Societal determinants of corporate social disclosures : an international comparative study

Orij, R.P. (2012)

Doctoral Thesis

The purpose of this study is to investigate whether corporate social disclosure levels are determined by society. A social accounting methodology is applied, consisting of a hypothetico-deductive approach. Social accounting research is a critical or interpretative branch of financial accounting research. The main difference from financial accounting is the unqualified acceptance of a social reality by social accounting researchers. Empirical evidence is assessed with the application of a system-oriented theoretical framework. The theoretical framework consists of a combination of theories: Stakeholder Theory, Legitimacy Theory and institutions from Institutional Theory. Research questions are developed out of the theoretical framework, which are input for the development of hypotheses. Stakeholder Theory and Legitimacy Theory are both suggested to explain corporate social disclosure levels and its relation with economic institutions, social institutions and political institutions. Prior research supports the suggested relationships, especially studies that take a similar outside-in approach; these studies suggest outside effects on the internal corporate social disclosure decision. Corporate social disclosure data are provided by Sustainalytics, which are similar to the often-studied KLD social performance data. Economic institutional variables applied are of legal origin, as a determinant of corporate governance systems and freedom of markets. Social institutional variables applied are national culture dimensions and combined measures. Political variables applied are political and civil freedom, national environmental and labour law indices. The sample tested consists of 600 large corporations from 22 countries. The corporations are part of what is known as Morgan Stanley Capital International index. They are all large corporations. Statistical testing with the use of bivariate correlations, t-tests and multivariate regression models largely support the hypotheses suggested. The main conclusion is that corporate social disclosure levels are related to the way society is organised. The outcomes of the study show several confirmations of theoretically suggested relationships. Economic institutions are weakly related to corporate social disclosure levels on the basis of a stakeholder orientation of societies, or communitarianism. The relationships that were suggested by theory and some of the prior literature were weakly and partially confirmed. The found relationship between corporate social disclosure levels and governmentally supported freedom of markets can be explained by stakeholder theory, especially communitarianism. Another variable related to communitarianism, the distinction between legal origins, which describes corporate governance systems, is not found to be relevant to explain corporate social disclosure levels. Legitimacy issues certainly play a role as a determinant of corporate social disclosure levels, but not with regard to economic institutions. The relationship described between corporate social disclosure levels and national cultures is consistent with the associations suggested by stakeholder theory. Legitimacy has been related in the past mainly with corporate characteristics, company size, and sensitive industry membership. As this study only applies data on large corporations measured by market capitalisation, sensitive industry membership remains as the main relevant corporate legitimacy variable. The sensitive industry membership variable causes the models with social institutional variables to improve. Political institutions are related to corporate social disclosure levels, though differentiated. The relationship between freedom and corporate social disclosure levels is described by applying stakeholder theory. Stakeholder theory states that the influence that stakeholders can have on the corporation depends on the salience of their needs. The relationship is confirmed, as expected. Political institutions are related to the way corporations deal with legitimacy issues. Clear relations are found between corporate environmental disclosure levels and national environmental performance indices. A relationship between corporate employment disclosure levels and national employment law indices is difficult to confirm. A generally valid relationship between corporate social disclosure levels and political institutions is not clearly found. A general conclusion is that meso-level institutions have shown to be relevant determinants of corporate social disclosure levels. The systems-oriented framework is found to be applicable in explaining relationships between levels of corporate social disclosure and the institutional environment. The conclusion that societal, institutional determinants are relevant for corporate social disclosures implicitly supports the acceptance of a social reality of social accounting, as institutions are social by definition.

• Corporate social reporting
• Institutions
• Legitimacy theory
• Social reality
• Stakeholder theory

• All authors: Orij, R.P.
• Supervisor: Kuijl, J.G.
• Co-supervisor: Grift, Y.K.; Offeren, D.H. van
• Qualification: Doctor (dr.)
• Awarding Institution: Faculty of Law, Leiden University
• Date: 2012-03-14
• Title of host publication: Meijers-reeks
• Publisher: Leiden: Leiden University Press
• ISBN (print): 9789087281625
• ISBN (electronic): 9789400600881
• Name: 201
• Court: LEI Universiteit Leiden