Corporate governance and corporate social responsibility (CSR) disclosure in an emerging economy: evidence from commercial banks of Kazakhstan

• DOI: https://doi.org/10.1108/CG-09-2018-0290
• Pages: 490-507
• Date: 16 May 2019
• Published date: 16 May 2019
• Author: Nurlan Orazalin
• Subject Matter: Corporate governance,Strategy

Corporate governance and corporate

social responsibility (CSR) disclosure in an

emerging economy: evidence from

commercial banks of Kazakhstan

Nurlan Orazalin

Abstract

Purpose –This paper aims to explore the extent and nature of corporate social responsibility (CSR)

reporting practices in the banking sector of Kazakhstan and investigates the effects of board

characteristicson CSR disclosures in the given emerging economy.

Design/methodology/approach –Data on CSR disclosures were manually collected from annual

reports of all commercial banks listed in the Kazakhstan Stock Exchange (KASE) for the period 2010-

2016. Financialdata were obtained from audited financialstatements available on bank websitesand the

Web page of theNational Bank of Kazakhstan.

Findings –The empirical results reveal that board gender diversity has a positive influence on CSR

reposting, while board size and board independence have no impact on the level of CSR disclosures.

Furthermore, theresults show that bank size and bank age are significant factorsin the dissemination of

CSR disclosures.Additionally, the findings suggestthat banks with a share of foreign ownership disclose

more extensive and transparent information on CSR activitiesthan banks owned by local investors and

state-ownedbanks.

Originality/value –The study providesevidence on the relationship between corporategovernance and

the level of CSR in the contextof an emerging economy such as Kazakhstan, representing the Central

Asian region. The study contributes to the current literature by focusing on the banking sector of

Kazakhstan as a research contextdue to its substantial representation in the capital market of the given

emergingeconomy.

Keywords Banking sector, Kazakhstan, Board characteristics, Corporate social responsibility,

Emerging markets, Ownership structures

Paper type Research paper

1. Introduction

In recent decades, growing and widespread interest has been paid to corporate social

responsibility (CSR) reporting both in academic studies and business practice (Benlemlih

and Girerd-Potin, 2017). While traditionally, CSR reporting issues have attracted

considerable attention in developed markets, recent studies have identified the need for

extensive CSR reporting studies in emerging markets as well (Ali et al.,2017;Kansal et al.,

2014). As noted by Beck et al. (2010), emerging markets are growing rapidly and

commercial banks play a crucial role in the economic and financial development of these

markets. However, international research related to CSR reporting practices is still limited

because very few studies have been carried out to analyze CSR reporting issues in the

banking sectors of emerging markets (Khan, 2010). The financial crisis of 2007-2008 has

led to a growing importance of CSR activities by commercial banks (Vogler and

Nurlan Orazalin is based at

the Bang College of

Business, KIMEP

University, Almaty,

Kazakhstan, Kazakhstan.

Received 10 September 2018

Revised 5 December 2018

Accepted 7 January 2019

PAGE 490 jCORPORATE GOVERNANCE jVOL. 19 NO. 3 2019, pp. 490-507, ©EmeraldPublishing Limited, ISSN 1472-0701 DOI 10.1108/CG-09-2018-0290

Gisler, 2016). Banks and other financial companies have been prompted to act more

ethically and in a socially responsible manner in their lending, financing, and investing

activities to protect the legitimate interests of depositors and other stakeholders (Chiu,

2014). Commercial banks are being held responsible and accountable for the impact of

their services and activities on the society, especially after the financial crisis (Coulson,

2009). As a result, the level of voluntary information reported by commercial banks has

substantially increased due to high pressure from the society (Kılıc¸ et al., 2015). In other

words, in recent years, commercial banks have enriched their reporting practices by

providing more information on environmental, social and other aspects of CSR.

While a number of prior studies have focused on specific determinants and underlying

factors driving CSR reporting in both developed and developing markets (Chakroun et al.,

2017;Hossain and Reaz, 2007;Hu and Scholtens, 2014), there has been relatively limited

research on whether specifics corporate governance attributes affect CSR disclosures in

the banking sectors of emerging markets (Khan,2010;Sharif and Rashid, 2014). Therefore,

the study explores CSR reporting practices in the banking sector of Kazakhstan and

investigates whether specific corporate governance mechanisms are associated with

enhanced CSR disclosures in the given emerging economy. Kazakhstan is currently a

leading economy in Central Asia and one of the most important emerging markets in the

Commonwealth of Independent States (CIS). Assessing CSR disclosure practices in the

banking sector of Kazakhstan in connection with board characteristics, bank-specific

characteristics, and ownership structures will provide important implications for other

emerging markets in the region. There are few studies focusing on CSR issues in

Kazakhstan (Mahmood and Humphrey, 2013;Mouly Potluri et al., 2010;Smirnova, 2012).

However, most of these studies are descriptive and do not provide empirical evidence on

the relationship between corporate governance and the level of CSR reporting. Thus, this

study attempts to fill this researchgap.

The contributions of the study are twofold. First, it provides further evidence on CSR

reporting issues in the contextof an emerging market such as Kazakhstan, representing the

Central Asian region. Although most prior studies have explored the nature and extent of

CSR disclosure practices in developed countries, recent empirical studies have begun to

focus on CSR issues in non-Western countries, especially in Asian markets (Chang et al.,

2017;Cheung et al.,2010). Moreover, in emerging markets with high economic growth,

CSR issues are usually felt most and business operations have huge social and

environmental impacts on the society (Pillarisetti and van den Bergh, 2010). Therefore, this

study adds to the current literature by examining CSR disclosure practices in the emerging

market of Kazakhstan. Second, the study is extending the CSR literature by focusing on the

banking industry. Empirical studies investigating CSR disclosure practices in connection

with corporate governance mechanisms and firm characteristics have often excluded

commercial banks from their analysis due to specific and stringent regulatory frameworks

associated with the banking industry (Barako and Brown, 2008;Kılıc¸ et al., 2015). As

commercial banks play a key role in the economy, there is a need to investigate how

commercial banks account for CSR activities, especially in the context of emergingmarkets

(Hu and Scholtens, 2014). Thus, this study focuses on the banking sector of Kazakhstan as

a research context due to its substantial representation in the capital market of the given

emerging economy.

The remainder of the paper is structured as follows. Section 2 provides background

information on the research context, i.e. corporate governance and CSR practices in the

banking of Kazakhstan. Section 3 discusses the theoretical framework of the study,

provides an overview of relevant literature review and develops hypotheses. Section 4

describes data and the research methodology.Findings are discussed in Section 4. Finally,

Section 6 concludes the paper.

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