining (21 companies), crude
petroleum and natural gas production (7 companies), metal and mineral mining (8
companies), and land/stone quarrying (2 companies). 2012 annual reports for these 38
companies were collected from the Indonesia Stock Exchange website (www.idx.co.id) and
from the companies’ corporate websites.

3.2. Environmental disclosure analysis

Content analysis was used to determine the extent of environmental disclosures made by
these companies in their annual reports. Content analysis is a research technique that applies
systematic procedures for analysing the content of written medium and converting them into
quantitative measures (Krippendorff 1980; Wolfe 1991). This method has been considered as
the most widespread form of data measurement used in studies that involve disclosures (see
e.g., Gray, Kouhy and Lavers 1995), and it has been commonly adopted, in various forms, in
previous social and environmental disclosure studies (e.g., Guthrie and Mathews 1985;
Guthrie and Parker 1990; Hackston and Milne 1996).

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AABFJ | Volume 10, no. 1, 2016 

In this study, we adopted a scoring approach used by Djajadikerta and Trireksani

(2012) on the examination of environmental disclosure by Indonesian listed companies in
their corporate websites, which was adopted and adjusted based on the previous work of
Cross and Djajadikerta (2004), Freedman and Wasley (1990), Ingram and Frazier (1980),
Walden and Schwartz (1997), and Wiseman (1982). In this approach, the extent of the
environmental disclosure was scored based on the three dimensions of evidence, timeframe
and specificity (see Table 1).

Table 1. Components of environmental disclosure extent score

Dimension Item Score
Evidence Monetary / Quantitative 3
Non-monetary / Qualitative 2
Declarative 1
No evidence 0

Time frame Future 2

Present 2
Past 1
No time frame 0

Specificity Specific 1
General 0

If there was no evidence of environmental disclosure, a score of zero was awarded. If

environmental disclosure was present, the scoring system described in Table 1 was used to
determine the score each dimension item of the disclosure. The total score ranges from zero
to six for each company and it represents a measure of environmental disclosure extent. An
environmental disclosure extent index (EDEI) for each company is calculated by dividing the
mean by six, which is the maximum possible total score.

3.3. Corporate governance variables

There are three corporate governance variables used in this study. Board of directors size (BS)
is measured by the number of directors on the board, proportion of female directors on the
board (FD) is measured by percentage of female directors on the board, and proportion of
independent directors on the board (ID) is measured by the percentage of independent
directors on the board. The correlations between these variables and the extent of
environmental disclosures made by the mining companies in this study were measured by
Spearman’s coefficients.

4. Analysis and findings

4.1. The extent of environmental disclosure made by Indonesian listed mining companies
Descriptive statistics of the content analysis for the extent of environmental disclosures made
by the 38 listed mining companies at IDX showed a minimum score of 0, a maximum score
of 6, and a mean of 2.39. This descriptive statistics indicated that the extent of environmental
disclosure made by these mining companies on their annual reports was moderate, with an
extent index of 0.39.

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 Trireksani & Djajadikerta | Corporate governance and environmental disclosure in the Indonesian mining industry

The data also showed a huge contrast in environmental disclosure practices among
these companies. 37% of the companies in the target sample significantly disclosed their
environmental activities and received a score of four and above, while the remaining 63% of
the companies in target sample barely disclosed any environmental activities and received a
score of one or zero. One example of the disclosure which provided monetary evidence, clear
time frame, and specific information is as follows:

During 2012, [our firm] completed management policies on environmental

management and mine closures. The firm also established performance standards for
caring for the environment, such as compliance with waste quality standards in all
operating units and post-mining and received GREEN PROPER rating for Precious
Metals Processing and Refinery Business Unit, BLUE PROPER rating for Southeast
Sulawesi Nickel Mining Business Unit, North Maluku Nickel Mining Business Unit
and Gold Mining Business Unit. The Southeast Sulawesi Nickel Mining Business Unit
also received Gold Award for Best Environmental Performance 2012 in Mineral IUP
Category. … In addition, [our firm] implemented a program to reclaim damaged land
and plant trees that resulted in 1.44 million trees planted, exceeding a target of 1.25
million trees. … In line with the principles of sustainability, [our firm’s] economic
performance achievement is also coupled with a commitment to preserving the
environment. We were also actively involved in efforts to reduce greenhouse gas
(GHG) emissions through tree planting program, emission reduction, and the use of
alternative renewable energy, water treatment and waste management. [Our firm]
spent Rp. 111 billion for environmental management activities in 2012, 5% higher
compared to 2011. Tree planting program was implemented in conjunction with [our
firm’s] efforts in post-mining land reclamation. One of them was planting 350,000
trees on post-mining land covering 22 hectares in Southeast Sulawesi Nickel Mining
Business Unit area. … We also organized training to calculate the potential
absorption of carbon dioxide (CO2) by the tree planting activities on 27 hectares area
of post-mining land in three business unit regions. The calculations that were done
during the training held by the Ministry of Environment, showed potential CO2
absorption reached 502.7 tons of CO2 eq. … We also optimized water use in all
business units under strict supervision to ensure the treated waste water meet quality
standards according to regulations. The total amount of water that has been recycled
in 2012 reached 3,817,737 cubic meters. …[1]

4.2. The relationship between board of directors size and the extent of environmental
disclosure
Descriptive statistics for board of directors size showed a minimum number of 2, a maximum
number of 10, and an average number of 4.61 directors on the board, with most of the
companies having 4 to 6 directors.
The first proposition (P1) predicted that board of directors size would be positively
associated with the extent of environmental disclosure. The result of the analysis showed a
statistically significant positive relationship between board of directors size and the extent of
environmental disclosure (ρ= 0.591271; p-level: 0.000093), and therefore the first proposition
(P1) is supported.
This result is consistent with Rao et al.’s (2012) and Said et al.’s (2009) findings. This
indicates that for mining companies in Indonesia a larger board size allowed the synergy of
expertise to be executed effectively in achieving and disclosing their environmental activities.
This result must be interpreted with care by considering the descriptive data, which shows
that most of the companies (27 of 38) had between 4 to 6 directors in the board. This may

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AABFJ | Volume 10, no. 1, 2016 

imply that even though, in this sample, a larger board size links positively with the extent of
environmental disclosure, the overall actual board size of the boards in this sample was
moderate. A different effect may be found if the numbers of directors on these companies’
boards are significantly increased.

4.3. The relationship between proportion of female directors on the board and the extent of
environmental disclosure
Descriptive statistics for proportion of female directors showed a minimum of 0%, a
maximum of 66.67%, and an average of 8.84% female directors on the board.
The second proposition (P2) predicted that proportion of female directors would be
positively associated with the extent of environmental disclosure. The result of the analysis
showed that the relationship between proportion of female directors and the extent of
environmental disclosure was statistically not significant (ρ= -0.075956; p-level: 0.650378),
and therefore the second proposition (P2) is not supported.
This result is not consistent with Rao et al. (2012) and Rupley et al. (2012) who found
a positive relationship between the proportion of female directors on the board and the level
of environmental disclosure.
Descriptive statistics may provide a possible explanation for this result. The data
showed that most of the companies (i.e. 25 of 38) had no female director in their boards. Nine
companies had only one female director and the remaining four companies had two female
directors in their boards. This might indicate that the governance in the Indonesian mining
industry was male-dominated. Since the percentage of female directors in these companies
was low, it was likely they had very little chance to have an impact on the decision making
process, including the decision regarding the environmental disclosure practice.

4.4. The relationship between proportion of independent directors on the board and the
extent of environmental disclosure
Descriptive statistics for proportion of independent directors showed a minimum of 0%, a
maximum of 100%, and an average of 41.80% independent directors on the board.
The third proposition (P3) predicted that proportion of independent directors would be
positively associated with the extent of environmental disclosure. The result of the analysis
showed that the relationship between proportion of independent directors and the extent of
environmental disclosure was statistically not significant (ρ= -0.072358; p-level: 0.665949),
and therefore the third proposition (P3) is not supported.
This result is consistent with Said et al. (2009) who found no relationship between the
proportion of independent directors and the level of sustainability disclosure. It is interesting
to see that in Said et al’s (2009) study, the sample companies had 63% independent directors
on their boards, while the sample companies in this study had only 41.80%. This may
indicate a contingency effect, in which the proportion of independent directors, whether
larger or smaller, may or may not affect the level of disclosure. It is the fit of the board
independence to the contingency that may affect the disclosure practice.
Descriptive statistics also showed that there was little variation in the number of
independent directors on the board. Most of the companies (i.e. 23 of 38) had only one
independent director in their boards. Two companies even had no independent director in
their boards. This might indicate that for the majority of the companies in the sample, the role
of an independent director was mostly filled in for compliance and complementary purposes.
Hence, in practice, their roles might not be significant.

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 Trireksani & Djajadikerta | Corporate governance and environmental disclosure in the Indonesian mining industry

5. Conclusions

The findings of this study suggest a few important aspects concerning the practice of
environmental disclosure made by listed mining companies in Indonesia. Firstly, the extent of
environmental disclosure made by these companies on their annual reports was moderate. It
was interesting to see that although the majority of these companies (63%) did not disclose
their environmental activities, the remaining 37% of these companies provided significant
disclosures of their environmental activities. Secondly, the study found that the majority of
these mining companies (66%) did not have any female director in their boards. The
remaining 34% of these companies only had one or two female directors in their boards. This
indicated clearly that the governance structure in the Indonesian mining industry was male-
dominated. Thirdly, the study found that the majority of these mining companies (61%) only
had one independent director in their boards, and two companies did not even have any
independent director in their boards. This to some extent leads to a question about
independence, control and the effectiveness of the boards.
With regard to the relationships between corporate governance variables and the
extent of environmental disclosure made by listed mining companies in Indonesia, this study
found a significant positive relationship between board of directors size and the extent of
environmental disclosure. The proportion of female directors on the board and the proportion
of independent directors on the board were found to have no relationships with the extent of
environmental disclosure made by listed mining companies in Indonesia. These results,
however, must be inferred cautiously since the majority of the companies in the sample had
small numbers of female and/or independent directors in their boards.
There are a few limitations of this study that should be considered. Firstly, the study
used a single source of data of environmental reporting, which was the annual reports.
Secondly, even though the study used all of the mining companies that were listed in the
Indonesia Stock Exchange (IDX) at the end of 2012, the total number of companies was
relatively small (i.e. 38 companies). An in-depth qualitative approach may help provide a
more profound understanding of these relationships.

Note
[1] Statements were shortened and the name of the company was undisclosed.

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