Corporate social responsibility reporting: meeting stakeholders expectations or efficient allocation of resources?

• DOI: https://doi.org/10.1108/IJAIM-09-2020-0150
• Published date: 11 December 2020
• Date: 11 December 2020
• Pages: 280-304
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Afzalur Rashid

Corporate social responsibility

reporting: meeting stakeholders

expectations or ef‌f‌icient allocation

of resources?

Afzalur Rashid

School of Commerce, University of Southern Queensland, Toowoomba, Australia

Abstract

Purpose –This study aims to examine whethercorporate social responsibility (CSR) reporting adds any

value to the f‌irm.

Design/methodology/approach –This study uses content analysisto capture the specif‌ic CSR-related

attributes and to construct a CSR reporting index. The data is manually collected from 115 publicly listed

f‌irms on the Dhaka Stock Exchange. The companies audited f‌inancial statements were the source of data.

This study uses an ordinary least square regression analysis to examine the relationship between CSR

reportingand f‌irm performance.

Findings –The results of this study show that f‌irms’involvementin CSR activities and related reporting

has a signif‌icant positive inf‌luence on f‌irm performance only under an accounting-based performance

measure. However, f‌irms’involvement in CSR activities and related reporting has a signif‌icant negative

inf‌luenceon f‌irm performance under a market-based performancemeasure.

Research limitations/implications –This study is subject to some limitations,such as the subjectivity

or judgementassociated in the coding process.

Practical implications –The f‌indings of this studyimply that f‌irms may be involved in CSR reporting to

meet the stakeholders’expectations, CSR reporting does not necessarily increase the intrinsic value of the

f‌irm.

Originality/value –This study supports the stakeholdertheory and contributes to the literature on the

practicesof CSR reporting in the context of developing countries.

Keywords Performance, CSR, Stakeholder theory, Content analysis, Legitimacy theory,

Instrumental stakeholder theory

Paper type Research paper

1. Introduction

Since its emergence in the 1950s,it has been vigorously debated whether a company should

be involved in corporate socialresponsibility (CSR) activities and should producea relevant

reporting of such activities. Because the corporate social and environmental activities are

signif‌icant business expenses, both internal and external stakeholders have developed an

increased interest in the subject (Al-Tuwaijri et al.,2004). They may have a divergence of

interests and views in many aspects of company operations, including spending on CSR

activities (Barnea and Rubin, 2010). As the owners of corporations, shareholders are mainly

interested in short-term benef‌its (short-term prof‌it maximisation/share price minimisation).

This is because, greater attention to CSR matters may result in a signif‌icant investment of

resources (increase in cost) by the companies, adversely affecting short-term prof‌itability

(Fortes, 2002;Darnall and Edwards, 2006;De Villiers et al.,2011). However, some

stakeholders may be interested in sustainable prof‌its and in the company meeting high

IJAIM

29,2

280

Received22 September 2020

Revised3 November 2020

Accepted12 November 2020

InternationalJournal of

Accounting& Information

Management

Vol.29 No. 2, 2021

pp. 280-304

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-09-2020-0150

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

health and safety standards for workers,respecting human rights, protecting the interests of

consumers and meeting environmental standards, regardless of where they operate (Smith,

2002). They may be interested in environmentally friendly products and production

methods to gain signif‌icant competitiveadvantages (Fifka, 2013). Thus, it is hypocritical for

a company to be involvedin CSR activities.

It has been argued that meeting the expectations of all shareholders and other

stakeholders may be benef‌icial to the f‌irm that CSR will also be part of a value-enhancing

strategy (Mathews, 1995;Lo and Sheu, 2007) and CSR activitieswill bring some anticipated

benef‌its (long-term value) to all the stakeholders (Baron, 2001;McWilliams and Siegel,2000,

2001;Bagnoli and Watts, 2003;Mackey et al.,2007;Siegel and Vitaliano, 2007). The

involvement of a f‌irm in a strategy involving CSR activities is not simply meeting some

stakeholders’expectations. As f‌irms’off-balance-sheet social and environmental impacts

can have tangible f‌inancial consequences(Strandberg, 2005), involvement in a CSR strategy

(by recognising the cost of addressing the externalitiescaused by company operations) can

help companies to account for the full cost of company operations or achieve a sustainable

prof‌it. Thus, the f‌inancial reports prepared by companies that incorporate CSR reporting

represent a true picture of the company given that it has invested its resources in social

responsibility activities,such as using equipment that creates fewer emissions and is energy

eff‌icient. CSR reporting also allows investors to make informed decisions, as a f‌irm can

thereby reduce the information asymmetry between managers and investors and,

ultimately, reduce the information costs incurred by investors (Cormier et al., 2009), which

may attract investors to the f‌irm. By releasingtransparent information about CSR activities,

af‌irm can reduce the external costof capital (Botosan, 2006;Beiner et al., 2006;Ahmed et al.,

2019) while it is evident that good corporate governance may lead to quality of CSR

reporting (Adel et al.,2019).

The relationship between socially responsible conduct and the f‌inancial performance of

business corporations has been a topic of interest and controversy for more than half a

century, and series of empirical research on the association between f‌inancial and social

performance indicators has been conducted for several decades (Preston and O’Bannon,

1997). Thus, between 1972 and 2002, 127 published studies empirically examined the

relationship between companies’socially responsible conduct and their f‌inancial

performance (Margolisand Walsh, 2003).

Given the substantial importanceof CSR practices to companies because of the potential

value added to the f‌irm, this study aims to investigatewhether CSR activities inf‌luence f‌irm

value (f‌irm performance) amongst listed f‌irms in Bangladesh, an emerging economy, i.e. if

f‌irm managers are involved in value-enhancing CSR. This study may provide a new source

of knowledge to academics and practitioners regarding CSR practice and f‌irm value in an

unfamiliar context. The remainderof this paper is organised as follows: Section 2 addresses

CSR reporting in Bangladesh, Section 3 presents the theoretical orientation of this study,

Section 4 develops the hypothesis, Section 5 presents the research method, Section 6

presents the empiricalresults and Section 7 presents a discussion and draws conclusions.

2. Corporate social responsibility practices in Bangladesh

CSR reporting, in general, is not widelypracticed in developing countries such as Malaysia,

Bangladesh, India and China (Fifka, 2013). Companies in Asian countries are involved less

in CSR reporting practices than that of companies in developed countries (Baughn and

McIntosh, 2007). Bangladeshis not exception to this and CSR practices are not very familiar

in the context of Bangladesh. The reason for this unfamiliarity is that, to date, no notable

environmental disaster has been caused by the country’s companies. However, employee

Meeting

stakeholders

expectations

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