CSR Disclosure and Financial Access: A Case Study of Pakistan

  • Zeshan Anwar University of Lahore, Pakistan.
  • Kausar Abbas University of Lahore, Pakistan.
  • Madiha Khan University of Lahore, Pakistan
  • Dzuljastri Abdul Razak International Islamic University Malaysia, Malaysia
Keywords: Corporate Social Responsibility Disclosure, Capital constraints, Informational asymmetry

Abstract

This study aimed at examining the association of Corporate Social Responsibility (CSR) disclosure with access to finance by estimating the level of financial constraints faced by listed firms of the Pakistan Stock Exchange. CSR disclosure (CSRD) is attracting the attention of researchers and stakeholders and also becoming a vital source of competitiveness and information dissemination. Many businesses in Pakistan have developed the structure for CSR activities but the awareness of CSR concept and its disclosure is still limited in Pakistan. Panel data set has been used from annual reports of 55 non-financial companies listed on the Pakistan Stock Exchange during the period 2013 to 2017 to investigate the impact of CSRD on financial access of firms by estimating the level of capital constraints they faced. The results reveal a significant positive impact of CSRD on firm financial access; the firms with higher CSRD face fewer capital constraints, resulting in better financial access. This study contributes to existing CSR literature which highlights the vital role that capital markets play in assessing the potential for long-run value creation by firms adopting CSR strategies. This study further highlights the relationship between capital markets and socially responsible firms by focusing on the critical impact of CSRD on the firm’s capital constraints. It contributes to an emerging literature inside CSRD which highlights the vital role played by capital markets in assessing the potential for long-run value creation by firms adopting CSR strategies. This study further highlights the relationship between capital markets and socially responsible firms by focusing on the critical impact of CSRD on the firm’s capital constraints. It provides a better understanding of legitimacy and stakeholder theory which motivates firms for CSRD and also makes a significant methodological contribution to CSRD literature by developing the CSRD index.

References

Adams, C.A., W-Y. Hill, and C.B. Roberts. "Corporate Social Reporting Practices in Western Europe: Legitimating Corporate Behaviour?" The British Accounting Review 30, no. 1 (1998): 1-21.

Almeida, H., M. Campello, and M.S. Weisbach. "The Cash Flow Sensitivity of Cash." The Journal of Finance 59, no. 4 (2004): 1777-804.

Archel, P. "The Disclosure of Social and Environmental Information of the Large Spanish Company in the Period 1994-1998: Current Situation and Prospects." Spanish Journal of Finance and Accounting/Revista Española De Financiación Y Contabilidad 32, no. 117 (2003): 571-601.

Aupperle, K.E. "The Use of Forced-Choice Survey Procedures in Assessing Corporate Social Orientation." Research in Corporate Social Performance and Policy 12, no. 1 (1991): 479-86.

_______, A.B. Carroll, and J.D. Hatfield. "An Empirical Examination of the Relationship between Corporate Social Responsibility and Profitability." Academy of Management Journal 28, no. 2 (1985): 446-63.

Baker, G.P., M.C. Jensen, and K.J. Murphy. "Compensation and Incentives: Practice vs. Theory." The Journal of Finance 43, no. 3 (1988): 593-616.

Bakke, T-E., and T.M. Whited. "Which Firms Follow the Market? An Analysis of Corporate Investment Decisions." The Review of Financial Studies 23, no. 5 (2010): 1941-80.

Beck, N., and J.N. Katz. "What to Do (and Not to Do) with Time-Series Cross-Section Data." American Political Science Review 89, no. 3 (1995): 634-47.

Berger, A.N., and G.F. Udell. "The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle." Journal of Banking and Finance 22, no. 6-8 (1998): 613-73.

Bowman, E.H., and M. Haire. "A Strategic Posture toward Corporate Social Responsibility." California Management Review 18, no. 2 (1975): 49-58.

Brammer, S., and S. Pavelin. "Building a Good Reputation." European Management Journal 22, no. 6 (2004): 704-13.

Campbell, Bonnie K. "Regulating Mining in Africa: For Whose Benefit?" Discussion Paper 26: Nordic Africa Institute, 2004.

Chen, H., and X. Wang. "Corporate Social Responsibility and Corporate Financial Performance in China: An Empirical Research from Chinese Firms." Corporate Governance: The International Journal of Business in Society 11, no. 4 (2011): 361-70.

Cheng, B., I. Ioannou, and G. Serafeim. "Corporate Social Responsibility and Access to Finance." Strategic Management Journal 35, no. 1 (2014): 1-23.

Clarkson, M.E. "A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance." Academy of Management Review 20, no. 1 (1995): 92-117.

Clarkson, P.M., Y. Li, G.D. Richardson, and F.P. Vasvari. "Does it Really Pay to Be Green? Determinants and Consequences of Proactive Environmental Strategies." Journal of Accounting and Public Policy 30, no. 2 (2011): 122-44.

Cowan, S., and D. Gadenne. "Australian Corporate Environmental Reporting: A Comparative Analysis of Disclosure Practices across Voluntary and Mandatory Disclosure Systems." Journal of Accounting and Organizational Change 1, no. 2 (2005): 165-79.

Cunningham, N. "Green Alliances: Conflict or Cooperation in Environmental Policy?" Australian Journal of Environmental Management 9, no. 3 (2002): 148-57.

Deegan, C. "Introduction: The Legitimising Effect of Social and Environmental Disclosures – A Theoretical Foundation." Accounting, Auditing and Accountability Journal 15, no. 3 (2002): 282-311.

______, and B. Gordon. "A Study of the Environmental Disclosure Practices of Australian Corporations." Accounting and Business Research 26, no. 3 (1996): 187-99.

Dhaliwal, D.S., O.Z. Li, A. Tsang, and Y.G. Yang. "Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting." The Accounting Review 86, no. 1 (2011): 59-100.

Eccles, Robert G, Ioannis Ioannou, and George Serafeim. The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance. National Bureau of Economic Research Cambridge, MA, USA, 2012.

El Ghoul, S., O. Guedhami, C.C.Y. Kwok, and D.R. Mishra. "Does Corporate Social Responsibility Affect the Cost of Capital?" Journal of Banking and Finance 35, no. 9 (2011): 2388-406.

Elijido-Ten, Evangeline. "Determinants of Environmental Disclosures in a Developing Country: An Application of the Stakeholder Theory." Paper Presented at The Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, Singapore, 2004.

______. "Applying Stakeholder Theory to Analyze Corporate Environmental Performance: Evidence from Australian Listed Companies." Asian Review of Accounting 15, no. 2 (2007): 164-84.

Epstein, M.J., and M. Freedman. "Social Disclosure and the Individual Investor." Accounting, Auditing and Accountability Journal 7, no. 4 (1994): 94-109.

Freeman, R Edward. Strategic Management: A Stakeholder Approach. Cambridge University Press, 2010.

Goss, A., and G.S. Roberts. "The Impact of Corporate Social Responsibility on the Cost of Bank Loans." Journal of Banking and Finance 35, no. 7 (2011): 1794-810.

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 8, no. 2 (1995): 47-77.

Griffin, J.J., and J.F Mahon. "The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-Five Years of Incomparable Research." Business and Society 36, no. 1 (1997): 5-31.

Guthrie, J., and L.D. Parker. "Corporate Social Reporting: A Rebuttal of Legitimacy Theory." Accounting and Business Research 19, no. 76 (1989): 343-52

______, and I. Abeysekera. "Content Analysis of Social, Environmental Reporting: What Is New?" Journal of Human Resource Costing and Accounting 10, no. 2 (2006): 114-26.

Hackston, D., and M.J. Milne. "Some Determinants of Social and Environmental Disclosures in New Zealand Companies." Accounting, Auditing and Accountability Journal 9, no. 1 (1996): 77-108.

Hadlock, C.J., and J.R. Pierce. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index." The Review of Financial Studies 23, no. 5 (2010): 1909-40.

Haniffa, R.M., and T.E. Cooke. "The Impact of Culture and Governance on Corporate Social Reporting." Journal of Accounting and Public Policy 24, no. 5 (2005): 391-430.

Hubbard, R.G. "Capital-Market Imperfections and Investment." Journal of Economic Literature 36 (1997): 193-225.

Islam, M. Azizul. "Social and Environmental Reporting Practices of Organisations Operating in, or Sourcing Products from, a Developing Country: Evidence from Bangladesh." SSRN (2009). https://ssrn.com/abstract=2878254

______, and C. Deegan. "Media Pressures and Corporate Disclosure of Social Responsibility Performance Information: A Study of Two Global Clothing and Sports Retail Companies." Accounting and Business Research 40, no. 2 (2010): 131-48.

Kaplan, S.N., and L. Zingales. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?". The Quarterly Journal of Economics 112, no. 1 (1997): 169-215.

Lamont, O., C. Polk, and J. Saaá-Requejo. "Financial Constraints and Stock Returns." The Review of Financial Studies 14, no. 2 (2001): 529-54.

Lee, D.D., and R.W. Faff. "Corporate Sustainability Performance and Idiosyncratic Risk: A Global Perspective." Financial Review 44, no. 2 (2009): 213-37.

Margolis, J.D., H.A. Elfenbein, and J.P. Walsh. "Does It Pay to Be Good? A Meta-Analysis and Redirection of Research on the Relationship between Corporate Social and Financial Performance." Ann Arbor 1001 (2007): 1-79.

Mathews, M.R. "Twenty-Five Years of Social and Environmental Accounting Research: Is There a Silver Jubilee to Celebrate?". Accounting, Auditing and Accountability Journal 10, no. 4 (1997): 481-531.

McGuire, J.B., A. Sundgren, and T. Schneeweis. "Corporate Social Responsibility and Firm Financial Performance." Academy of Management Journal 31, no. 4 (1988): 854-72.

McWilliams, A., and D. Siegel. "Corporate Social Responsibility and Financial Performance: Correlation or Misspecification?" Strategic Management Journal 21, no. 5 (2000): 603-09.

Murthy, V., and I. Abeysekera. "Corporate Social Reporting Practices of Top Indian Software Firms." Australasian Accounting Business and Finance Journal 2, no. 1 (2008): 36-59.

O’Donovan, G. "Environmental Disclosures in the Annual Report: Extending the Applicability and Predictive Power of Legitimacy Theory." Accounting, Auditing and Accountability Journal 15, no. 3 (2002): 344-71.

O’Dwyer, B. "Conceptions of Corporate Social Responsibility: The Nature of Managerial Capture." Accounting, Auditing and Accountability Journal 16, no. 4 (2003): 523-57.

Patten, D.M. "Exposure, Legitimacy, and Social Disclosure." Journal of Accounting and Public Policy 10, no. 4 (1991): 297-308.

Preston, L.E, and D.P. O'bannon. "The Corporate Social-Financial Performance Relationship: A Typology and Analysis." Business and Society 36, no. 4 (1997): 419-29.

Purushothaman, M., G. Tower, P. Hancock, and R. Taplin. "Determinants of Corporate Social Reporting Practices of Listed Singapore Companies." Pacific Accounting Review 12, no. 2 (2000): 101-33.

Roberts, R.W. "Determinants of Corporate Social Responsibility Disclosure: An Application of Stakeholder Theory." Accounting, Organizations and Society 17, no. 6 (1992): 595-612.

Ruf, B.M., Krishnamurty Muralidhar, Robert M Brown, Jay J Janney, and Karen Paul. "An Empirical Investigation of the Relationship between Change in Corporate Social Performance and Financial Performance: A Stakeholder Theory Perspective." Journal of Business Ethics 32, no. 2 (2001): 143-56.

Saleh, M. "Corporate Social Responsibility Disclosure in an Emerging Market: A Longitudinal Analysis Approach." International Business Research 2, no. 1 (2009): 131-41.

Stein, Jeremy C. "Agency, Information and Corporate Investment." In G. Constantinides, M. Harris and R. Stulz (Eds.), Handbook of the Economics of Finance, 111-65: Elsevier North Holland: Amsterdam., 2003.

Stulz, R.M. "Managerial Discretion and Optimal Financing Policies." Journal of Financial Economics 26, no. 1 (1990): 3-27.

Tsoutsoura, Margarita. "Corporate Social Responsibility and Financial Performance." Haas School of Business University of California at Berkeley. (2004).

Van der Laan Smith, J., A. Adhikari, and R.H. Tondkar. "Exploring Differences in Social Disclosures Internationally: A Stakeholder Perspective." Journal of Accounting and Public Policy 24, no. 2 (2005): 123-51.

Williams, S.M., and C-A.H.W. Pei. "Corporate Social Disclosures by Listed Companies on Their Web Sites: An International Comparison." The International Journal of Accounting 34, no. 3 (1999): 389-419.

Wokutch, R.E., and E.W. McKinney. "Behavioral and Perceptual Measures of Corporate Social Performance." Research in Corporate Social Performance and Policy 12 (1991): 309-30.

Wolfe, R. "The Use of Content Analysis to Assess Corporate Social Responsibility." Research in corporate Social Performance and Policy 12 (1991): 281-307.

Yawar, HM. "CSR Pakistan Evolution, Rise and Impact of Socio-Economic Development Capital Business (Pvt) Ltd." Gulberg III, Lahore, Pakistan (2009).

Published
2019-06-29
How to Cite
Anwar, Z., Abbas, K., Khan, M., & Razak, D. A. (2019). CSR Disclosure and Financial Access: A Case Study of Pakistan. International Journal of Economics, Management and Accounting, 27(1), 167-186. Retrieved from https://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/672
Section
Articles