Financial and non-financial determinants of corporate social responsibility: empirical evidence from Pakistan

Purpose - The purpose of this research study is to lower the knowledge gap by exploring the degree of corporate social responsibility disclosures (CSRD) made by top Pakistani (Karachi Stock Exchange [KSE] 100 listed non-financial) companies and investigating the financial and non-financial CSRD determinants which aid to the policy development in implementing required regulatory reforms. Design/methodology/approach - KSE 100 index listed companies are covered in this study that published their annual reports consistently during the time period of five years from 2009 to 2013. Financial and non-financial data will be collected from the sample of KSE-listed company’s annual reports. Information related to corporate social responsibility (CSR) will be collected by hand from reports of disclosure of CSR, disclosures of corporate governance, report of the directors, a statement of Chairman’s and notes to the financial statement enclosed in companies’ annual reports. Content analysis technique to measure corporate environmental and social disclosures for items scoring the approach is, in essence, dichotomous, one score assigned to the item in the scores of instrument of research if it disclosed, otherwise assigned zero, and no penalty or negative score is imposed to the item which is reflected irrelevant. Findings - Family ownership, industry type and firm size have positive significant relationship with CSR disclosure, and the authors found negative significant relationship between risk and CSRD. Results of this study propose that, in developing countries like Pakistan, the extent of determinant of CSRD is based on the number of important firm and industry characteristics and are aligned with empirical evidence. Research limitations/implications - This research uses only annual reports of the companies for the data of CSRD but companies also use other sources for disclosure of their CSR information such as mass media, etc. Content analysis is performed by one author and the second author cross-checked the companies, so biasness may remain a limitation due to the fact that errors attach in rating scale due to judgments of human. Practical implications - The finding of this study helps policymakers to quantify and know the degree of CSRD and its determinants which enables them to boost the organizational legitimacy and CSR practices by adopting the needed regulatory reform. Social implications - The results of this study provide warning signals to the management of the companies in some cases where disclosure level of CSR is lower in the period before issuance of SECP CSR guidelines of 2013. Originality/value - This research study offers valuable inputs in the development and betterment of CSR rules for the reason that the findings of the research provide information to the future CSR rules and guidelines. The results of this study also help the regulator (SECP) in Pakistan to revise the CSRD to align with the need of changing industrial characteristics and economic environment.