Research on the Influential Factors of CSR Information Disclosure

ORIENT ACADEMIC FORUM
Research on the Influential Factors of CSR Information Disclosure
YUAN Yun
School of Management, Southwestern University of Nationalities, China, 610041
[email protected]
Abstract: The paper empirically researched on relationship between influential factors and CSR
information disclosure based on the CSRDI (Corporate Social Responsibility Disclosure Index). The
paper selects A-share companies listed in Shanghai and Shenzhen Stock Exchanges in 2007 as a sample.
The results show that the corporation size, corporation performance and industry significantly and
positively affect the disclosure of CSR information, while the ratio of independent directors and the
structure of management are not decisive elements.
Keywords: CSR (Corporate Social Responsibility), Influential factors, Information disclosure,
Corporate governance
1 Introduction
Corporate social responsibility (CSR) has become a much-discussed subject in the business world and a
number of issues have arisen, such as CSR information disclosure. Why do firms voluntarily disclose
information to external parties? Why do some firms choose to provide more extensive disclosures than
do other firms? Are there some factors which influent the CSR information disclosure?
In order to investigate the level of CSR information influenced by kinds of reasons, this paper aims to
identify the factors that determine the disclosure level of CSR information and to give an empirical
observation on Chinese listed companies. It turns out that the size, achievement and business are the
main infective factors of information disclosure of CSR for listed companies. The variable force of
Corporate Governance didn’t have remarkable effect on the information disclosure of CSR. This is
mainly because that in the practical situation in china nowadays, the mechanism of the Listed Company
Governance is still incomplete and doesn’t have enough influence on the information disclosure of CSR
of listed companies. Especially the increase of the numbers of independent directors doesn’t have the
power to restrict the actions of executive directors and to monitor the opportunistic behavior of the
managers. Besides, the insufficient demand of the Social Responsibility Information from the pressure
group also leads to the lack of desire to disclose the Social Responsibility Information for listed
companies.
The study also tells us that the information disclosure of CSR is still at the attempt and initiating stage,
consequently the habit of providing and using the Social Responsibility Information has not been
formed for enterprises and relevant stakeholders. The promotion of the information disclosure of CSR
will still be the field of our further study in the future.
2 The Literature Review
2.1 Legality is the motive to disclose CSR information
Gray (1995) considered that the theory of legality can most explain the information disclosure.1
Deegan, his colleagues (1996, 1998, 1999) and Patten’s (1991,1992) 2 research indicated when
corporations get trapped in circumstance pollution, disobeying human rights and action at law, they
1
Gray, R. R Kouhy and S Lavers, Corporate Social and Environmental Reporting, A Review of the Literature and a
Longitudinal Study of UK Disclosure Accounting Auditing and Accountability Journal, 1995.47.
2
Patten, D. M, Exposure, Legitimacy and Social Disclosure. Journal of Accounting and Public Policy, 1991, 10,
297-308; Patten, D. M, Intra-industry Environmental Disclosures in Response to the Alaskan Oil Spill: Anode on
Legitimacy Theory. Accounting, Organizations and Society, 1992(17):471-475
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ORIENT ACADEMIC FORUM
preferred disclosing more abundant CSR information. Mark J. Epstein and Martin Freedman (1994)
thought that to abide by laws was one of the main reasons for CSR information disclosure.
2.2 Cost and benefit to disclose CSR information
Qiuyali and Xuzhi(2006) pointed out that the high cost as the crucial reason hinders the CSR
information disclosure. Especially for some small companions, they have no enthusiasm to disclose
CSR information, when the cost exceeding the income.
2.3 The corporation size, industry and performance are the influential factors to disclose CSR
information
Having researched the 150 corporations in FTSE4GooD, Simon Knox (2005) discovered that CSR
information was connected with the corporation size. Because the large enterprises have more resources,
they take on CSR more possibly to disclose more information. Julia Clarke (1999) emphasized the
appearance of consumer who were interested in environment bring the high pressure to most corporation
to disclose CSR information. Li Zheng (2006) chose 829 listed companies in 2003 and used OLS
method to verify that the big size companies are more possible to disclose CSR information, and ST
companies are less. Preston and O. Bannon3 , Peter A Stanwick, Sarah D Stankwick (1998), all of them
found the correlation between CSR and financial performance is positive. Preston (1997) considered if
the companies have good financial performance, they would have plenty resources to partake the CSR
activity and disclose CSR information.
2.4 Stakeholder affects the CSR information disclosure
Caral discovered the community, government, employee and consumer, who are the main users of CSR
information, thought that these companions disclosed little CSR information. Epstein and Freedman
(1994)4 discovered that the individual investors need more CSR information than what had been
disclosed.
3 Hypotheses
Most documents indicate that some factors would influence the CSR information disclosure, such as the
corporation’s size, industry, performance, Stakeholder and so on. But the reality of CSR information
disclosure in listed corporations is not enough well. In order to explain the factors that affect CSR
information disclosure, these hypotheses are designed with this paper.
3.1 The size
The literature suggests that larger firms are more likely to be under public scrutiny on environmental
disclosure. Eilbert and Parket (1973) found that the size and the voluntary disclosure have significantly
positive correlation according to the research on voluntary disclosure. The big corporations pay more
attention to social image and reputation, and the voluntary disclosure is an active measure to
communicate with stakeholders. Most CSR information is voluntary disclosure, and so I consider this
conclusion can be used in CSR information disclosure. This generates the first hypothesis for this study:
H1: the size is positively correlative to CSR information disclosure
Size is defined as the natural log value of the firm’s assets in this study.
3
Lee E. Preston and Douglas P.O. Bannon. The Corporate Social-Financial Performance Relationship: A Typology
and Analysis [J]. Business and Society 1997(4):419-429.
4
Epstein M. J. and Freedman, Social Disclosure and the Individual Investor, Accounting Auditing and
Accountabi1ity Journa,1994:94-100
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ORIENT ACADEMIC FORUM
3.2 The creditor power
Caral found the pressure group (including the community, government, employee and consumer)
especial the creditor is the main users of CSR information. If stakeholders exert more pressure, the
corporations would prefer to publish more CSR information. This suggests the second hypothesis which
may be expressed as:
H2: the pressure group has positive correlation to CSR information disclosure
The level of a firm’s financial leverage is adopted to present the creditor power in this study.
Accordingly, the asset liability ratio of the sampled companies is sourced for the analysis.
3.3 The performance
In view of relationship between performance and information disclosure, most scholars think that the
corporations with higher performance have the trend to disclose more CSR information. This study uses
return on equity (ROE) to present the economic performance of the listed companies. This creates the
third hypothesis for this study:
H3: the performance has positive correlation to CSR information disclosure
3.4 Heavy-polluted industry and the CSR information disclosure
Due to different CSR and attention paid by public, corporations differed from industry should disclose
different CSR information. Consequently, I quote standards promulgated by Environmental Protection
Bureau to define the heavy-polluted corporations. The heavy-polluted corporations include:
metallurgical industry, chemical industry, coal industry, petrochemical industry, building materials
industry, paper industry, brewery, spinning and weaving, leather industry, mining industry,
pharmaceutical industry and electric industry. This generates the forth hypothesis for this study:
H4: heavy-polluted industry has positive correlation to CSR information disclosure
3.5 Independent directors’ pressure
Generally, if the independent directors accord higher proportions, they can effectively supervise
executive directors (Rosenstein and Wyatt, 1990). But Eng and Mark 2003 got the different conclusion.
They discovered that no-compulsory disclosure had opposite correlation to Independent directors’
proportions. Because of the faultiness of corporation governance in China, the hypothesis 5 can be
showed:
H5: independent directors’ proportion is connective with CSR information disclosure, but the orientation
is not definite
（ ）
3.6 The proportion of stocks held by heavy stockholders
Mitchell (1995) considered that the more stock right, the higher is level of CSR information disclosure.
On the contrary, if the stock is grouped in several big stockholders, the average stockholders’ right can’t
be ensured. This suggests the sixth hypothesis which may be expressed as:
H6: the proportion of stocks held by heavy stockholders is negatively correlative to CSR information
disclosure.
3.7 high managers’ pressure
Due to inherent contradiction between the manager and stockholder, the managers’ trend is to go after
short-term profit exclusively at cost of the long-term interest. So the managers maybe abandon to protect
the environment, employee’s health and safety. On account of it, the hypothesis 7 had been taken:
H7: the proportion of stocks held by high managers is negatively correlative to CSR information
disclosure
3.8 Chairman of the board holding the post of CEO
According to IRRC’s investigation, the posts of Chairman of the board and CEO are separated in
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ORIENT ACADEMIC FORUM
American listed companions. To some extent, it increases the information disclosure quality. Many
researches clearly indicated that chairman of the board holding the post of CEO concurrently is not
beneficial to increase the information’s openness. Then can this conclusion be used in CSR information
disclosure? So this creates the eighth hypothesis for this study:
H8: chairman of the board holding the post of CEO concurrently is negatively correlative to CSR
information disclosure.
4 The Resource of Data and Definition of Variables
4.1 Samples
The samples and data for this study were collected from Chinese listed companies. Initially, the whole
name list of the listed companies was downloaded from Shanghai and Shenzhen Stock Exchanges which
was publicized by Securities Regulatory Commission on August 4th 2001. The list was sorted by
industrial sectors and the volume of company’s registered capitals and then the sample was selected
randomly as a representative candidate. The second step was to search such data as basic information
regarding the candidate companies. The data, such as debt to asset ratio, return of equity, the structure of
board and so on, were obtained from the CSMAR (China Stock Market & Accounting Research)
database of Chinese listed companies. Several samples, which are appointed as Special Treatment (ST)
companies due to their continuous loss-making over two years, were excluded from this study. This is
because the corresponding companies are under financially abnormal status and there are certain
limitations on the ST stocks’ exchange in China. A few other samples were deleted due to the lack of
complete data for the statistical analysis. Overall, 291 usable samples were obtained in this study.
The last step was quantification of CSRDI (CSR disclosure index). For a definition of information to
indicate the CSR level of the samples, reporting guideline of G3 suggested by Global Reporting
Initiative (GRI) had been taken a criterion and the CSR information disclosure guideline issued by the
Shanghai and Shenzhen Stock Exchanges was the reference. As to the standard, all the CSR information
was divided into 41 indicators. Every item was defined 0/1/2 score according the disclosure degree. For
ease of analysis, the basic principle is as: if no information was found for the item, a score of 0 was
assigned. A score of 1 was assigned for the item with descriptive or incomplete quantitative data. And a
score of 2 was given to the item with descriptive and quantitative data in details. Then the total score
were 82 and every company can get its own score. So “index” (company’s score/the total score) can be
adopted to quantify the CSR information disclosure level.
4.2 Identification of the econometric model
The dependent variable in this study is CSRDI. I assume that the firm discloses the CSR information
according to these factors (size, D/A, ROE, board, etc.,) identified in the analytical framework.
According to hypotheses, eight independent variables had been designed, as table 1.
independent
variable
Table 1:
Meaning of independent
variable
SIZE
LEVER
ROE
INDUS
BOARD
The size
debt to asset ratio
The performance
The industry
The structure of board
STOCK
The proportion of heavy
stockholders’ stock
Independent Variables
method
Ln capital stock
Debt/Asset
rate of return on equity
The heavy polluted industry =1 Or=0
Independent directors /the number of
directors
The quantity of heavy stockholders’
stock/capital stock
214
Relation to
dependent
variable
＋
＋
＋
＋
±
－
ORIENT ACADEMIC FORUM
MANAGE
CEOCHA
The proportion of the
managers
Whether Chairman of the
board holding the CEO
The quantity of the managers’ stock/ capital
stock
If it is =1, or not=0
－
－
The hypotheses are tested by using multiple regression models which employ ordinary least squares
estimation. The econometric model is given and is estimated for CSRDI.
5 Empirical Analyses
5.1 Relativity analysis
Table 2 manifests the relativity of variables. As a result, CSRDI (CSR Disclosure Index) is positively
correlative with SIZE, ROE and INDUS, which is consistent to hypothesis 1, 3 and 4. So, the correlation
is significant at the 0.01 level. Although CSRDI is not significant in relation to MANAGA and
CEOCHA, the symbol is consistent to hypotheses, which also supports hypothesis 7 and 8. The
correlation between CSRDI and BOARD is negative, which, to some extent, supports hypothesis 5. The
reason is that we believe independent directors’ quantity may be correlative with CSR information,
despite uncertainty of direction.
Table 2:
variable
CSRDI
SIZE
LEVER
ROE
INDUS
BOARD
STOCK
MANAG
E
CEO
Correlation
CSRDI
1
SIZE
.220**
LEVER
-.069
ROE
.198**
INDUS
.325**
BOARD
-.046
STOCK
.077
MANAG
E
-.032
CEO
-.082
.
.000
.240
.001
.000
.433
.191
.584
.164
.220**
1
.003
.111
.048
.024
.222**
.053
-.098
.000
.
.964
.059
.414
.686
.000
.367
.095
-.069
.240
.198**
.003
.964
.111
1
.
-.229**
-.229**
.000
1
-.113
.054
.078
-.001
.980
.060
-.112
.056
.136*
.071
.227
-.004
.013
.824
-.054
.001
.059
.000
.
.184
.308
.020
.949
.360
.325**
.048
-.113
.078
1
.006
.087
-.041
-.055
.000
.414
.054
.184
.
.919
.140
.491
.347
-.046
.024
-.001
.060
.006
1
.033
-.051
.049
.433
.686
.980
.308
.919
.
.573
.384
.406
.077
.222**
-.112
.136*
.087
.033
1
-.174**
-.146*
.191
.000
.056
.020
.140
.573
.
.003
.013
-.032
.053
.071
-.004
-.041
-.051
-.174**
1
.008
.584
-.082
.367
-.098
.227
.013
.949
-.054
.491
-.055
.384
.049
.003
-.146*
.
.008
.890
1
.164
.095
.824
.360
.347
.406
.013
.890
.
** Correlation is significant at the 0.01 level (2-tailed)
* Correlation is significant at the 0.05 level (2-tailed)
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ORIENT ACADEMIC FORUM
5.2 Descriptive Statistics of the variables
Descriptive Statistics as table 3:
variable
SIZE
LEVER
ROE
INDUS
BOARD
STOCK
MANAGE
CEOCHA
Table 3:
Descriptive Statistics
minimum
maximum
mean
17.73
25.19
19.546
0.11
0.98
0.508
-1.46
0.71
0.03
0
1
0.378
0.14
0.60
0.349
0.23
0.97
0.614
0
0.1
0.003
0
1
0.113
Std. Deviation
0.912
0.177
0.206
0.486
0.046
0.132
0.013
0.318
5.3 Multiple regressions
Using SPSS, the model can be carried on liner regression. From this we get these parameters, the
information of independent variable and CSRDI can be based on table 4.
Form the result, the R Square is 0.177 and Adjusted R Square is 0.154. F-statistic is 7.584305,
T(Prob.)=0.0000. All of these can explain the model has high affection.
Variable
C
SIZE
LEVER
ROE
INDUS
BOARD
STOCK
MANAGE
CEO
R Square
Adjusted R Square
Durbin-Wstson stat
Table4: Independent variable’s regression
Coefficient
Std. Error
T
0.28192
0.082462
3.418769
0.014028
0.004081
3.436898
0.000382
0.021027
0.018165
0.050962
0.018199
2.800295
0.041376
0.007478
5.532923
-0.08919
0.079098
-1.12762
-0.0118
0.029017
-0.40662
-0.18995
0.286929
-0.66202
-0.00793
0.011484
-0.69031
0.177061
F-statistic
Prob F- statistic
0.153716
2.038778
（
*** Correlation is significant at the 0.01 level
** Correlation is significant at the 0.05 level
）
Prob.
0.000722
0.000677***
0.98552
0.005458***
0.0000***
0.260439
0.684593
0.508497
0.490567
7.584305
0.00000
（2-tailed）.
（2-tailed）.
6 Conclusion
From statistical significance of variables, SIZE, ROE and INDUS can explain CSRDI, because
hypothesis 1, 3 and 4 are significant less than 1%. It indicates that the bigger size and the better
achievement, the more CSR information is disclosed by corporations, especially by heavy-polluted
corporations.
Although other control variables are statistically insignificant, the direction of symbol is consistent with
the hypothesis. The higher quantity of the heavy stockholder’s stocks or managerial staff’s stocks, the
less CSR information is disclosed by corporations. Furthermore, if the chairman of the board holds the
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ORIENT ACADEMIC FORUM
concurrent post of manager, it would reduce the degree of openness of CSR information. Though
LEVER is the least statistically significant, which means that the debt to asset higher ratio doesn’t
influence the disclosure of CSR information, the direction of it is consistent with hypothesis. For
stakeholders don’t exert their influence on corporation, corporation can decide whether and how to
disclose CSR information.
The BOARD basically proves hypothesis 5, which submits that the quantity of independent directors is
related to the action of CSR information disclosure positively or negatively. This, to some extent,
indicates the malpractice of existing corporate governance system in China. Since the independent
director system didn’t radically interdict the key link, namely the way of voting independent directors,
by which the heavy stockholder can control independent directors, their behavior wouldn’t be
independent. Although independent directors are voted by a general meeting of shareholders, these
directors have to represent the will of heavy stockholder when performing, becoming adornment on the
corporate Christmas tree and losing their independence.
On the whole, the hypotheses from 5 to 8, which belong to the item of corporate governance, feebly
explain the model. It manifest that the intrinsic motivation to disclose CSR information is scanty, and
the faultiness of corporate governance structure hinders not only disclosure of CSR information, but also
quality of the whole information.
：
Author in brief or Acknowledgment
YUAN Yun, Associate Professor, Management Doctor, Research focus: the information disclosure of the
listed companies.
The paper is supported by the fundamental research funds for the central universities (09SZYZJ19) and
supported by the SWUN’s funds for Project of Doctors’ Innovation (08SBS004)
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