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The determinants influencing the

extent of CSR disclosure

CSR disclosure

Grigoris Giannarakis
Department of Financial Applications, Technological Education Institute
(TEI) of West Macedonia, Kila, Greece
Abstract
Purpose The aim of this study is to investigate the potential effects of corporate governance and
financial characteristics on the extent of corporate social responsibility (CSR) disclosure focusing on the
US companies.
Design/methodology/approach The sample consists of 366 companies from the Fortune 500 list
for 2011. The environmental, social and governance disclosure score calculated by Bloomberg is used as
a proxy for the extent of CSR disclosure. Multiple regression analysis was developed to identify factors
that affect the extent of CSR disclosure.
Findings Results show that company and board size is significantly and positively related to the
extent of CSR disclosure, and companies with Chief Executive Officer (CEO) duality characteristics
publish less information on their CSR disclosure, while there are significant differences between
different industries and the extent of CSR disclosure.
Research limitations/implications The research is based only on the presence or the absence of
CSR disclosure without receiving the quality aspect of the CSR disclosure which could lead to
misinterpretation. The results should not be generalized as the sample was based on large-size US
companies for 2011.
Originality/value This study extends the scope of previous studies by introducing new
independent and dependent variables. It contributes to the understanding of determinants of CSR
disclosure to improve the implementation of disclosure guidelines.

393
Received 30 May 2013
Revised 24 July 2013
Accepted 19 August 2013

Keywords Corporate governance, Disclosure, Corporate social responsibility

Paper type Research paper

1. Introduction
Recent corporate scandals, such as those of Enron, WorldCom and Lehman Brothers,
appear to have drawn more attention on corporate social responsibility (CSR) and CSR
disclosure. The concept of CSR is constantly changing over time, and it means different
things to different stakeholders and companies in different countries (Dawkins and
Lewis, 2003; Igalens and Gond, 2005; World Business Council for Sustainable
Development, 2003; Kitchin, 2002; Welford et al., 2007; Fafaliou et al., 2006). Perrini
(2005) supported that CSR and CSR disclosure emerged together. CSR [] means not
only fulfilling legal expectations but also going beyond compliance and investing more
into human capital, the environment and the relations with stakeholders (Commission
of the European Communities, 2001).
Mathews (1995) explained why companies develop CSR disclosure initiatives. First,
companies that provide socially responsible information can positively affect their
market performance. Second, the CSR disclosure can contribute to the establishment of
the legitimacy of the company with both a specific target group and the general public.

International Journal of Law and

Management
Vol. 56 No. 5, 2014
pp. 393-416
Emerald Group Publishing Limited
1754-243X
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Finally, non-financial disclosure can ensure a social contract between companies and the
society within which they operate. In addition to Mathews (1995), reputation
management and brand protection can be considered as important motives for the
elaboration of CSR disclosure (Kolk, 2005).
The USA is considered a pioneer in the field of CSR and CSR reporting, as a number
of Socially Responsible Investment indices were developed, such as Dow Jones
Sustainability Indices and Kinder, Lydenberg, Domini (KLD). Both of them have
integrated the aspect of reporting in their assessment procedure. In the USA, CSR
disclosure still remains on a voluntary basis to meet the expectations of their
shareholders (Rodrguez and LeMaster, 2007; Tschopp, 2005). Matten and Moon (2008)
argued that the US companies tend to provide more non-financial information about the
corporate discretion in their disclosure than their competitors. Regarding KPMG
survey, 83 per cent of the US companies participated in CSR reporting compared to 74
per cent in 2008 (KPMG, 2011). However, only 119 US companies in 2008 and 353 US
companies in 2011 elaborated CSR disclosures regarding Global Reporting Initiatives
(GRI) requirements.
The aim of the study is to identify the significant determinants affecting the extent of
CSR disclosure. More specifically, it incorporates both corporate governance and
financial indicators on the extent of CSR information disclosed by companies listed in
Fortune 500 for 2011. In total, nine variables are proposed, namely: Chief Executive
Officer (CEO) duality, companys size, women on board, profitability, boards age,
industrys profile, board meetings of directors, board size and financial leverage. the
environmental, social and governance (ESG) disclosure score is used as a proxy for the
extent of CSR disclosure which consists of three sub-dimensions, namely,
environmental, social and governance. Contrary to previous empirical studies, this
study incorporates a greater sample of companies extracting more reliable results. As
industry profile dimension is limited to use, this study integrates this dimension in the
proposed research model to ascertain the significance of industry profile in CSR
disclosure extent. The third-party rating calculation procedure from Bloomberg online
database is adopted for the first time n the field of CSR disclosure extent to diminish the
calculation errors. The CSR disclosure score, which is calculated by Bloomberg, is based
on 100 out of 219 raw data points more than the previous studies which are based on a
few decades of disclosure points. Finally, it attempts to examine, for the first time, the
role of new corporate governmental characteristics, such as woman on board and the
number of board meetings in the extent of CSR disclosure. The study contributes to the
understanding of determinants of CSR disclosure so as to improve the implementation
of disclosure guidelines and assists stakeholders to ascertain the kind of companies
through a CSR disclosure.
The paper is structured as follows: Section 2 presents a recent literature review on
CSR disclosure and its determinants followed by the hypothesis development in
Section 3. Section 4 describes the methodology, while in Section 5, the results of the
study are presented. The last section presents the conclusions along with suggestions
for further research.
2. Determinants of CSR disclosure
This section illustrates a sample of recent literature review regarding the relationship
between the governance and financial indicators on the extent of CSR disclosure.

Rahman et al. (2011) investigated the relationship of corporate characteristics of CSR

disclosure of 44 government-linked companies listed on stock exchange of Malaysia for
2005 and 2006. A content analysis was used to develop a CSR disclosure index taking
into account only 16 disclosure items. Results based on the multiple linear regression
analysis illustrated that only the companys size was positively associated with CSR
disclosure index.
Jennifer Ho and Taylor (2007) examined the determinants of the extent of CSR
disclosure comparing 50 of the largest US and Japanese companies at the beginning of
2003. The construction of CSR disclosure index was grounded on 20 disclosure items
based on previous empirical studies. Based on multiple regression models, the results
showed that companies with larger size, lower profitability, lower liquidity and
membership of manufacturing were important determinants of the extent of CSR
disclosure. In addition, the extent of CSR disclosure is higher for Japanese companies,
with environmental disclosure being the most important aspect because of differences in
national cultures, regulatory environmental and other institutional factors between the
USA and Japan.
Khan (2010), in a study of 30 Bangladesh private commercial banks, investigated the
effect of corporate governance characteristics on the extent of CSR disclosure for
2007-2008. A CSR disclosure index was calculated by using content analysis method
based on 60 disclosure items. The multiple regression analysis was used to test the
hypothesis development taking into account five explanatory variables. The companys
size, profitability, non-executive directors and the existence of foreign nationalities in
the board are positively significant for the extent of CSR disclosure.
Siregar and Bachtiar (2010) focused on companies from Indonesia Stock Exchange to
examine corporate characteristics on CSR disclosure of 87 public companies for 2003. To
measure CSR disclosure index, a checklist of CSR disclosure requirements was modified
from the disclosure items adopted by Haniffa and Cook (2005) and Sembiring (2005). Two
different measures were developed; the number of corporate social reporting items stated in
index and the number of disclosure sentences. A content analysis method and linear
regression were used to develop a CSR disclosure index and analyze the relationship
between the explanatory determinants and the extent of CSR disclosure. Both the board and
company size had a positive effect on the extent of CSR disclosure.
Gamerschlag et al. (2010) investigated the determinants of voluntary CSR disclosure
focused on 130 biggest listed German companies on Deutsche Aktien-index (DAX), Mid
Cap Dax (MDAX) and Smallcap-DAX (SDAX) for 2008. A CSR disclosure index was
based on Global Reporting Initiative requirements and content analysis method to
quantify the amount of CSR information. The ordinary least square regression approach
revealed that higher profitability is associated more with environmental than social
disclosures, while the German companies CSR disclosure was affected by visibility,
shareholders value, the relationship with US stakeholders, the companys size and the
industry membership.
Hossain and Reaz (2007) concentrated on 38 listed banks on the Bombay Stock
Exchange and the National Stock Exchange to explore the determinant of the extent of
CSR disclosure considering the annual reports of 2002-2003. The CSR disclosure index
was based on 65 disclosure items taking into account an outweighed dichotomous
disclosure approach. The ordinary least square regression model presented that the

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companys size and assets-in-place were significantly positive to the extent of CSR
disclosure.
Reverte (2009) investigated the determinants of CSR disclosures by companies listed
on the Madrid Stock Exchange and included in the IBEX35 index for 2005 and 2006. The
Observatory on CSR was used to develop different types of CSR disclosures. Based on
the linear regression model, the results showed that the most influential determinants
were media exposure, the companys size and the type of industries where the
companies operated.
Said et al. (2009) intended to examine the extent of CSR disclosure to corporate
governance characteristics focusing on 150 Malaysian public listed companies for
the year 2006. The content analysis method was used for the development of CSR
disclosure index based on disclosure items from previous empirical studies. Based
on the hierarchical regression analysis, only the governments ownership and audit
committee determinants affected the extent of CSR disclosure.
Tagesson et al. (2009) explained the extent and the content of social disclosure
information on official corporations Web sites by 169 companies on Stockholm Stock
Exchange and all State-owned corporations for 2007. The social disclosures on the
corporate Web site were divided into three dimensions, namely, environmental
disclosures, ethics disclosures and human resource disclosures which are based on
previous research studies and organizations. An unweighted-scoring approach was
used to create a disclosure index, while a multiple regression has been adopted to
investigate the relationship between the social disclosures on the corporate Web site and
different corporate characteristics. The findings showed a positive correlation between
the size and the profitability and the content of social disclosure information on
corporate Web sites. In addition, state-owned corporations disclose more social
information on their Web sites than privately owned corporations, while significant
differences existed between the industry and corporate characteristics.
Branco and Rodrigues (2008) aimed to compare the Internet and annual disclosure
investigating what factors affected the extent of CSR disclosure. The study incorporated
49 companies listed on Euronext Lisbon for 2003. The extent of CSR disclosure was
measured by using content analysis where each disclosure item was equally important.
According to the multiple linear regression analysis, the results showed that the
companys size is an important determinant of the extent of CSR disclosure, the media
exposure is an important characteristic only for annual disclosure and the financial
leverage has a negative effect on Web site disclosure, while the dimension of
profitability is positively significant only to products and consumers disclosure.
Haniffa and Cook (2005) intended to examine the effects of cultural and corporate
governance characteristics on CSR disclosures of 139 non-financial companies listed on
Kuala Lumpur Stock Exchange of Malaysia for the year 1996 and 2002. The content
analysis method was used to elaborate on two types of measures:
(1) the number of corporate social reporting items stated in the index; and
(2) the number of disclosure sentences.
The results showed that the companys size, profitability, multiple listing and the type of
industry were significant factors that affected the extent of CSR disclosure by using
regression analysis. Table I illustrates the most important aspects of the aforementioned
literature review. It identifies the country where the studies took place, the sample size,

Authors

Country

Sample size

Year of reference

Research technique

Rahman
et al. (2011)
Jennifer Ho
and Taylor
(2007)

Malaysia

44 government-linked
companies
50 of the largest US
and Japanese
companies

2005-2006

Multiple linear
regression analysis
Multiple regression
model

Khan (2010)

Bangladesh

30 private commercial
banks listed on the
Dhaka Stock
Exchange

2007-2008

Siregar and
Bachtiar
(2010)
Gamerschlag
et al. (2010)

Portugal

87 public firms listed

2003
in the Indonesian
Stock Exchange
130 largest companies 2008 considering four
(DAX, MDAX, and
reporting periods
SDAX)
between 2005 and
2008

Multiple regression
model

Hossain and
Reaz (2007)

India

2002-2003

Ordinary least square

regression model

Reverte
(2009)

Spain

38 listed banking
companies in Bombay
Stock Exchange
(BSE) and the
National Stock
Exchange (NSE)
46 companies of
IBEX35 index

2005, 2006

Linear regression
models

Said et al.
(2009)

Malaysia

150 public listed

companies

2006

Hierarchical
regression analysis

Tagesson
et al. (2009)

Sweden

2006

Multiple regressions

Branco and
Rodrigues
(2008)

Portugal

169 companies on
Stockholm Stock
Exchange and all
state-owned
corporations
49 companies listed
on Euronext

2003

Multiple linear
regression model

Haniffa and
Cooke (2005)

Malaysia

139 non-financial
companies listed on
the Kuala Lumpur
Stock Exchange

1996, 2002

Multivariate
regression models

USA, Japan

Germany

2003

Multiple regression
model

Ordinary least square

regression model

Significance
explanatory
variables

CSR disclosure

Firm size
Firm size
Profitability
Liquidity Industry
Country profile
Firm size
profitability Nonexecutive directors
Foreign
nationalities on
the board
Firm size Board
size

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Visibility
Relationship to US
stakeholders
Shareholder
structure
Firm size Assets
in-place

Media exposure
Firm size Industry
profile
Government
ownership Audit
committee
Firm size
Profitability

Firm size
Financial
Leverage Media
Exposure
Firm size
profitability
multiple listing
industry profile

the year of study reference, the research techniques and the significance explanatory
variables.
According to recent literature review, empirical studies have been conducted both in
developed and developing countries; however, the respective studies in the USA are
limited. The size of the samples ranges from 30 to 169 listed companies, probably
because those are more likely to develop CSR initiatives in their business operations

Table I.
Main aspects of literature
review

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than non-listed companies. The content analysis method is considered a viable method
to measure the extent of CSR disclosure. However, this procedure can be criticized as the
disclosure items which comprise the CSR disclosure index vary according to the
authors perception of the concept of CSR disclosure. As far as the explanatory variables
are concerned, each study introduces different explanatory variables; however, the most
common were the companys size, profitability and the industrys profile. Regression
analysis was a statistical tool for the investigation of the relationships between the
extent of the CSR disclosure and the examined explanatory variables. In most of the
empirical studies, only one year was investigated, thus, the results could not be
generalized.
3. Development of hypothesis
This section presents the explanatory variables that affect the extent of CSR disclosure.
Both corporate governance and financial variables are involved, namely, CEO duality,
companys size, women on board, profitability, boards age, industry profile, board
meetings of directors, board size and financial leverage. In many cases, the results of
previous empirical studies regarding the association of explanatory variables and
extent of CSR disclosure are mixed, thus, no a priori hypothesis development can be
made (Reverte, 2009; Branco and Rodrigues, 2008).
3.1 CEO duality
CEO duality refers to the situation where the same person holds CEO and the
chairpersons positions simultaneously (Rechner and Dalton, 1991). CEO duality as an
explanatory variable regarding the extent of CSR disclosure has not been analyzed
extensively. Elsayed (2009) showed that the effect of CEO duality on CSR performance
varies across the industry type, as fewer conflicts may arise. In the USA, the regulators
bodies and investors recommend the separation between the CEOs role and the
chairmans duties because the companies with CEO duality might suffer from poor
corporate governance (Chen et al., 2008).
Said et al. (2009) did not find any relationship between CEO duality and the extent of
CSR disclosure in Malaysian companies. In addition, Cheng and Courtenay (2006)
showed that CEO duality was not associated with the level of voluntary disclosure on
companies listed in Singapore Stock Exchange for 2000. Gul and Leung (2004)
demonstrated that CEO duality was associated with lower levels of corporate voluntary
disclosures in a sample of Hong Kong listed companies in 1996; thus, CEO duality
decreases the likelihood of companies to communicate CSR extensively. Huafang and
Jianguo (2007) showed that CEO duality is associated with lower levels of voluntary
disclosure regarding listed Chinese companies. As a solution, the separation of CEO
from the chairmans duties and the placement of an outside member with varied
experience can be recommended (Li et al., 2010). This study hypothesizes that
companies with CEO duality are expected to present lower level of CSR disclosure:
H1. CEO duality has a negative effect on the extent of CSR disclosure.
3.2 Companys size
Typically, the companys size is used as a proxy of its visibility (Brammer and
Millington, 2006; Branco and Rodrigues, 2008; Brammer and Pavelin, 2004; Branco and
Rodrigues, 2008). As the larger companies are under scrutiny from various

stakeholders, they are also under pressure to provide more information on their
disclosure legitimizing, thus, their business activities (Cowen et al., 1987). Regarding
larger companies, the CSR disclosure can be used as a tool by the managers to handle or
reduce the political cost (Mohd Ghazali, 2007; Watts and Zimmerman, 1978). As the
larger companies have more financial resources than medium or small ones, the cost of
preparing disclosure is decreasing for large companies because of economics of scales
(Jennifer Ho and Taylor, 2007; Lang and Lundholm, 1993).
A number of different indicators have been used to measure the companys size, such
as the number of employees (Tagesson et al., 2009), the market value of equity (Jennifer
Ho and Taylor, 2007), turnover (Adams et al., 1998; Tagesson et al., 2009), the market
capitalization (Mohd Ghazali, 2007; Reverte, 2009) and the total asset (Brammer and
Pavelin, 2004; Haniffa and Cooke, 2005; Siregar and Bachtiar, 2010; Hossain and Reaz,
2007; Khan, 2010; Reverte, 2009; Rahman et al., 2011). The positive relationship between
the companys size and the extent of CSR disclosure has been recorded by numerous
empirical studies in different countries (Eilbert and Parket, 1973; Haniffa and Cooke,
2005; Tagesson et al., 2009; Mohd Ghazali, 2007; Adams et al., 1998; Branco and
Rodrigues, 2008; Gamerschlag et al., 2010; Reverte, 2009; Siregar and Bachtiar, 2010;
Hossain and Reaz, 2007; Khan, 2010; Reverte, 2009; Rahman et al., 2011). However, large
companies are more powerful, and they can resist to the stakeholders pressure (Meznar
and Nigh, 1995). In addition, Roberts (1992) found that the companys size did not
adequately explain an association with the extent of social disclosure focused on
companies of Fortune 500. Thus, the underlying assumption is:
H2. Companys size has a positive effect on the extent of CSR disclosure.
3.3 Women on board
The presence of women on the board of directors can be used as a proxy of board
diversity (Carter et al., 2003). Gender composition has been traditionally associated with
the financial performance, and no satisfactory evidence exists regarding this and the
CSR disclosure. Womens experiences may force the board to meet a wider variety of
customers expectations and establish more effective stakeholder management (Daily
and Dalton, 2003; Zhang et al., 2013); thus, the implementation of CSR initiatives is more
feasible. Therefore, boards of socially responsible companies have significantly more
women than boards of non-socially responsible companies (Webb, 2004). Wang and
Coffey (1992) stated that the presence of women and other minority directors tend to
be more corporate social performance-oriented which is positively significant to
firms charitable giving. Williams (2003) showed that an increasing number of
women members on boards is positively related to the firms level of charitable
giving to the arts and cultural programs. It is pointed out that there is no clear
motive why women may be more charitable than men. In contrast, Khan (2010) did
not find a significant relationship between the womens representation on the board
and CSR reporting by private commercial banks of Bangladesh. Thus, based on the
above studies, the hypothesis is:
H3. The presence of women on the board of directors has a positive effect on the
extent of CSR disclosure.

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3.4 Profitability
The results regarding the relationship between profitability and the level of CSR
disclosure are mixed. The positive relationship between profitability and CSR
disclosure can be attributed to the fact that a profitable company has the freedom and
the flexibility to expose its CSR practices more extensively to the stakeholders,
legitimizing, thus, its existence (Haniffa and Cooke, 2005; Heinze, 1976; Khan, 2010).
Roberts (1992) found a positive relationship between CSR disclosure and lagged profits.
However, there are studies showing that there is no association between profitability
and CSR disclosure (Patten, 1991, da Silva Monteiro and Aibar-Guzman, 2010; Mohd
Ghazali, 2007). Siregar and Bachtiar (2010) noted that there is an insignificant
association of profitability with the level of CSR disclosure because CSR initiatives add
cost without any direct benefits. Jennifer Ho and Taylor (2007) found that companies
with less profit tend to provide more information to present that their business
operations contribute to social values and to society. Regarding the previous mixed
results, it is hypothesized:
H4. There is an association between profitability and the extent of CSR disclosure.
3.5 Boards age
No available empirical study exists as regards the boards age and the extent of CSR
disclosure. The boards age is used as a proxy for directors business experience
(Andersona et al., 2004). Bilimoria and Piderit (1994) pointed out that older directors are
characterized by their general experience and maturity. Muth and Donaldson (1998)
mentioned that boards with higher average age may exhibit a conservative bias and
better judgment. In addition, Muth and Donaldson (1998) extended Bantel and Jacksons
(1989) positions for younger managers and noted that a younger board of directors has
superior education and evaluate business risks effectively; thus, it is more likely to
develop CSR initiatives in business operations. As no previous empirical study exists,
the boards age is tested without making a priori negative or positive assumption:
H5. The boards age affects the extent of CSR disclosure.
3.6 Industry profile
Wallace et al. (1994) mentioned that different industries may provide a different
disclosure level because of the unique characteristics of each industry. Reverte (2009)
noted that industries with negative impact on environment provide more information in
disclosures than other industries. In addition, newer manufacturing industries and
service industries with less environmental impacts publish less information on
environmental aspects. Clarke and Gibson-Sweet (1999) stated that industries with high
visibility to final consumers are more likely to enclose in their disclosure initiatives
related to community involvement. Cowen et al. (1987) stated that the nature of the
industry is an important determinant of CSR disclosures, with consumer-oriented
industries demonstrating their interest in CSR because it could affect their sales.
Regarding previous empirical studies, Mohd Ghazali (2007) did not find a significant
effect of the industry competitiveness on the extent of CSR disclosure, probably because
the classification was not able to capture the political or social sensitivity of each one.
Patten (1991) investigated the effect of the industrys profile on the extent of CSR
disclosure. Different industries were incorporated, such as petroleum, chemical and

forest and paper product, as they have a greater motive to integrate CSR initiatives into
their operations to create a more positive social profile. Results revealed a positive
relationship of CSR profile to the level of CSR disclosure. Gamerschlag et al. (2010) found
that companies that are classified as consumer and energy supplying industries provide
more CSR information in disclosures to reduce the stakeholders pressure, while
companies that belong to the service sector tend to publish less CSR information.
Reverte (2009) categorized different industries in two categories:
(1) more sensitive including mining, oil and gas, chemicals, forestry and paper,
steel and other metals, electricity, gas distribution and water industry; and
(2) less sensitive includes all the other industries.
Results showed that higher CSR disclosure ratings belong to more environmentally
sensitive industries, as compared to those with lower CSR disclosure ratings. Branco
and Rodrigues (2008) distinguished two groups of industries:
(1) consumer proximity industries; and
(2) environmental sensitivity industries.
The empirical results showed no relationship between the extent of CSR disclosure to
the groups of industries. Jennifer Ho and Taylor (2007) categorized seven types of
industries into two groups: manufacturing and non-manufacturing companies. It was
found that there are significant differences in the extent of CSR disclosures between the
two types of companies, with Japanese companies publishing more information than US
companies. Taking into account the previous studies the adopted hypothesis is:
H6. The extent of CSR disclosure significantly differs among different industries.
3.7 Board meetings of directors
The number of board meetings is used as a proxy for the board diligence (Laksmana,
2008), and it is a decisive dimension to improve the effectiveness of a board and the level
of monitoring activity delivered (Vafeas, 1999; Laksmana, 2008). Vafeas (1999) showed
a negative correlation between the frequency of board meetings and performance.
However, it was found that frequent board meetings after crises satisfy the
shareholders expectations improving the companys performance. As CSR initiatives
are incorporated into business operations, it is expected that CSR strategy and policy are
discussed in every board meeting. It is hypothesized that the increased number of board
meetings is more likely to be associated with CSR duties, such as CSR disclosure:
H7. The number of board meetings has a positive effect on the extent of CSR
disclosure.
3.8 Board size
Board size can be used as a proxy to measure board governance (Zainon et al., 2012).
Jensen (1993) showed that the increased members of a board cause less effective
coordination, communication and decision-making and the board is more difficult to be
controlled by the CEO. Said et al. (2009) rejected the negative relationship between the
board size and the extent of CSR disclosure of the Malaysian public listed companies.
Siregar and Bachtiar (2010) found that the extent of CSR disclosure has a positive and
non-linear relationship with the board size. It is supported that as the board size becomes

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larger, the monitoring process becomes more ineffective. Esa and Mohd Ghazali (2012)
investigated whether corporate governance attributes, such as the board size, affect the
extent of CSR disclosure of Malaysian government-linked companies. Results showed
that the board size was positively associated with the extent of CSR disclosure. Cheng
and Courtenay (2006) focused on companies that are listed on the Singapore Stock
Exchange and found no association between the board size and the voluntary
disclosure. Further empirical research is needed in this subject. As Abeysekera (2010)
supported, a larger board brings diverse and vital resources, meeting global challenges
more effectively and efficiently, it is hypothesized:
H8. Board size has a positive effect on the extent of CSR disclosure.
3.9 Financial leverage
The level of a corporate financial leverage can be used as a proxy for creditors power (Liu
and Anbumozhi, 2009). Purushothaman et al. (2000) claimed that companies with high
leverage may have close relationships with their creditors and use other means to disclose
social responsibility information. Alsaeed (2006) claimed that those leveraged firms should
disclose more information to satisfy the expectations of creditors for information. Jennifer Ho
and Taylor (2007) supported that firms with higher levels of leverage seem to increase the
level of corporate disclosure to reduce the agency costs. However, the hypothesis
development for leverage cannot be supported. Branco and Rodrigues (2008) found that
leverage is statistically significant with socially responsible disclosures on the Internet
which means that the higher the levels of leverage, the less the information published on
disclosures. Reverte (2009) showed that leverage cannot explain differences in CSR
disclosure initiatives on Spanish listed firms. Rahman et al. (2011) hypothesized a positive
association between leverage and the extent of CSR disclosure. However, statistical results
showed an insignificant association for both explored periods of study. As the results of
previous studies are mixed, an a priori assumption for the association between CSR
disclosure and leverage cannot be made. The following hypothesis is tested:
H9. The financial leverage has significant effect on the extent of CSR disclosure.
4. Research methodology
4.1 Data selection
The companies selected for analysis were those listed in Fortune 500 in the USA. The
sample is based on large in size companies, as it is more possible to integrate CSR
initiatives into their business operations. In addition, it is more likely to find corporate
data from online database in relation to CSR. Regarding the source of data, the
Bloomberg online database is selected both for the corporate data and CSR disclosure
score. Out of 500 companies, 366 companies comprise the final sample because of
missing data. More specifically, ESG disclosure score was not available from all Fortune
500 companies, probably because they are not obligated to implement CSR initiatives.
This study focused only on the US economy for comparability purposes producing
homogeneous results (Gamerschlag et al., 2010; Matten and Moon, 2008).
4.2 Dependent and independent variables
This section describes both dependent and independent explanatory variables in the
proposed model. In previous studies, the development of CSR disclosure index was
based on the authors experience adopting criteria existing in literature; however, this

study is based on third-party rating calculation to evaluate the CSR disclosure score. A
number of different Socially Responsible Investment indices, as well as sustainability
indices, have been developed to assess companies in terms of sustainability, under
economic, social, environmental and corporate governance criteria (Escrig-Olmedo et al.,
2010). Sariannidis et al. (2010) claimed that one of the main challenges of the most
well-known socially responsible investment (SRI) indices is the lack of transparency, as
they do not publish important information on the measurement process and neglect the
dimension of industry where the companies are developed.
The ESG disclosure score is used as a proxy for the extent of CSR disclosure provided by
Bloomberg online database. Bloomberg scores companies solely on their ESG data
disclosure. The ESG disclosure score is a means of providing information to users for a better
understanding of the companys risks and opportunities associated with social expectations
and potential investments. The score is based on 100 out of 219 raw data points that
Bloomberg collects based mainly on GRI requirements. The ESG disclosure score ranges
from 0.1 for companies that disclose a minimum amount of social and environmental data to
100 for those that disclose every data point. Each data point is weighted in terms of
importance, with the workforce data carrying greater weight than other disclosures. The
ESG disclosure score is also tailored to different industries. In this way, each company is only
evaluated in terms of the data that are relevant to its industry sector, as each sector has
unique characteristics and challenges regarding CSR concerns (Fafaliou et al., 2006;
Giannarakis and Litinas, 2011; Giannarakis et al., 2011a; Sariannidis et al., 2010).
The ESG data incorporate three categories:
(1) The environmental aspect includes data, such as water consumption, waste total
generation, total greenhouse gases and energy use.
(2) The social aspect concerns data, such as employee turnover, workforce
accidents, total fatalities and women in the workforce.
(3) The governmental aspect includes data, such as board meeting attendance and
independent directors.
The total ESG disclosure score consists of three sub dimensions:
ESG disclosure score Socially disclosure score Environmental disclosure
score Governmental disclosure score.
Regarding explanatory variables, Table II presents the independent variables that
are recommended to explain the extent of disclosure information retrieved from
Bloomberg online database.
Multiple linear regression attempts to model the relationship between explanatory
variables and the extent of CSR disclosure (Khan, 2010; Siregar and Bachtiar, 2010;
Mohd Ghazali, 2007; Hossain and Reaz, 2007; Branco and Rodrigues, 2008; Haniffa and
Cooke, 2005; Reverte, 2009) using the statistical Eviews software package:
The regression models are:
ESGDS a0 b1*CSIZE b2*INDP b3*FLRG b4*PROF b5*CEOD
b6*BSIZE b7*NBMTNGS b8*BAGE b9*WBOARD
where,
ESGDS

ESG disclosure score;

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Table II.
Description of
independent variables

Independent variables

Measurement

Firm size
Financial leverage

Total assets
Average total assets/average total common equity firms capital
structure
Return on sales (ROS)
Dummy variable (value 1 CEO and Chairman, value 0 otherwise)
Number of directors on the companys board
Total number of corporate board meetings for the year 2011
Board average age
Percentage of women on board
Dummy variables for different industry profiles: financial, industry,
information technology, utilities companies, materials, consumer
staples, consumer discretionary, energy and telecommunication, while
health care is used as a reference variable

Profitability
CEO duality
Boards size
Board meetings
Boards age
Women on board
Industry profile

CSIZE
company size;
INDP
industry profile;
FLRG
financial leverage;
PROF
profitability indicator ROS;
CEOD
CEO duality;
BSIZE
boards size;
NBMTNGS number of board meetings;
BAGE
boards average age; and
WBOARD women on board. Different statistical tests were developed, namely,
DurbinWatsons test, JarqueBeras test and Whites test, to ensure that the data were
appropriate for the statistical analysis along with the correlation matrix table which was
used for detecting multicollinearity problems.
5. Results
5.1 Descriptive statistics and correlations
In total, ten different industries are incorporated in the sample for the year ended 2011
(Table III). A total 20 per cent (n 73) of the sample is in financial industry, 14 per cent
(n 52) is in industrial industry, 13 per cent (n 46) belongs to healthcare industry,
while the reaming companies belong to material, information technology,
telecommunications services, consumer staples, utilities, consumer discretionary and
energy industry. In addition, the industry analysis table shows the median of ESG
disclosure score presenting that material, consumer staples and energy companies have
higher ESG disclosure score than the other types of industries.
Table IV illustrates the descriptive statistics for both dependent and independent
variables. The descriptive statistics table includes statistics, such as mean, median,
minimum, maximum and standard deviation. The mean for the CSR disclosure score is
26.47 out of 100 that is generally low, while the size of company and women on board, for
example, has considerable dispersion in the scores, as presented by the minimum,
maximum and the standard deviation. The statistics also show that the number of board
meetings is different among the companies of the sample, as the number of boards

Industry

Number of companies

ESG disclosure median

73
46
22
44
8
25
21
41
34
52
366

20
13
6
12
2
7
6
11
9
14
100

21, 66
26, 80
34, 43
28, 86
24, 39
33, 39
25, 01
22, 17
35, 42
25, 16

Financial
Health care
Material
Information technology
Telecommunications services
Consumer staples
Utilities
Consumer discretionary
Energy
Industrials
Total

Variables
ESGDS
CEOD
BSIZE
CSIZE
BAGE
WBOARD
FLRG
NBMTNGS
PROF

Mean

Median

Maximum

Minimum

Standard deviation

26.47737
0.587432
11.03825
68416.26
62.39137
15.14071
4.036517
8.576503
0.116565

19.95850
1.000000
11.00000
16551.65
62.60000
15.38000
2.537750
8.000000
0.102390

85.12400
1.000000
32.00000
2265792
71.86000
45.45000
43.68990
28.00000
0.784517

10.96490
0.000000
6.000000
1150.856
53.75000
0.000000
1.084100
2.000000
0.322582

15.00238
0.492970
2.398324
222181.0
3.171637
8.713562
4.384046
3.752390
0.103858

ranges from 2 to 28. Similarly, the mean value of the board size is 11 members with
minimum and maximum values ranging from 2 to 32 members, indicating different
approaches in governmental aspects. Finally, the board average age does not show
much variation with a mean value of 62,3.
Table V illustrates Pearsons correlation analysis among the explanatory variables and
their significance level. If the correlation coefficient between the explanatory variables is
0.80, there is an indication of serious multicollinearity (Guajarati, 1995). In this study,
Pearson correlations between the explanatory variables range from 0.258 to 0.086; thus,
multicollinearity cannot be a problem for interpreting the regressions results.
5.2 Multiple regression findings
The JarqueBera tests show that the data do not follow a normal distribution, thus, both
dependent and independent variables are transformed to make distribution
approximately normal; dividing 1 by each score to reduce the impact of large scores
(Field, 2013). The regression analysis is presented with the transformed variables. In
addition, the possible existence of heteroscedasticity is investigated by Whites test
where the chi-squared test is not significant, and no corrective procedure should be
followed. Regarding the correlation aspect, DurbinWatson test is approximately 2
which means that no autocorrelation problem exists. As far as the recommended model
is concerned, the regression results are presented in Table VI.
Thus, the final proposed model is transformed as follows:

CSR disclosure

405
Table III.
Industry analysis of the
final sample

Table IV.
Descriptive statistics

1
0.175332*
0.017696
0.133639**
0.033683
0.288321*
0.073445
0.082120
0.144804*
0.016580
0.176841*
0.009940
0.014366
0.003663
0.106652**
0.068641

1
0.039795
0.043918
0.028171
0.043926
0.038986
0.048909
0.255737*
0.057348
0.067433
0.126210**
0.080069
0.003725
0.061609
0.225856*
0.027124
0.070780
0.104206**
0.012907
0.044410
0.189016*
0.037028
0.010360
0.195324*
0.010189
0.069639

1
0.043509
0.201961*
0.091086***
0.185866*
0.198146*
0.037088
0.033704
0.038760
0.040036
0.016377
0.095185***
0.202175*
0.026549
0.039709

1
0.076482
0.079081
0.037071
0.162674

CEOD

0.013543
0.036899
0.120409**
0.452625*
0.140956*
0.062425
0.143981*
0.020994
0.012635

1
0.112631**
0.337361*
0.121321**

FLRG

0.071617
0.112073**
0.118596**
0.116148**
0.040361
0.090005***
0.141737*
0.128482**
0.057222

1
0.001948
0.064715

PROF

Notes: * Significant at the 0.01 level (two-tailed); ** significant at the 0.05 level (two-tailed); *** significant at the 0.10 level (two-tailed)

BAGE
NBMTGS
Bsize
CEOD
FLRG
PROF
CSIZE
WBOARD
Consumer
Staples
Consumer discretionary
Energy
Financial
Health care
Materials
Information technology
Telecommunication
Utility

Bsize

0.039053
0.086518***
0.037861
0.349575*
0.073644
0.058404
0.069385
0.009338
0.039076

1
0.121618**

CSIZE

NBMTGS

Table V.
Correlation matrix of
explanatory variables
BAGE

406

Probability

0.066071
0.108441**
0.230632*
0.019015
0.078445
0.010472
0.003970
0.038727
0.046587
(continued)

WBOARD

IJLMA
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BAGE
NBMTGS
Bsize
CEOD
FLRG
PROF
CSIZE
WBOARD
Consumer
Staples
Consumer discretionary
Energy
Financial
Health care
Materials
Information technology
Telecommunication
Utility

1
0.096171***
0.086649***
0.135151*
0.102659**
0.068474
0.100090***
0.040476
0.066803

Consumer
staples

1
0.113663**
0.177287*
0.134665*
0.089822***
0.131295**
0.053095
0.087630***

Consumer
discretionary

1
0.159734**
0.121332**
0.080929
0.118296**
0.047838
0.078953

Energy

1
0.189248*
0.126229**
0.184513*
0.074616
0.123148**

Financial

1
0.095882***
0.140153
0.056677
0.093541***

Health care

1
0.093483
0.037804
0.062392

Materials

1
0.055259
0.091201***

Information
technology

Utility

Telecommunication

1
0.036881

CSR disclosure

407

Table V.

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408

Table VI.
Regression results

Dependent variable: ESG disclosure score

Variable
Coefficient
C
CSIZE
BAGE
BSIZE
CEOD
FLRG
NBMTNGS
PROF
WBOARD
Industry 1
Industry 2
Industry 3
Industry 4
Industry 5
Industry 6
Industry 7
Industry 8
Industry 9
R-squared
Adjusted R-squared
F-statistic
Prob (F-statistic)
Durbin-Watson stat
Heteroskedasticity Test: White

Standard error

0.031906
27.54914
0.434120
0.215807
0.006130
0.007810
0.000439
7.37E05
0.000956
0.006432
0.003885
0.006940
0.006211
0.000899
0.012618
0.002761
0.004704
0.011193
0.232513
0.195021
6.201636
0.000000
2.184680
Obs*R2 129.1430
p 0.3344

0.009368
9.903865
0.395008
0.062541
0.002147
0.006940
0.020128
0.000620
0.003954
0.005338
0.007597
0.004172
0.005107
0.003969
0.004012
0.004465
0.004259
0.004898

t-Statistic

3.406005
2.781655
1.099014
3.450661
2.855510
1.125481
0.021813
0.118900
0.241743
1.204924
0.511405
1.663292
1.216141
0.226459
3.145100
0.618348
1.104718
2.285072

0.0007*
0.0057*
0.2725
0.0006*
0.0046*
0.2612
0.9826
0.9054
0.8091
0.2291
0.6094
0.0972***
0.2248
0.8210
0.0018*
0.5368
0.2700
0.0229**

Notes: * Significant at the 0.01 level (two-tailed); ** significant at the 0.05 level
(two-tailed); *** significant at the 0.10 level (two-tailed); Industry 1 utilities, Industry 2
telecommunications services, Industry 3 information technology, Industry 4 material, Industry
5 industry, Industry 6 financial, Industry 7 energy, Industry 8 Consumer discretionary,
Industry 9 Consumer staples

ESGDS 0.031906 27.54914 CSIZE 0.215807 BSIZE 0.006130 CEOD

0.006940 Ind.3 0.012618 Ind.6 0.011193 Ind.9
The explanatory power of the proposed model is satisfied, with an adjusted R2 measure
of 0.23, implying that the explanatory variables explain 19.5 per cent of the variance in
ESG disclosure score, while F-ration is 6.2 (p 0.01). As hypothesized, the coefficient on
corporate size is positively significant at 1 per cent. As far as the board size is concerned,
the result shows that it is significant and positively related at 1 per cent. Therefore, CEO
duality is negatively associated with CSR disclosure score and statistically significant at
the 1 per cent level. Regarding the industry profile of the sample, financial and
healthcare industry are significantly related to the extent of CSR disclosure at 1 per cent,
while consumers staples and information technology industry are negatively related at
5 and 10 per cent, respectively. There is no significant association with the level of CSR
disclosure for the rest of the explanatory variables.

5.2 Discussion of results

The study illustrates that the companys size has a very strong positive explanatory
power regarding the extent of CSR disclosure, suggesting that the larger US companies
provide more CSR information in their disclosures. Accountability and visibility are two
important factors that lead large companies to publish more information (Haniffa and
Cooke, 2005). As larger companies are under scrutiny from the government and pressure
from other social groups (Cowen et al., 1987; Brammer and Pavelin, 2008; Siregar and
Bachtiar, 2010), they develop CSR disclosure to avoid regulation, absorb the extra cost of
disclosure and reduce political costs (Gray et al., 1995; Adams et al., 1998; Alsaeed, 2006).
The result is consistent with that of the studies by Eilbert and Parket (1973), Trotman
and Bradley (1981), Haniffa and Cooke (2005), Branco and Rodrigues (2008),
Gamerschlag et al. (2010), Hossain and Reaz (2007), Khan (2010), Reverte (2009) and
Rahman et al. (2011).
In addition, the relation of board size to the level of CSR disclosure is positive which
means that larger board size exercise better monitoring including the extent of CSR
disclosure. Larger board size can lead to wider exchange of innovative ideas and
experience (Esa and Ghazali, 2012) including CSR. The result is consistent with Said
et al. (2009) and Esa and Ghazali (2012). Therefore, it is demonstrated that the CEO
duality has a negative relation to the extent of CSR disclosure. The role of CEO duality
may limit the transparency level of a company both to inside and outside stakeholders.
A solution could be the separation of CEO from the chairman responsibilities (Gul and
Leung, 2004). The result is consistent with Gul and Leung (2004) and Huafang and
Jianguo (2007).
Regarding the relation between the industrys profile and the extent of CSR
disclosure, the results are contradictory. The financial industry plays a catalytic role
in supporting others industries by financing them. In addition, the financial
companies provide more information on their CSR initiatives to convince that the
maximization of the profit is not the unique purpose of the companies. Similarly,
healthcare industries tend to publish more CSR information in their CSR disclosure
inconsistent with Tagesson et al. (2009). The close relation with other stakeholders,
such as government and consumers, pushes them to increase the transparency level
toward society. In addition, the reputation of healthcare companies is an important
element of the patients trust and a foundation for improvements (Leatherman and
McCarthy, 1999) which lead them to increase information in their disclosures. Even
if consumer staples and information technology companies are customer oriented
and they are highly visible to final consumers, they publish less information in their
CSR disclosures probably due to the unclear purpose of these companies in relation
to social expectations. This evidence is consistent with Tagesson et al. (2009) and
inconsistent with previous studies where women in boards are more socially
sensitive (Wang and Coffey, 1992; Williams, 2003).
As far as the rest of the explanatory variables are concerned, they are not
statistically significant to the extent of CSR disclosure. Even if the presence of
women on the board of directors can be valuable for companies (Burgess and
Tharenou, 2002), this study shows that it is not an important variable and does not
explain the level of CSR disclosure, consistent with Khan (2010). One possible
explanation could be that both women and men directors study at the same
educational institutions and they confront societal expectations in the same way.

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The boards average age has no effect on the extent of CSR disclosure contrary to the
beliefs that younger managers can introduce more innovative management
techniques, such as CSR, because of their superior education. In addition, the
number of board meetings seems not to be a substantial factor so as to explain the
extent of CSR disclosure, probably because the board of directors is responsible only
for CSR at policy level and not for the implementation of CSR which, in all
probability, is the most time-consuming part. Financial leverage coefficient shows
that this explanatory variable is not statistically significant to the extent of CSR
disclosure consistent with Siregar and Bachtiar (2010), Reverte (2009), Rahman et al.
(2011), Michelon and Parbonetti (2012), Branco and Rodrigues (2008) as regards the
annual CSR disclosure and inconsistent with Esa and Mohd Ghazali (2012) and
Branco and Rodrigues (2008) as regards socially responsible disclosures on the
Internet. The explanatory variable of profitability is not associated with the extent
of CSR disclosure, probably due to the fact that it is not necessary to fund CSR
initiatives. This result is achieved probably because of the argument that CSR
disclosure is more influenced by public rather than economic pressure
(Williams, 1999; Esa and Mohd Ghazali, 2012). This evidence is consistent with
McNally et al. (1982), Alsaeed (2006), Michelon and Parbonetti (2012), Reverte (2009),
Siregar and Bachtiar (2010), Branco and Rodrigues (2008) and inconsistent with
Jennifer Ho and Taylor (2007), Tagesson et al. (2009), Khan (2010).
6. Conclusions
This study attempts to investigate the factors that affect the extent of the CSR disclosure
among listed companies in the Fortune 500 in the USA. Both corporate governance and
financial characteristics have been incorporated, namely, CEO duality, companys size,
women on board, profitability, boards age, industry profile, board meetings of directors,
board size and financial leverage. According to literature review, the construction of
CSR disclosure score was based on the authors experience; however, in this study, the
development of CSR disclosure was based on Bloombergs ESG disclosure score. The
sample of the study was based on 366 large companies because these are more
possible to integrate CSR initiatives into their business operations than smaller in
size companies. Multiple linear regression analysis showed that the larger the
companys size and the larger the board, the more information is provided in their
disclosure, while companies with CEO duality are negatively related to the extent of
CSR disclosure. Finally, significant differences exist between different industries
and the extent of CSR disclosure.
Regarding the companys size, large companies are more visible, they are able to
absorb extra costs of the development of CSR disclosure, they attempt to reduce
political costs and they avoid regulation and scrutiny from stakeholders. The board
size seems to be positively associated with CSR disclosure as a larger board can
contribute to wider exchange of innovative ideas and experience, such as CSR.
Companies that have the same person holding CEO and the chairpersons position
simultaneously tend to publish less information in their disclosures decreasing,
thus, the companys transparency level.
Companies that belong to financial, healthcare, consumer staples and information
technology are statistically significant to the level of CSR disclosure. The recent
scandals of financial companies and financial consumer protection issues lead them to

incorporate more information into their disclosure to illustrate that it is not the unique
purpose of the companies. The positive relation of healthcare companies with the extent
of CSR disclosure is based on two reasons:
(1) the first one concerns the close relation of healthcare companies with various
stakeholders; and
(2) the second one concerns the attainment and maintenance of a satisfactory level
of corporate reputation.
Companies that belong to consumer staples and information technology provide less
information in their CSR disclosure probably due to the controversial inclusion of this
information of these specific sectors.
This study makes several potential theoretical and practical implications. First, the study
is useful for companies to identify those corporate governance aspects that are essential to
enhance their CSR disclosure. Second, the association of the industry type with the CSR
disclosure could urge corporate managers to adapt corporate disclosure relative to industry
characteristics improving their knowledge in relation to CSR. In addition, reporting audit
organizations should take into account the determinants of CSR disclosure in their disclosure
requirements that are beneficial to the stakeholders to ascertain the kind of companies
through CSR disclosure. Finally, the implication for policy-regulators is that the
development of disclosure regulation should focus on smaller size, companies smaller size of
board members, CEO duality and operate in consumers staples and information technology
industry which are least likely to disclose adequately the impact of their business operations
on the CSR disclosure.
There are three main limitations that need to be acknowledged and addressed on the
present study. The first limitation concerns the negligence of the quality dimension of
information in CSR disclosure. The combination of quality and quantity aspects of CSR
disclosure could lead to more accurate results regarding the explanatory factors that
affect CSR disclosure. Therefore, this study is based on only one-year disclosure data
and needs to enclose more annual data to generalize the results taking into account
companies that operate in different countries. A longitudinal analysis is recommended
to clarify how companies change their CSR policies in relation to recession period (Esa
and Mohd Ghazali, 2012; Huafang and Jianguo, 2007). In addition, it would be valuable
to explore how CSR disclosure is developed in different countries providing more
reliable results. In this way, it would be able to be verified whether the cultural
dimension is an important element to understand the concept of CSR (McMurtrie, 2005;
Jennifer Ho and Taylor, 2007) or to generalize the results irrespectively of the country
where the companies operate (Reverte, 2009; Cormier and Magnan, 2003). The third
limitation is that this study incorporates large in size companies listed in Fortune 500
and neglects small or medium size companies, as their corporate data are difficult to be
collected. The comparison of the two groups of companies could be valuable for the
purpose of exploring the differences in CSR disclosure strategies and policies.
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Corresponding author
Grigoris Giannarakis can be contacted at: ggianaris@gmail.com

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