Determinants of

Some determinants of social disclosures in

and environmental disclosures NZ companies

in New Zealand companies

77
David Hackston
KPMG, Wellington, New Zealand, and
Markus J. Milne
University of Otago, Dunedin, New Zealand

Introduction
During the past 20-30 years there has been a growing public awareness of the
role of corporations in society. Many of the firms which have been credited with
contributing to economic and technological progress have been criticized for
creating social problems. Pollution, resource depletion, waste, product quality
and safety, the rights and status of workers, and the power of large corporations
are issues which have become the focus of increasing attention and concern
(Gray et al., 1987, p. 1). Pressures from a variety of sources have come to bear on
the private sector to accept responsibility for impacts on society from business
activities. Companies are being urged to become accountable to a wider
audience than shareholder and creditor groups. Friedman’s (1962) doctrine that
the only social responsibility of business is to maximize profits is not
universally accepted. Studies have documented a growing awareness on the
part of business executives that business has an obligation to help society, even
if it means less profit (Holmes, 1976; Ostlund, 1977).
The growth in awareness of corporate social responsibility has added to the
criticisms of the use of profit as an all-inclusive measure of corporate
performance. In response, some major accounting institutions (AICPA, NAA,
ICAEW) began to consider corporate social accounting in the mid 1970s
(Ramanathan, 1976). Progress has been slow and sporadic at best, however.
Accounting researchers have also begun to articulate different theoretical
perspectives in support of corporate social accounting, including agency
theory, legitimacy theory, political economy of accounting theory and
stakeholder theory (see, for example, Belkaoui and Karpik, 1989; Gray et al.,
1987, 1988, 1995a; Guthrie and Parker, 1990; Patten, 1991, 1992; Roberts, 1992).

The authors would like to thank Kate Brown, Ralph Adler, Alan Macgregor and an anonymous
reviewer from the First Asian Pacific Interdisciplinary Research in Accounting Conference,
Sydney, 1995, for comments on earlier drafts. In addition, Carol Adams and two anonymous
reviewers are expressly thanked for comments on later drafts. All errors remain the responsibility Accounting, Auditing &
Accountability Journal, Vol. 9
of the authors. Correspondence on this paper should be addressed to Markus J. Milne, Fax: 64 3 No. 1, 1996, pp. 77-108. © MCB
4798450. University Press, 0951-3574
AAAJ To date, however, there still exists no universally accepted theoretical
9,1 framework of corporate social accounting (Belkaoui and Karpik, 1989; Gray et
al., 1995a; Guthrie and Mathews, 1985).
Despite the lack of consensus in the accounting profession and the theoretical
accounting literature about why companies disclose social responsibility
information, an increasing number of companies are voluntarily disclosing
78 their social responsibility activities in their annual reports. Corporate social
disclosure (CSD) can be defined as the provision of financial and non-financial
information relating to an organization’s interaction with its physical and social
environment, as stated in corporate annual reports or separate social reports
(Guthrie and Mathews, 1985). CSD includes details of the physical environment,
energy, human resources, products and community involvement matters (see
Appendix).
The purposes of the present study are to provide an up-to-date description of
New Zealand companies’ CSD practices in the light of documented overseas’
CSD practices; examine some potential determinants of social disclosures in
New Zealand companies; and examine the research analysts’ choice of
measurement technique of CSD on any relationships found. By replicating
overseas studies using similar sampling and measurement techniques, this
study provides a benchmark of New Zealand disclosure practices from which
further work can proceed. Further, by using multiple measures for various
variables, the robustness of any relationships found can be rigorously assessed.
Before proceeding to test explanations for why companies make social
disclosures, it is important that empirical research establish the existence and
reliability of its measured evidence (Lindsay, 1995).

Prior literature
Patterns of CSD
Most empirical studies to date provide a descriptive basis from which a number
of disclosure patterns have emerged. Further studies have also found
associations between several corporate characteristics and CSD. These studies
are now reviewed before proceeding to an examination of New Zealand
disclosure practices.
Most empirical studies on CSD practices have focused on the USA, the UK,
and Australia. A little work has also been done with other countries including
Canada, Germany, Japan, New Zealand, Malaysia and Singapore[1]. Much of the
empirical research into US practices has tended to utilize the extensive survey
evidence of Ernst & Ernst (1978). This study is now somewhat out of date, and
only Guthrie and Parker (1990) provide more recent survey evidence on US
practices. Gray et al. (1987, 1995a) provide survey evidence on the UK, with the
later study including every year from 1979 to 1991. Surveys of Australia include
Trotman (1979) and Guthrie (1983). Two surveys by Davey (1982) and Ng (1985)
have provided some descriptions of CSD in New Zealand.
Table I provides a summary of the survey evidence. Results from the present
study are shown for comparative purposes and discussed later. The Table
 Survey country, study and year of study
USA UK Australia New Zealand
Ernst & Guthrie and Guthrie and Gray et al. Gray et al. Guthrie and Guthrie and Davey Ng Hackstone
Ernst (1977) Parker (1983) Parker (1983) (1983) (1991) Parker (1983) Parker (1980) (1982) (1985) Milne (1992)

Sample 500 50 50 100 100 50 50 32 32 50

Incidencea 90 85 9856 b 72 100 56 56 84 100 83
Amountc N/A 1.26 0.89 0.5 2.0 0.7 0.68 270d 300d 0.75

Themee:
Environment 57 53 14 7 75 21 17 6 13 23

Human resources 47 75 98 65 100 93 34 66 88 79

Products 33 35 10 4 10 0 4 3 28 40

Energy 59 43 2 1 15 4 7 0 3 6

Community 33 63 96 10 62 29 11 16 19 30

General/other 24 0 0 5 15 18 6 13 3 19

Notes: a Percentage of total sample of companies that made at least one social disclosure
b Guthrie and Parker’s 98 per cent incidence rate includes both mandatory and voluntary disclosures. When voluntary disclosures
only are considered, the UK incidence rate is 56 per cent
c Average amount of disclosure to the nearest 100th of an annual report page for those companies making at least one social disclosure
d Average number of words
e Percentage of companies making at least one disclosure in that theme of the total sample of companies
79
NZ companies
Determinants of

studies
social disclosure
comparison of
International
Table I.
disclosures in
AAAJ indicates the incidence, nature and amount of CSD in the respective countries.
9,1 All the figures relating to the incidence and nature of CSD are percentages.
Except for Davey (1982) and Ng (1985), the amount of CSD is measured in
average number of pages of CSD per company.
A number of patterns emerge from the data in Table I: first, the incidence of
CSD appears much higher in the USA, The UK, and New Zealand than in
80 Australia. Guthrie and Parker’s 1983 UK result of 98 per cent, however, includes
both mandatory and voluntary disclosures. When adjusted for only voluntary
disclosures, they reported an incidence rate of 56 per cent for the UK. Gray et
al.’s (1995a) reported figures for the UK are for voluntary disclosures only and,
consequently, there is some difference between the two surveys for the 1983 UK
results. Interestingly, Trotman’s (1979) survey of 100 Australian companies in
1977 (not shown in Table I) reported a higher 69 per cent incidence rate than
Guthrie and Parker’s later 1983 study which reported 56 per cent. As most of
the surveys shown in Table I sample the “top” companies rather than draw
random samples, it may be that sampling technique and sample size influences
incidence rates.
Second, the pattern of ranking of CSD by theme, for companies which make
CSD, appears reasonably consistent across all countries, with human resources,
environment, and community receiving most attention. Energy and product
themes, however, receive much more attention in the USA than in the other
countries surveyed. The particularly high rate for the product theme in our own
study was not expected, and is discussed later in the results section.
Third, the amount of CSD is also reasonably consistent between companies in
the USA, UK, and Australia. Measured in average pages per company, US
companies do disclose more information than their UK or Australian
counterparts. From Guthrie and Parker’s comparative study, however, these
differences are not statistically significant. Again, some care is required in
making comparisons across studies to sort out voluntary disclosure from totals
of both mandatory and voluntary disclosure. Gray et al.’s (1995a) UK page
amounts are for voluntary disclosure and compare to the Australian and New
Zealand studies, where very little, if any, CSD is mandated. Guthrie and Parker’s
UK and US page amounts are for both mandated and voluntary disclosures,
and this may explain the difference in the 1983 UK results. Prior to this study,
comparison with New Zealand companies was difficult because both Davey
(1982) and Ng (1985) measured the amount of disclosure in average number of
words per company.
Some caution needs to be exercised in claims relating to patterns in
disclosure practices from these survey data, however. The surveys were
conducted in different time periods, involve different sample sizes, different
methods, and different researchers. Moreover, as discussed below, a number of
additional variables now appear to be associated with CSD, and the surveys
have not controlled for these, either directly or by drawing random samples. As
such, the data are not strictly comparable.
Corporate characteristics and CSD Determinants of
Beyond the descriptive analyses, studies have begun to extend the empirical disclosures in
CSD literature by focusing on a number of corporate characteristics which are NZ companies
potential determinants of CSD practices. Studies have investigated the effects of
company size, profitability, industry, country of ownership, reporting country,
capital intensity, senior executive attitudes, company age, and the existence of
company social responsibility committees. In reviewing these studies, Gray et 81
al. (1995a, pp. 49-50) tentatively conclude:
• CSD is not related to profitability in the same period, but it may be
related to lagged profits;
• CSD does appear to be related to company size;
• industry appears to affect CSD, but the studies are not clear or consistent
enough to determine such effects precisely;
• the country in which the company reports and the country of company
ownership appear related to CSD. In addition, capital intensity, age,
senior executive attitudes, and social responsibility committees may be
related to CSD.

Size
An association between company size and CSD has been demonstrated in a
number of empirical studies (see, for example, Belkaoui and Karpik, 1989;
Cowen et al., 1987; Kelly, 1981; Pang, 1982; Patten, 1991, 1992; Trotman and
Bradley, 1981). Both agency theory and legitimacy theory contain arguments
for a size-disclosure relationship. In addition, larger companies undertake more
activities, make a greater impact on society, have more shareholders who might
be concerned with social programmes undertaken by the company, and the
annual report provides an efficient means of communicating this information
(Cowen et al., 1987). Not all CSD studies have supported a size-disclosure
relationship, however. For example, Roberts (1992) found no relationship in a
US sample. Similarly, in New Zealand, both Davey (1982) and Ng (1985) failed to
support hypothesized associations between company size and CSD practices.
Guthrie and Mathews (1985) suggest Davey’s and Ng’s results may have been
due to the small sample used[2]. With sampling and analytical methods
comparable to other studies, this study re-examines the impact of company size
on CSD practices in New Zealand.

Industry
The nature of a company’s industry has been identified as a factor potentially
affecting CSD practices. Dierkes and Preston (1977) contend that companies
whose economic activities modify the environment, such as extractive
industries, are more likely to disclose information about their environmental
impacts than are companies in other industries. Consumer-oriented
companies can be expected to exhibit greater concern with demonstrating
their social responsibility to the community, since this is likely to enhance
AAAJ corporate image and influence sales (Cowen et al., 1987). Patten (1991), on the
9,1 other hand, argues industry, similar to company size, influences political
visibility and this drives disclosure to ward off undue pressure and criticism
from social activists.
Several empirical studies have found positive associations between
industry classifications and CSD. In an Australian study, Kelly (1981) found
82 that primary and secondary industry companies tended to disclose more
environmental and energy-related information than corporations engaged in
tertiary industries, while the opposite relationship was found for information
relating to community interaction. In a study of US companies which was
similar in design to Kelly’s, Cowen et al. (1987) found that industry category
influenced energy and community involvement disclosures. Their results,
however, clearly indicated that the incidence and total amount of CSD are not
associated with industry category. Contrary to this finding, however, Patten
(1991) and Roberts (1992) have found positive relationships between high-
profile industries and the amount of corporate social responsibility
disclosure. As for company size, both Davey (1982) and Ng (1985) failed to
find an association between industry type and CSD for New Zealand
companies. Again, industry type and CSD in New Zealand are re-examined.

Corporate profitability
The relationship between CSD and corporate profitability has been
postulated to reflect the view that social responsiveness requires the same
managerial style as that necessary to make a firm profitable (Bowman and
Haire, 1976). CSD is believed to reflect an adaptive management approach to
dealing with a dynamic, multidimensional environment and an ability to meet
social pressure and respond to societal needs. Such management skills are
considered necessary to survive in today’s corporate environment (Cowen et
al., 1987). Heinze (1976), however, contends that profitability is the factor that
allows management the freedom and flexibility to undertake and reveal to
shareholders more extensive social responsibility programmes.
Empirical research on the profitability-CSD relationship, however, has
produced very mixed results. Both Bowman and Haire (1976) and Preston
(1978) provide results which support a profitability-CSD relationship.
Bowman and Haire (1976) report significant differences for a five-year average
return on equity (ROE) between disclosing and non-disclosing companies.
Preston reports a higher, single-year ROE for high disclosers than for other
Fortune 500 companies. On the other hand, Cowen et al. (1987) failed to
support any profitability-CSD relationship. Belkaoui and Karpik’s (1989)
results for this relationship conflict and are difficult to interpret. They report
a positive and significant pairwise correlation, and an insignificant, yet
negative regression coefficient for ROA and disclosure. While Roberts (1992)
has found evidence for a positive relationship between lagged profits and
CSD, Patten (1991), using multiple measures of profitability including lagged
measures, fails to find any relationship between profitability and CSD. Neither
Davey (1982) nor Ng (1985) could find evidence of a profitability-CSD Determinants of
relationship for New Zealand companies. disclosures in
NZ companies
Country of ownership and reporting country
From Gray et al.’s (1995a) review, a number of studies seem to indicate that the
country in which the company reports affects the theme of CSD, if not the
amount of disclosure (see, for example, Guthrie and Parker, 1990). In addition, 83
Andrews et al. (1989) report that the country of ownership may have some effect
on CSD, although it is difficult to assess the reliability of this result since it
appears to be confounded with company size. Since the study here is confined
to New Zealand companies, the influence of country effects on CSD is not
investigated. However, the study does offer some additional tentative insights
into the ownership-CSD relationship. Although not an original intention of the
study, companies with dual and multiple (overseas) stock exchange listings are
investigated for their level of association with CSD amount.
Whether any systematic relationships between CSD and the variables
discussed above exist is open to question. Like the descriptive analyses, such
relationships have been investigated in different time periods, employing
different sampling and measurement techniques. Without systematic
investigation using multiple measures and standardized techniques (replication
studies), drawing firm conclusions about the existence of any such relationships
is extremely difficult (Lindsay, 1995). Until such time as techniques are
standardized, researchers need to be careful and explicit about what and how
they make their measurements. In the light of such disparity, research studies in
the CSD field would do well to establish the reliability of its evidence for any
such relationships before moving on to tackle the issues of why such
relationships occur.

Method
Sample design and data collection
The annual reports from the largest 50 companies listed on the New Zealand
Stock Exchange at 31 December 1992 were selected for this study. The “top” 50
is based on a size ranking of market capitalization as in Guthrie and Parker
(1990), and therefore provides data for the international comparisons. Guthrie
(1983) used a similar method for selecting his sample. The largest 50 companies
comprised 92 per cent of the total market capitalization on this date. The 92 per
cent figure is comparable with the amount of the Australian share market (90 per
cent) included in Guthrie’s study.
From the initial sample, two companies were removed as they had been listed
on the exchange during the year and had not filed an annual report during the
period. Another company was removed from the study as it was a foreign
registered company and released its annual report to meet the reporting criteria
of the UK. The UK reporting criteria make some CSDs compulsory. The final
sample for this study comprised 47 companies.
AAAJ Measurement of variables
9,1 Dependent variable – corporate social disclosure. Content analysis is used to
measure corporate social responsibility disclosures. Content analysis is a
method of codifying the text (or content) of a piece of writing into various groups
(or categories) depending on selected criteria (Weber, 1988). Following coding,
quantitative scales are derived to permit further analysis. Krippendorff (1980,
84 p. 21) states that “content analysis is a research technique for making replicable
and valid inferences from data according to their context”. In one form or
another, the method has been widely adopted in previous social responsibility
disclosure studies (see, for example, Abbott and Monsen, 1979; Ernst & Ernst,
1978; Guthrie and Mathews, 1985; Guthrie and Parker, 1990).
To enable content analysis to be performed in a replicable manner, an
interrogation instrument, checklist, and decision rules were developed. The
interrogation instrument is shown in Figure 1 and the checklist is included in the
Appendix. The interrogation instrument is used to record the amount of CSD in
different categories. The instrument categories are constructed based on the
earlier work of Ernst & Ernst (1978), Guthrie and Parker (1990), and Gray et al.
(1995a) and include the dimensions of disclosure theme (environment, energy,
products/consumers, community, employee/human resources, general/other);
evidence (monetary quantification, non-monetary quantification, declaration);
news type (good news, bad news, neutral news); and amount (number of
sentences).
The instrument does contain some differences from earlier work, however,
and these are now considered.
• Location in report. The dimension of location in report is excluded. The
literature is unclear as to why location in report is important and
location data appears to have very little value beyond permitting
description (Gray et al., 1995b, p. 83).
• Amount of disclosure. The amount of disclosure per company and per
content category is measured by the number of sentences. In many earlier
studies, quantification for each of the disclosure categories consisted of
recording whether or not a company made a disclosure in the category,
and total amount per company was measured to the nearest tenth or
quarter of a page. Ng (1985) is critical of portion of pages measurement
because print sizes, column sizes and page sizes may differ from one
annual report to another. To overcome these problems, Ng used number
of words. Measuring CSD amount by the number of words, however,
leaves the researcher pondering which individual word is a CSD and
which is not. Consequently, the possibility remains that disagreement
between different coders could be quite serious. Sentences, as a
measurement unit, overcome the problems of portion of pages and
remove the need to account for, or standardize, the number of words. On
the other hand, one might concede that a difference does exist between
two sentences which are identical but for different font sizes. As natural
units of written English which clearly exist between two punctuation
Social responsibility disclosure instrument Name Year

Text disclosures Environment Energy Product/ Community Employee Employee General Totals
Sentence characteristics consumers (health and safety) (other)

Monetary/non-monetary/good news

Monetary/non-monetary/bad news

Monetary/non-monetary/neutral

Monetary/good news

Monetary/bad news

Monetary/neutral

Non-monetary/good news

Non-monetary/bad news

Non-monetary/neutral

Declarative/good news

Declarative/bad news

Declarative/neutral

Total (number of sentences)

Total amount of measured page disclosure to nearest 100th

Figure 1.
85
NZ companies
Determinants of

disclosure instrument
Social responsibility
disclosures in
AAAJ marks, sentences are also likely to provide more reliable measures of
9,1 inter-rater coding than words.
Given the concern over page measurement versus sentences, we
decided to construct an approximation to page measurement from the
sentence-coded data. First, the average number of sentences per page of
the chairman’s report for each annual report was calculated. The
86 average for each report was then divided into the total number of social
disclosure sentences for that report to produce a derived page
measurement for each company.
Later, it was decided to go back and measure the absolute amount of
social disclosure per company (but not per content category) by
proportions of annual report page to the nearest hundredth of a page[3].
In all three measures of social disclosure amount, no attempt is made to
standardize for annual report length. There is no restriction on the
number of pages an annual report can include and, if companies consider
additional disclosure is sufficiently important, it is believed they will
include extra pages in the report. The use of all three measures of social
disclosure amount enables comparisons with other studies and permits
comparative analysis to assess the importance of the choice of measure.
• Theme of disclosure. To facilitate the completion of the interrogation
instrument an extensive checklist of items to be included under each of
the theme dimension categories was developed. Obtained from Ng
(1985), but based on original work by Ernst & Ernst (1978), this checklist
was subsequently revised as a result of pretesting. In addition, a number
of decision rules were developed to facilitate a consistent interpretation
of the checklist. The original checklist and its amendments are included
in Appendix 1, and the decision rules are included in Appendix 2. As
distinct from many of the earlier studies, the employee theme is divided
into employee health and safety and employee other content categories.
This division is consistent with the most recent work of Gray et al.
(1995a).
• Voluntary/mandated disclosure. Recent work by Guthrie and Parker
(1990) and Gray et al. (1995a) draws an important distinction between
voluntary disclosures and those disclosures mandated by legislation. In
New Zealand, however, so little social disclosure is mandated by
legislation that no provision for the voluntary/mandated distinction is
made in the interrogation instrument. All the classified disclosures are
treated as voluntary.
Three rounds of pretesting were performed by the two authors and an
additional academic staff member. These pretesting rounds produced
increasingly convergent views as to what constituted a CSD sentence, and led to
the formulation of several decision rules and amendments to the initial
checklist (see Appendices 1 and 2). Although the three coders believed these
pretesting rounds had produced high levels of coding reliability, the final round Determinants of
was formally assessed using content analytic reliability measures. disclosures in
Scott’s (1955) π, and Krippendorff’s (1980) α were both used to assess the NZ companies
levels of inter-coder agreement occurring above chance on the initial coding
decision “is this sentence a social disclosure, yes? or no?” The reliability tests
indicated Krippendorff’s (1980) α = 0.901 and Scott’s (1955) π = 0.873. As noted
in Guthrie and Mathews (1985), while no acceptable standards of reliability have 87
been established for social disclosure content analysis, 0.80 (80 per cent
agreement above chance) or better is suggested as an acceptable level of inter-
coder reliability (Guthrie and Mathews, 1985, p. 261). Similarly, Wimmer and
Dominick (1991, pp. 171-5) suggest 0.75 or better is normally accepted within
the content analysis literature for these tests.
With the new guidelines and checklist established from the pretesting
rounds, the remaining 47 annual reports were photocopied and spiral bound.
Given the high levels of coder reliability from the pretesting phase, content
analysis was performed on the final data by a single coder using the checklists
and instruments developed during the pretesting process.
Independent variables – company size. In previous studies, company size has
been measured by either number of employees, total asset value, sales volume,
or an index rank (e.g. Fortune 500). Belkaoui and Karpik (1989) employed the
log of net sales in their study, whereas Trotman and Bradley (1981) used both
sales and total assets. Cowen et al. (1987) used Fortune rank. Roberts (1992) used
a four-year average of revenues. Patten (1991) used the log of sales, but also
repeated the analysis with Fortune 500 rankings. Employee numbers, sales and
total assets have been shown to be highly correlated (Kimberly, 1976).
Nonetheless, given that no theoretical reasons exist for a particular measure of
size in this and other disclosure studies, three measures of size will be used:
market capitalization, sales, and total assets.
Corporate profitability. Profitability is measured using the accounting-based
return on equity (EBIT/total equity), and return on assets (EBIT/total assets). In
addition to current (1992) measures of these variables, five-year (1988-1992)
averages are also used in line with previous studies (Abbott and Monsen, 1979;
Bowman and Haire, 1976; Cowen et al., 1987). Measuring return on equity, or
return on assets, over an extended period is claimed to provide a more reliable
measure of corporate performance than measurement of a single year. Where
data are unavailable for the full five-year period, an average is calculated for
those years that are available.
Industry type. The industry variable in this study is measured as a
dichotomous classification of industries into high-profile and low-profile
industries. Roberts (1992, p. 605) defines high-profile industries as those with
consumer visibility, a high level of political risk, or concentrated intense
competition, and suggests prior studies which include industry may have
captured a systematic relationship between such characteristics and social
responsibility activities. Of course, all such classifications are to an extent
subjective and ad hoc. Patten (1991), for example, identified petroleum,
AAAJ chemical, and forest and paper as high profile for one study. Dierkes and
9,1 Preston (1977) suggest extractive industries are highly visible and, therefore,
subject to greater legal constraints. Roberts (1992) included automobile, airline,
and oil industries as high profile, and food, health and personal products, hotel,
and appliance and household products as low profile.
All those industries identified in the above studies as high profile are included
88 as high-profile in this study. In addition, agriculture, liquor and tobacco, and
media and communications are classified as high profile. While these industries
might not be regarded universally as high profile, they are particularly
dominant in New Zealand society, and are believed to meet the criteria outlined
by Roberts (1992) for high profile[4].

Analysis, results and discussion

The results of the descriptive analysis of the corporate social disclosure
measures are presented in Tables II and III. In addition to the incidence figures,
i.e. the number of disclosing companies as a percentage of the total sample of
companies shown in the second column, Table II reports on issues of theme,
evidence, and news by proportions of amount of disclosure as measured by
number of sentences (fourth column). Nearly all previous studies have tended to
report only the incidence rate, primarily because disclosure amount has not
been recorded in a disaggregated manner by theme, evidence, and news. A
problem with relying on incident rates is that they may be misleading in the

Disclosing Disclosing Disclosed

companies companies as a Number of sentences as a
(making at least percentage of total disclosed percentage of all
one disclosure) sample (incidence) sentences (amount) disclosed sentences

Theme
Environment 11 23 107 12
Human resources 37 79 523 57
Products 19 40 79 9
Energy 3 6 6 1
Community 14 30 172 19
General/other 9 19 27 3
Total 914 100
Evidence
Monetary 29 62 162 18
Non-monetary 30 64 182 20
Declarative 34 72 570 62
Total 914 100
News
Table II. Good 37 79 710 78
Descriptives for social Bad 15 32 57 6
disclosure measures in Neutral 22 47 147 16
New Zealand companies Total 914 100
sense that they treat companies which make one or more disclosures as equal – Determinants of
a company making one sentence disclosure on the environment is treated as disclosures in
equal to a company which discloses 50 sentences on the environment. As can be NZ companies
seen from Table II, measuring proportions by amount can make a difference.
For example, while 40 per cent of companies make disclosures on aspects of
products, most of those which do disclose only disclose a small amount since
the product theme only accounted for 9 per cent of the total disclosure for the 89
sample. Although not shown in Table II, on average companies making product
theme disclosures only disclosed four product-theme sentences each. In
contrast, companies making human resource disclosures, disclosed an average
of 14 human resource related sentences each.

Sentences Measured pages Derived pages

Total 914 29.29 52.84

Average 23.4 0.75 1.35
Minimum 1 0.02 0.04
Maximum 137 3.8 7.75 Table III.
Note: Total sample of companies = 47; all disclosing companies = 39 Total amount of disclosure

Similarly, while it might appear from the incidence rates shown in the second
column that monetary (62 per cent), non-monetary (64 per cent), and declarative
(72 per cent) evidence are fairly equally represented, the proportion by amounts
measure (fourth column) provides a very different picture. Clearly, while many
companies do make monetary and non-monetary social disclosures, the vast
bulk of their social disclosures are declarative statements (62 per cent of total
disclosure). Companies making declarative disclosures, on average, disclose
about 17 declarative sentences each. In contrast, companies making monetary
disclosures average about six monetary sentences each. Likewise, and not
surprising, good news statements clearly dominate (78 per cent of total
disclosure) with only a very small proportion of statements being bad news
(6 per cent of total disclosure). Of the companies making good news disclosures,
they each average about 19 good news sentences, while bad news disclosers
each average about four bad news sentences.
In terms of the total amount disclosed, 39 companies (out of 47) disclosed a
total 914 sentences, representing an average of 23 sentences. The maximum
disclosed by any single company was 137 sentences. In terms of page amount,
a total of 29.29 actual measured pages was disclosed, representing an average
of 0.75 pages, with the most disclosed by a single company being 3.8 pages.
Clearly, the derived page measurement grossly overestimates the amount of
disclosure. Nonetheless, as discussed later, the measure appears to overestimate
each company systematically and holds up very well as a relative measure of
disclosure.
AAAJ Table IV provides the descriptive statistics for the continuous independent
9,1 measures of size, profitability, and the three dependent measures of CSD
amount. The three measures of size have been transformed by their natural log
due to non-normality, while the four profitability measures, being ratios, met
the K-S tests of normality without adjustment. The three measures of CSD
amount have been left unadjusted. Note that the means (and the minimums)
90 reported in Table IV do not tally with those in Table III because Table IV is
based on the total sample of 47 companies, and not the 39 disclosing companies.

Mean SD Min. Max. Skewness Kurtosis K-S stats

Independent variables
Size:
Nat log of 1992 sales 19.10 1.55 16.21 23.25 0.431 0.114 0.653 0.786
Nat log of 1992
total assets 19.36 1.58 17.13 23.77 0.994 0.535 1.054 0.216
Nat log of 1992
market capitalization 19.20 1.18 17.90 22.47 1.335 1.080 1.125 0.158
Profitability:
Return on assets 1992 0.112 0.05 –0.03 0.250 0.121 0.062 0.440 0.990
Average return on
assets 1988-1992 0.108 0.04 0.03 0.210 0.358 –0.08 0.663 0.771
Return on equity 1992 0.237 0.12 –0.03 0.730 1.365 5.028 0.619 0.837
Average return on
equity 1988-1992 0.221 0.09 0.06 0.630 1.750 6.300 0.691 0.725
Dependent variable
CSD amount:
Measured pages 0.623 0.81 0.00 3.80 2.535 7.611 1.512* 0.020
Derived pages 1.124 1.60 0.00 7.75 2.588 7.836 1.653**0.008
Number of sentences 19.44 28.86 0.00 137.0 2.971 9.985 1.865**0.009
Notes:
Table IV. *Significant at the 5% level.
Descriptive statistics **Significant at the 1% level.
for continuous The sources of data for all the variables (except market capitalization) are each company’s 1988-
variables 1992 annual reports. The source for market capitalization is the NZSE 1992 annual report

Table V presents the dichotomous high- and low-profile industry classification.

Collapsing the New Zealand Stock Exchange (NZSE) industry classifications
into high- and low-profile on the basis of Roberts’ (1992) criteria results in 21
high-profile cases, and 26 low-profile cases as shown in Table V.
To test the levels of association between the different continuous dependent
and independent variables (size, profitability, and disclosure amount), pair-wise
Pearson’s and Spearman’s rank correlations were performed. The correlation
coefficients are reported in Tables VI and VII. In Table VI the correlation
coefficients are reported in the top of each cell, with the probability value
reported underneath in each cell.
Market capitalization rank Company name NZSE industrial class Determinants of
disclosures in
Low-profile industries NZ companies
30 Milburn New Zealand Ltd BLD
20 PLD Holdings Ltd ELE
12 Fischer & Paykel Industries Ltd ELE
19 BNZ Finance Ltd FIN
34 Huttons Kiwi Ltd FOD 91
15 Progressive Enterprises Ltd FOD
44 Best Corporation Ltd FOD
11 Sanford Ltd FOD
45 Mainzeal Group Ltd INV
4 Brierley Investments Ltd INV
13 Ceramco Corporation Ltd INV
48 Corporate Investments Ltd INV
16 Fay Richwhite and Company Ltd INV
42 Salmond Smith Biolab Ltd MED
28 Fortex Group Ltd MET
29 Mair Astley Ltd MET
41 U-Bix Business Machines Ltd MIS
17 Rank Group Ltd MIS
38 Waste Management NZ Ltd MIS
46 Shortland Properties Ltd PRO
32 Robt Jones Investments Ltd PRO
36 Gulf Resources Pacific Ltd PRO
43 Michael Hill International Ltd RET
23 Hallenstein Glasson Holdings Ltd RET
27 Cavalier Corporation Ltd TEX
24 Donaghys Ltd TEX
High profile industries
47 Regal Salmon Ltd AGS
50 Apple Fields Ltd AGS
49 Reid Farmers Ltd AGS
40 Nuplex Industries Ltd CHM
8 Fernz Corporation Ltd CHM
9 The New Zealand Refining Company Ltd ENE
18 Steel & Tube Holdings ENG
3 Fletcher Challange Ltd FOR
2 Carter Holt Harvey Ltd FOR
14 DB Group Ltd LIQ
5 Lion Nathan Ltd LIQ
7 Wilson and Horton Ltd MCM
10 Independent Newspapers Ltd MCM
1 Telecom Corporation of New Zealand Ltd MCM
25 New Zealand Oil and Gas Ltd MIN
22 Southern Petroleum NL MIN
21 Macraes Mining Company Ltd MIN
6 Air New Zealand Ltd TRN
31 Port of Tauranga Ltd TRN
35 The Helicopter Line Ltd TRN
33 Owens Group Ltd TRN
Notes: BLD = Building; ELE = Electrical; FIN = Finance and banks; FOD = Food; INV = Investment;
MED = Medical supplies; MET = Meat and by-products; MIS = Miscellaneous services; PRO = Property;
RET = Retailers; TEX = Textiles and apparel; AGS = Agricultural and associated services; Table V.
CHM = Chemicals; ENE = Energy and fuel; ENG = Engineering; FOR = Forestry; LIQ = Liquor and tabacco; Classification of
MCM = Media and communications; MIN = Mining; TRN = Transport and Tourism companies by industry
AAAJ Return Return Nat log Nat log Nat log Average
9,1 on on of of market of return
Measured equity assets sales capitalization assets on assets
pages 1992 1992 1992 1992 1992 1988-1992

Return on equity –0.079

92 1992 0.595
Return on assets –0.191 0.628
1992 0.198 0.000
Nat log of sales 0.638 0.048 –0.156
1992 0.000 0.747 0.293
Nat log of market
market 0.757 –0.154 –0.197 0.784
capitalization 1992 0.000 0.298 0.183 0.000
Nat log of total 0.679 –0.277 –0.524 0.788 0.848
assets 1992 0.000 0.059 0.000 0.000 0.000
Table VI. Average return on –0.136 0.364 0.562 –0.181 –0.070 –0.359
Pearson correlation assets 1988-1992 0.361 0.012 0.000 0.222 0.639 0.013
coefficients for Average return on 0.102 0.744 0.349 0.176 0.069 –0.059 0.628
continuous variables equity 1988-1992 0.493 0.000 0.016 0.235 0.645 0.692 0.000

From Table VI, it is clear that all the size measures (Nat log of sales 1992, Nat
log of market capitalization 1992, and Nat log of total assets 1992) are highly
positively correlated with the actual measured page amount of social
disclosure. Consistent with studies from the USA (Cowen et al., 1987; Belkaoui
and Karpik, 1989; Patten, 1991, 1992) and Australia (Kelly, 1981; Trotman and
Bradley, 1981), the results indicate that the larger listed New Zealand firms (of
relatively large firms) disclose more social and environmental information.
Although these results are in contrast to the earlier New Zealand studies of
Davey (1982) and Ng (1985), such differences may be due to the different
sampling and analytical methods used in their studies.
From Table VI none of the four profitability measures is significantly
associated with the social disclosure measure, and these findings are consistent
with Davey (1982), Ng (1985), Cowen et al., (1987), Patten (1991), and Roberts
(1992). Also consistent with Patten (1991), but in contrast to Roberts (1992),
various measures of lagged profits (not shown in Table VI) were not
significantly correlated with disclosure amount. The profitability of large New
Zealand companies (both current and lagged), therefore, appears unrelated to
the amount of social and environmental information they disclose.
In addition to firm size and amount of disclosure, the only other significant
correlations between measures of the independent variables occurs, perhaps
not surprisingly, between the return on assets measures and the natural log of
total assets. Also, as expected, for both the size and the profitability variables,
the different measures of the same variable are all significantly correlated.
 Measured pages Number of sentences Derived pages
Determinants of
disclosures in
Number of sentences 0.981 NZ companies
0.000
0.963a
Derived pages 0.979 0.980
0.000 0.000 93
0.964a 0.969a
Return on equity 1992 –0.079 –0.117 –0.097
0.595 0.434 0.513
–0.041a –0.071a –0.065a
Return on assets 1992 –0.191 –0.169 –0.178
0.198 0.254 0.229
–0.187a –0.198a –0.195a
Nat log of sales 1992 0.638 0.576 0.605
0.000 0.000 0.000
0.532a 0.532a 0.528a
Nat log of market capitalization 0.757 0.697 0.734
1992 0.000 0.000 0.000
0.596a 0.551a 0.554a
Nat log of total assets 1992 0.679 0.612 0.648
0.000 0.000 0.000
0.488a 0.436a 0.437a
Average return on assets –0.136 –0.130 –0.153
1988-1992 0.361 0.381 0.303
–0.110a –0.151a –0.149a
Average return on equity 0.102 0.075 0.075 Table VII.
1988-1992 0.493 0.617 0.616 Pearson correlation
0.157a 0.120a 0.129a coefficients for
continuous dependent
Note: aSpearman rank correlation coefficients variables

To examine the possible effects of measuring the amount of social disclosure in

different ways, the correlation analysis reported in Table VI was re-run using
measured pages, derived pages, and number of sentences. Table VII reports the
pair-wise correlations for the independent variables and the three measures of
the dependent variable. Pearson’s correlation coefficients are shown in the top of
each cell, with the probability value below. To alleviate any concerns over the
non-normality of the dependent variable measures, Spearman’s rank
correlations are also reported. Again, and confirming the results in Table VI, all
the measures of size are significantly correlated with the different measures of
the dependent variable, while none of the profitability measures is even close to
significance. Given the earlier discussion over how to measure the amount of
social disclosure, a particularly important result from Table VII is the extremely
high correlations between the three measures of disclosure amount (measured
pages, derived pages, and number of sentences). In some respects this is quite
AAAJ Mean Mean
9,1 high- low- Mean SE of Two-tailed
profile profile diff diff t-value p

Independent variables
Size
94 Nat log of sales 1992 19.32 18.93 –0.388 0.456 –0.85 0.400
Nat log of total
assets 1992 19.77 19.09 –0.676 0.460 –1.47 0.149
Nat log of market
capitalization 1992 19.64 18.85 –0.789 0.332 –2.38 0.022
Profitability
Return on assets 1992 0.098 0.124 0.026 0.017 1.58 0.122
Average return on
assets 1988-1992 0.101 0.113 0.012 0.013 1.00 0.323
Return on equity 1992 0.200 0.267 0.066 0.035 1.91 0.063
Average return on
equity 1988-1992 0.202 0.236 0.033 0.028 1.19 0.241
Dependent variable
CSD amount
Measured pages 0.965 0.346 –0.619 0.222 –2.80 0.008
Derived pages 1.770 0.599 –1.173 0.441 –2.66 0.011
Table VIII. Number of sentences 10.57 30.42 –19.85 8.032 –2.47 0.017
t-tests for independent
samples of industry Note: Industry is partitioned into high-profile (21 cases) and low-profile (26 cases)

surprising, especially given what appeared to be the crudity of the derived page
measurement.
In addition to examining the association between the continuous variables,
two-tailed t-tests for independent samples of industry were performed. The
purpose of these tests is to assess whether any significant differences exist
between the mean amounts of size, profitability, and disclosure amount
between the high- and low-profile industry groups. From Table VIII, significant
differences exist between high- and low-profile industries for all of the measures
of social disclosure amount (measured pages, derived pages, and number of
sentences). High-profile industry companies disclose significantly more social
and environmental information than low-profile industry companies. This
finding is similar to those of Patten (1991) and Roberts (1992), against whose
work the more relevant comparisons can be made due to similarities in the
construction of the industry classification in this and their studies.
In terms of the relationship between industry and the other independent
variables, none of the profitability measures show significant differences,
although the single-year return on equity ratio for 1992 is marginal. For the
measures of size, neither sales nor assets show significant differences by
industry. The market capitalization measure, however, does differ by industry
partition. As measured by market capitalization, the average company size of
the high-profile industry group is significantly larger than the average company
size of the low-profile industry group. Further, although not shown, this Determinants of
association between market capitalization and industry (as measured in this disclosures in
sample) also exists for the previous two years (1990, 1991). Why these particular NZ companies
industries should dominate the New Zealand stock market is not clear. Moreover,
whether this relationship is peculiar to New Zealand, and whether it continues to
exist outside of the top 50 companies, needs further investigation.
To examine the multiple effect of the independent variables on the amount of 95
social disclosure in New Zealand companies, the following OLS multiple
regression equation was run:
Measured pages = a 1 + b 1 Nat log of sales 1992 + b 2 Industry
+ b3 Return on assets 1992
where:
Measured pages = amount of social disclosure measured in actual
pages to nearest one-hundredth of a page.
Nat log of sales 1992 = natural logarithm of sales turnover for 1992.
Industry = industry classification, dummy variable with
1= high-profile, 0= low-profile.
Return on assets for 1992 = earnings before interest and tax over total assets
The equation is a direct replication of that found in Patten (1991), and the
results shown in Table IX are entirely consistent with Patten’s, both size and
industry are significant variables, while profitability is not. A minor difference
with the study here is that social disclosure is measured as a continuous
variable, whereas Patten partitioned his sample into high and low disclosers.
The model would also appear to fit the New Zealand sample better since it
explains 46 per cent of the variation (Adjusted R2 = 0.467), while Patten (p. 303)
reports 25 per cent (Adjusted R2 = 0.256). Although not shown in Table IX,

Measured pages = a1 + b1Nat log of sales 1992 + b2Industry + b3Return on assets 1992
B SE B Beta t Sig t

Nat log of sales 1992 0.31048 0.05709 0.59527 5.4380 0.0000

Industry 0.48806 0.17876 0.30318 2.7300 0.0091
Return on assets 1992 –0.40655 1.57392 –0.02881 –0.2580 0.7974
Constant –5.48203 1.12964 –4.8530 0.0000

Regression measures ANovA DF Sum of squares Mean squares

Multiple R = 0.70842 Regression 3 15.10821 5.03507
R2 = 0.50185 Residual 43 14.99661 0.34876
Adjusted R2 = 0.46710 F = 14.44000 Sig F = 0.000
Standard error = 0.59056
Table IX.
Notes: B = regression coefficient; SE B = standard error of regression coefficient; Beta = Regression results:
standardized regression coefficient; Industry = industry classification – dummy variable with Nat log of sales 1992 +
1 = high profile, 0 = low profile, n = 47 Return on assets 1992
AAAJ dropping the insignificant profitability measure of return on assets 1992 from
9,1 the regression model marginally improves the adjusted R2 measure to 0.478 (48
per cent).
Following Patten (1991), various runs of this model were carried out using the
different measures of profitability (return on equity 1992, average return on
equity 1988-1992, and average return on assets 1988-1992) and, consistent with
96 his findings, none of the profitability measures even approaches significance.
For brevity, these results are not reported. In addition, various runs were also
made using the different measures of the dependent variable (measured pages,
derived pages and number of sentences) and the different measures of size (Nat
log of sales 1992, Nat log of total assets 1992 and Nat log of market
capitalization 1992). Not surprisingly, given their very high correlation, the
measures of the dependent variable made no significant difference to the
regression results (not shown), although the model best fits measured pages,
then derived pages, and finally number of sentences.
Substituting assets for sales makes little difference to the regression results,
but the results do change with the market capitalization measure. As shown in
Table X, the effect of market capitalization is to reduce the significance of the
industry variable, yet the model explains considerably more of the variation (a
total of 57 per cent) than when using the other size measures. Market
capitalization, alone, appears to capture more of both size and industry. Why
this should be is not clear.
Given the multiple significance of size and industry (excepting when size is
measured using market capitalization) in the above regression model, further
insights into the size-industry-disclosure relationship can be gained by re-
examining the size-disclosure correlations shown in Table VII. As shown in

Measured pages = a1 + b1Nat log of market capitalization 1992 + b2 Industry + b3 Return on

assets 1992
B SE B Beta t Sig t

Nat log of market capitalization

1992 0.47356 0.07044 0.69529 6.7230 0.0000
Industry 0.26898 0.16866 0.16709 1.5950 0.1181
Return on assets 1992 –0.70016 0.82856 –0.08366 –0.8450 0.4028
Constant –8.74723 1.31960 –6.6290 0.0000

Regression measures ANovA DF Sum of squares Mean squares

Multiple R = 0.77399 Regression 3 18.03461 6.01154
R2 = 0.59906 Residual 43 12.07021 0.28070
Adjusted R2 = 0.57109 F = 21.41603 Sig F = 0.000
Table X. Standard error = 0.52981
Regression results
Nat log of market Notes: B = regression coefficient; SE B = standard error of regression coefficient; Beta =
capitalization 1992 + standardized regression coefficient; Industry = industry classification – dummy variable with
Return on assets 1992 1 = high profile, 0 = low profile, n = 47
Table XI, when the correlations are recalculated on the separate sub-samples of Determinants of
industry rather than the entire sample, in all cases the size-disclosure disclosures in
correlations are much higher for the high-profile industry sub-sample. NZ companies
Similarly, the size-disclosure correlations for the low-profile industry sub-
sample are in all cases lower, and in many cases insignificant. An interpretation
to be drawn from these sub-sample correlation analyses is that industry
appears to moderate the size-disclosure relationship. Being a larger company 97
(in terms of assets or sales) is likely to indicate a larger discloser of social and
environmental information, if the company is in a high-profile industry. For low-
profile industry companies, relative size is not such a good indicator of
disclosure amount.

High-profile industry companies (n = 21) Low-profile industry companies (n = 26)

Measured Number of Derived Measured Number of Derived
pages sentences pages pages sentences pages

Number of 0.984 0.934

sentences 0.000 0.000
0.971a 0.956a
Derived pages 0.983 0.986 0.935 0.929
0.000 0.000 0.000 0.000
0.949a 0.982a 0.971a 0.951a
Nat log of 0.736 0.667 0.683 0.379 0.285 0.392
sales 1992 0.000 0.000 0.000 0.056 0.158 0.047
0.752a 0.673a 0.658a 0.321a 0.379a 0.345a
Nat log of total 0.811 0.733 0.752 0.251 0.169 0.303
assets 1992 0.000 0.000 0.000 0.261 0.407 0.132
0.823a 0.718a 0.721a –0.004a 0.019a –0.042a
Table XI.
Notes: aSpearman rank correlation coefficients Correlation coefficients
Due to the significant interdependence between Nat log of market capitalization 1992 for size and disclosure
and the industry classification, the correlations for Nat log of market capitalization variables by industry
1992 and measures of disclosure not reported group

In addition to the possible association of size and industry with disclosure

amount, this study also examined the possible association of overseas (multiple)
stock exchange listings on disclosure amount. In an attempt to suggest an
indicator for the largest companies in the sample, which are extremely high
disclosers, overseas stock exchange listings was introduced as a dummy
variable in the size-industry-disclosure regression models previously shown in
Tables IX and X.
An explicit rationale for the use of the overseas listing variable cannot be
found in the existing social disclosure literature. However, as noted earlier, Gray
et al. (1995a) suggest country of ownership and reporting country do appear to
be associated with social disclosure. Either because they are mandated by
regulation, both legislation and the stock exchange (see, for example, Gray et
AAAJ al., 1995a; Guthrie and Parker, 1990) or because the reporting culture demands
9,1 it, companies make more social disclosures in such regulated countries,
particularly the USA, Canada and the UK. Now, although companies dually
listed on overseas stock exchanges are not required to make the extra social
disclosures in their New Zealand annual reports, they may do so anyway, if only
because the information is readily accessible and already in the public arena.
98 A shown in Table XII, the sample was partitioned in three different ways.
First, companies with dual listings on North American (USA or Canada) stock
exchanges were partitioned from the others. This dummy variable is labelled
“overseas listing”. Second, companies with dual listings on North American or
UK stock exchanges were partitioned from the others (labelled “overseas
listing” 1). Finally, companies with dual listings on North American, UK or
Australian stock exchanges were partitioned from the others (labelled “overseas
listing” 2). The thinking behind the various partitions is that North American
social reporting requirements, followed by UK and then Australia are more
demanding than those in New Zealand.
From the regression results reported in Tables XIII-XV it appears that
overseas listings may be additionally associated with the amount of social
disclosures made by New Zealand companies. Comparing the results in Table
XIII with those in Table IX shows that the addition of overseas listing, the
strongest partition of overseas listings in terms of social reporting
requirements, increases the explained variation from 46 per cent (Adjusted R2 =
0.467) to 76 per cent (Adjusted R2 = 0.767). Similar, but smaller, increases in the
adjusted R2 figures are shown in Tables XIV and XV when the other (weaker)
partitions of overseas listings are used. The t-statistics in Tables XIII-XV show
that the size and industry variables, in addition to the overseas listing variable,
remain significantly associated with the amount of social disclosure. In the
“overseas listing” 2 model (shown in Table XV), however, the industry variable
does become marginal.
As for the earlier regression model, various runs of the later model were made
using the three different measures of social disclosure amount, the four
measures of profitability, and the three measures of size. In all cases for the
disclosure measures the models remained highly significant and the t-statistics
largely unchanged from those in Table XIII. As with the earlier model none of
the profitability measures approached significance and are not reported. Again,
substituting the market capitalization size measure produces a highly
significant model in which industry is no longer significantly associated with
disclosure amount. This time, however, comparing Tables XIII and XVI shows
the extra explanation gained from using the market capitalization measure in
place of the sales measure is quite marginal.

Conclusions
This paper has presented an empirical investigation into the social and
environmental disclosure practices of a sample of listed New Zealand
companies. In doing so, the paper provides a more up-to-date description of
 Determinants of
New Zealand, Australia, UK and North America
1 Telecom Corporation of New Zealand Ltd disclosures in
3 Fletcher Challange Ltd NZ companies
New Zealand, Australia and UK
4 Brierley Investments Ltd
99
New Zealand and Australia
2 Carter Holt Harvey Ltd
5 Lion Nathan Ltd
8 Fernz Corporation Ltd
21 Macraes Mining Company Ltd
25 New Zealand Oil and Gas Ltd

New Zealand only

6 Air New Zealand Ltd
7 Wilson and Horton Ltd
9 The New Zealand Refining Company Ltd
10 Independent Newspapers Ltd
11 Sanford Ltd
12 Fischer & Paykel Industries Ltd
13 Ceramco Corporation Ltd
14 DB Group Ltd
15 Progressive Enterprises Ltd
16 Fay Richwhite and Company Ltd
17 Rank Group Ltd
18 Steel & Tube Holdings
19 BNZ Finance Ltd
20 PDL Holdings Ltd
22 Southern Petroleum NL
23 Hallenstein Glasson Holdings Ltd
24 Donaghys Ltd
27 Cavalier Corporation Ltd
28 Fortex Group Ltd
29 Mair Astley Ltd
30 Milburn New Zealand Ltd
31 Port of Tauranga Ltd
32 Robt Jones Investments Ltd
33 Owens Group Ltd
34 Huttons Kiwi Ltd
35 The Helicopter Line Ltd
36 Gulf Resource Pacifics Ltd
38 Waste Management NZ Ltd
40 Nuplex Industries Ltd
41 U-Bix Business Machines Ltd
42 Salmond Smith Biolab Ltd
43 Michael Hill International Ltd
44 Best Corporation Ltd
45 Mainzeal Group Ltd
46 Shortland Properties Ltd
47 Regal Salmon Ltd
48 Corporate Investments Ltd Table XII.
49 Reid Farmers Ltd Overseas stock
50 Apple Fields Ltd exchange listings
AAAJ Measured pages = a1 + b1Nat log of sales 1992 + b2Industry + b3Overseas listing
9,1 B SE B Beta t Sig t

Nat log of sales 1992 0.17266 0.04151 0.33104 4.1590 0.0000

Industry 0.32074 0.11704 0.19924 2.7400 0.0089
Overseas listing 2.42985 0.32206 0.61282 7.5450 0.0000
100 Constant 2.92290 0.78974 –3.7010 0.0006

Regression measures ANovA DF Sum of squares Mean squares

Multiple R = 0.88617 Regression 3 18.03461 6.01154
R2 = 0.78530 Residual 43 12.07021 0.28070
Adjusted R2 = 0.77032 F = 52.42504 Sig F = 0.000
Standard error = 0.38771

Notes:
Table XIII. B = regression coefficient; SE B = standard error of regression coefficient; Beta = standardized
Regression results: regression coefficient; Industry = industry classification – dummy variable with 1 = high
Nat log of sales 1992 + profile, 0 = low profile; Overseas listing = overseas listing classification – dummy variable with
Overseas listing 1 = US or Canadian listing, 0 = others; n = 47

Measured pages = a1 + b1Nat log of sales 1992 + b2Industry + b3Overseas listing 1

t Sig t

Nat log of sales 1992 3.0470 0.0039

Industry 3.3340 0.0018
Overseas listing 5.1630 0.0000

Regression measures ANovA DF Sum of squares Mean squares

Multiple R = 0.83188 Regression 3 20.83335 6.94445
R2 = 0.60203 Residual 43 9.27147 0.21562
Adjusted R2 = 0.67054 F = 32.20755 Sig F = 0.000
Standard error = 0.43434

Table XIV. Notes:

Regression results: Industry = industry classification – dummy variable with 1 = high profile, 0 = low profile;
Nat log of sales 1992 + Overseas listing 1 = overseas listing classification – dummy variable with 1 = US, Canada or
Overseas listing 1 UK listings, 0 = others; n = 47

such practices. In addition, by using sampling and measurement techniques

more consistent with those used in other studies, the paper allows some
comparisons with surveys from other countries.
Consistent with companies from the USA, UK and Australia, New Zealand
companies make most social disclosures on human resources, with environment
and community themes also receiving significant attention. The vast majority
of the disclosures made by New Zealand companies tend to be declarative
(narrative) and good news. The amount of social disclosure made by New
Zealand companies averaged about three-quarters of an annual report page.
Compared with US and UK companies’ voluntary disclosures, New Zealand
Measured pages = a1 + b1Nat log of sales 1992 + b2Industry + b3Overseas listing 2
Determinants of
t Sig t
disclosures in
NZ companies
Nat log of sales 1992 4.3330 0.0001
Industry 1.8560 0.0703
Overseas listing 2 2.6520 0.0112
101
Regression measures ANovA DF Sum of squares Mean squares
Multiple R = 0.75579 Regression 3 17.19625 5.73208
R2 = 0.57121 Residual 43 12.90852 0.30020
Adjusted R2 = 0.54130 F = 19.09425 Sig F = 0.000
Standard error = 0.54790

Notes: Table XV.

Industry = industry classification – dummy variable with 1 = high profile, 0 = low profile; Regression results:
Overseas listing 2 = overseas listing classification – dummy variable with 1 = US, UK or Nat log of sales 1992 +
Australian listings, 0 = others; n = 47 Overseas listing 2

Measured pages = a1 + b1Nat log of market capitalization 1992 + b2Overseas listing

B SE B Beta t Sig t

Nat log of market capitalization

1992 0.30406 0.05502 0.44643 5.5270 0.0000
Overseas listing 2.25089 0.32029 0.56769 7.0280 0.0000
Constant –5.31251 1.05069 –5.0560 0.0000

Regression measures ANovA DF Sum of squares Mean squares

Multiple R = 0.89371 Regression 2 24.04550 12.02275
R2 = 0.79873 Residual 44 5.05932 0.13771
Adjusted R2 = 0.78958 F = 87.30362 Sig F = 0.000
Standard error = 0.37110
Table XVI.
Notes: Regression results:
B = regression coefficient; SE B = standard error of regression coefficient; Beta = standardized Nat log of market
regression coefficient; Overseas listing = overseas listing classification – dummy variable with 1 capitalization 1992 +
= US or Canadian listing, 0 = others; n = 47 Overseas listing

companies make much lower social disclosures on average, but it should be

remembered they are also much smaller companies. Moreover, although
interesting, such comparisons should always be made with extreme caution
until such time as a standardized set of sampling and measurement techniques
are universally adopted.
As well as investigating the disclosure practices, the study also examined
some potential relationships between corporate characteristics and disclosure
identified in other studies. Results are reported which, consistent with other
studies, show both size and industry are significantly associated with amount
of disclosure, while profitability is not. In addition, the results indicate that the
AAAJ size-disclosure relationship is much stronger for the high-profile industry
9,1 companies than for the low-profile industry companies.
The interaction between size and industry is interesting because it suggests
relative size alone is not a sufficient indicator of disclosure amount. It may be, for
example, that the size-industry-disclosure relationships support the argument
that New Zealand companies are responding to the information needs of
102 investors who wish to know about the companies’ potentially risky activities.
While size may be a good proxy for the relative (perceived) magnitude and
frequency of such activities, it may not be such a good proxy for the relative
(perceived) risk of such activities. Industry type, however, may be capturing this
relative risk. For example, because some industries face much more stringent
regulatory environments than others, firms in such industries may consider it
necessary to reassure existing and potential investors that all is well.
Alternatively, or perhaps in addition, and equally as plausible, the size-
industry-disclosure relationships could support the argument that New Zealand
companies are attempting to mitigate the effects of large and noticeable impacts
on the environment and society. In doing so, they attempt to ward off either
perceived or real pressure from social and environmental activists. Again,
industry type may be an indicator of the relative pressure (real or potential) which
companies face from social and environmental activists, and the constituencies
within the New Zealand population from which such activists derive their
support.
In addition to the size and industry relationships, this study also provides some
tentative evidence that dual and multiple overseas listings may
be associated with greater social disclosure. Whether this relationship is
particular to New Zealand is a matter for further investigation. It may be
that dual and multiple overseas listings only have an impact when the countries
in which the companies are listed have largely different social reporting
requirements. Moreover, it would be interesting to know whether any impact
worked in both directions. For example, would overseas companies also listed on
the New Zealand stock exchange report differently in New Zealand from New
Zealand companies listed on those same overseas stock exchanges?
Using various measures of size, profitability and disclosure demonstrated the
relative robustness of the relationships reported in this study, and also provided
some answers to questions surrounding the methods of measuring disclosure
amount. Finding that market capitalization appears significantly related to
industry classification (at least for the sample in this study), however, illustrates
that an arbitrary choice of measure for a variable may have an impact on the
results. Further work is required to see if the market capitalization measure and
industry relationship is an aberration peculiar to large New Zealand companies or
whether it is more widespread.
This study establishes an important benchmark in that the size-industry-
disclosure relationships found in other overseas studies (in particular, the USA)
also hold for New Zealand companies when comparative sampling and
measurement techniques are used. Further, this study also demonstrates that
the relationships found are relatively robust to different measurement choices. Determinants of
From such a starting point, social disclosure research in New Zealand can move disclosures in
on to more specific explanations for the relationships found in this study. NZ companies
Notes
1. See Gray et al. (1995a, fn 8) for a full list of references to CSRD studies in these and other
countries. 103
2. An alternative explanation, but one not tested in this study, is that the size-disclosure
relationship only holds for the largest of companies and does not exist for relatively
smaller companies. All those studies reporting positive relationships either sample the
“top” companies in various countries or do not draw random samples. Davey’s (1982)
study, and Ng’s (1985) replication using the same sample, were based on a random sample.
3. Page measurement is undertaken using a clear plastic A4 sheet divided into a grid of 100
rectangles (each side of the A4 sheet is divided into 10). The grid is laid over each
highlighted sentence in the annual report and the number of hundredths assessed
(rounding up). These hundredths were finally summed to produce a total for each annual
report.
4. The liquor and communication industries in New Zealand, for example, are both
dominated by major players. At times, the intense competition has resulted in cases been
taken to the New Zealand Commerce Commission – a body responsible for policing anti-
competitive behaviour. The meat and by-products industry, although classified along with
the food industry as low-profile, could have been classified along with agriculture as high-
profile. In the event, the results are not significantly affected by either treatment.

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Appendix 1: Checklist of categories of social disclosure Determinants of
The following is a taxonomy of the types of corporate social disclosure that form the substance disclosures in
of the content analysis of annual reports. The list is intended to represent an exhaustive
itemization of information with social importance. Adaptations to the original list used by Ng NZ companies
(1985) are shown in italics.

Environment
(1) Environmental pollution
105
• pollution control in the conduct of the business operations; capital, operating and
research and development expenditures for pollution abatement;
• statements indicating that the company’s operations are non-polluting or that they
are in compliance with pollution laws and regulations;
• statements indicating that pollution from operations has been or will be reduced;
• prevention or repair of damage to the environment resulting from processing or
natural resources, e.g. land reclamation or reforestation;
• conservation of natural resources, e.g. recycling glass, metals, oil, water and paper;
• using recycled materials;
• efficiently using materials resources in the manufacturing process;
• supporting anti-litter campaigns;
• receiving an award relating to the company’s environmental programmes or
policies;
• preventing waste.
(2) Aesthetics
• designing facilities harmonious with the environment;
• contributions in terms of cash or art/sculptures to beautify the environment;
• restoring historical buildings/structures.
(3) Other
• undertaking environmental impact studies to monitor the company’s impact on the
environment;
• wildlife conservation;
• protection of the environment, e.g. pest control.
Energy
• conservation of energy in the conduct of business operations;
• using energy more efficiently during the manufacturing process;
• utilizing waste materials for energy production;
• disclosing energy savings resulting from product recycling;
• discussing the company’s efforts to reduce energy consumption;
• disclosing increased energy efficiency of products;
• research aimed at improving energy efficiency of products;
• receiving an award for an energy conservation programme;
• voicing the company’s concern about the energy shortage;
• disclosing the company’s energy policies.
Employee health and safety
• reducing or eliminating pollutants, irritants, or hazards in the work environment;
• promoting employee safety and physical or mental health;
• disclosing accident statistics;
AAAJ • complying with health and safety standards and regulations;
• receiving a safety award;
9,1
• establishing a safety department/committee/policy;
• conducting research to improve work safety;
• providing low cost health care for employees.
Employee other
106 (1) Employment of minorities or women
• recruiting or employing racial minorities and/or women;
• disclosing percentage or number of minority and/or women employees in the
workforce and/or in the various managerial levels;
• establishing goals for minority representation in the workforce;
• programme for the advancement or minorities in the workplace;
• employment of other special interest groups, e.g. the handicapped, ex-convicts or
former drug addicts;
• disclosures about internal advancement statistics.
(2) Employee training
• training employees through in-house programmes;
• giving financial assistance to employees in educational institutions or continuing
education courses;
• establishment of trainee centres.
(3) Employee assistance/benefits
• providing assistance or guidance to employees who are in the process of retiring or
who have been made redundant;
• providing staff accommodation/staff home ownership schemes;
• providing recreational activities/facilities.
(4) Employee remuneration
• providing amount and/or percentage figures for salaries, wages, PAYE taxes,
superannuation;
• any policies/objectives/reasons for the company’s remuneration package/schemes.
(5) Employee profiles
• providing the number of employees in the company and/or at each branch/
subsidiary;
• providing the occupations/managerial levels involved;
• providing the disposition of staff – where the staff are stationed and the number
involved;
• providing statistics on the number of staff, the length of service in the company and
their age groups;
• providing per employee statistics, e.g. assets per employee and sales per employee;
• providing information on the qualifications of employees recruited.
(6) Employee share purchase schemes
• providing information on the existence of or amount and value of shares offered to
employees under a share purchase scheme or pension programme;
• providing any other profit sharing schemes.
(7) Employee morale
• providing information on the company/management’s relationships with the
employees in an effort to improve job satisfaction and employee motivation;
 • providing information on the stability of the workers’ jobs and the company’s Determinants of
future;
• providing information on the availability of a separate employee report;
disclosures in
• providing information about any awards for effective communication with NZ companies
employees;
• providing information about communication with employees on management styles
and management programmes which may directly affect the employees.
(8) Industrial relations
107
• reporting on the company’s relationship with trade unions and/or workers;
• reporting on any strikes, industrial actions/activities and the resultant losses in
terms of time and productivity;
• providing information on how industrial action was reduced/negotiated.
(9) Other
• improvements to the general working conditions – both in the factories and for the
office staff;
• information on the re-organization of the company/discussions/branches which
affect the staff in any way;
• the closing down of any part of the organization, the resultant redundancies created,
and any relocation/retraining efforts made by the company to retain staff;
• information and statistics on employee turnover;
• information about support for day-care, maternity and paternity leave.
Products
(1) Product development
• information on developments related to the company’s products, including its
packaging, eg. making containers reusable;
• the amount/percentage figures of research and development expenditure and/or its
benefits;
• information on any research projects set up by the company to improve its product
in any way.
(2) Product safety
• disclosing that products meet applicable safety standards;
• making products safer for consumers;
• conducting safety research on the company’s products;
• disclosing improved or more sanitary procedures in the processing and preparation of
products;
• information on the safety of the firm’s product.
(3) Product quality
• information on the quality of the firm’s products as reflected in prizes/awards received;
• verifiable information that the quality of the firm’s product has increased (e.g. ISO
9000).
Community involvement
• donations of cash, products or employee services to support established community
activities, events, organizations, education and the arts;
• summer or part-time employment of students;
• sponsoring public health projects;
• aiding medical research;
• sponsoring educational conferences, seminars or art exhibits;
AAAJ • funding scholarship programmes or activities;
• other special community related activities, e.g. opening the company’s facilities to the
9,1 public;
• supporting national pride/government sponsored campaigns;
• supporting the development or local industries or community programmes and activities.
Others
108 (1) Corporate objectives/policies: general disclosure of corporate objectives/policies relating to the
social responsibility of the company to the various segments of society.
(2) Other: disclosing/reporting to groups in society other than shareholders and employees, e.g.
consumers; any other information that relates to the social responsibility of the company.

Appendix 2: Decision rules for social disclosures

• Discussion of directors’ activities are not to be included as a discussion on employees.
• All sponsorship activity is to be included no matter how much it is advertising.
• All disclosures must be specifically stated, they cannot be implied.
• Good/neutral/bad classifications to be determined from perspective of the stakeholder
group involved.
• If any sentence has more than one possible classification, the sentence should be classified
as to the activity most emphasized in the sentence.
• Tables (monetary and non-monetary) which provide information which is on the checklist
should be interpreted as one line equals one sentence and classified accordingly.
• Innovations in products or services should not be included unless they are beyond what is
necessary to compete in the marketplace or attract business.
• Any discussion of the pension funds or employee share schemes would be classified as good
news unless it was clearly to the contrary, e.g. that the scheme had been scrapped.
• Any disclosure which is repeated shall be recorded as a CSD sentence each time it is
discussed.
• Discussions relating to the quality of goods and services will not be a CSD unless it contains
notice of a verifiable change in quality, e.g. accreditation to the International Standards
Organisation ISO 9000 quality series standard.