Effect of Corporate Governance elements on CSR Disclosure

Effect of Corporate Governance elements on CSR Disclosure


This chapter analyses the methodological analysis for carry oning research which has the nonsubjective to cognize whether the construction of corporate administration has an consequence on CSR revelation. Furthermore it attempts to set about an in-depth analysis of CG and CSR revelation and the demand to pull a model to develop and implement such system within a concern which will advance CSR revelation. It will besides discourse the type of research to be carried out for this research.

For the intent of this survey, several hypotheses based on the literature reappraisal will be developed. The research will be intensively based on the aggregation of secondary informations and analysis of the information. The major trust of the research design is aggregation of secondary informations through one-year study for the twelvemonth 2009-10 and company ‘s web sites. Finally multiple arrested developments analysis will be used to happen the relationship between CSR revelation and the corporate administration construction.

Research design

Hypothesis Development

The hypothesis that will be developed will take into consideration the relationship between CSR revelation and the independent variables, viz. the board size, board independency, dichotomy, managerial ownership and foreign ownership after statistically commanding the effects of a house ‘s size and the profitableness of the companies.

Hypothesis 1: The greater the board size, the lower the degree of CSR revelation.

When looking back at old researches, it comes to be known that little boards have less managerial struggles. Therefore when there are fewer struggles between direction, the quality of fiscal revelation will be enhanced and more attending is put in CSR revelation.

Hypothesis 2: There is a positive relationship between proportion of independent managers and the degree of CSR revelation.

In a survey done by Webb, it was found that socially responsible houses have more independent managers as the latter has the aim to safeguard the involvement of its stockholders and heighten the image of the concern. Hence companies with more independent managers will set about more societal duties, taking to an addition in CSR revelation.

Hypothesis 3: Companies, which holding CEO Duality, are more likely to hold a lower extent of CSR revelation.

When there is CEO dichotomy in a concern, it consequences in state of affairs whereby a individual has more control than the board on the concern. In this status the individual will prefer to better quality of the concern instead maximising stockholder ‘s wealth. Hence when concentrating on the betterment of concern quality, there will less societal activities and accordingly less CSR revelation.

Hypothesis 4: There is a positive relationship between proportion of independent non-executive managers sit in audit commission and the degree of CSR revelation ownership concentration and corporate societal revelation.

Audit Committee and its composing play a critical function in coverage of fiscal and non fiscal information. Harmonizing to Mauritanian Code of Corporate Governance ( First Edition, Revise April 2004 ) , the board should set up an audit commission with bulk of independent managers. As mentioned above independent managers are more concerned with maximising stockholders wealth, therefore they will seek to do upper limit of revelations which will be good to the stockholders.

Hypothesis 5: There is a negative relationship between the proportions of portions held by executives ‘ managers with the extent of corporate societal revelation.

Harmonizing to the bureau theory, conflicts arise between stockholders and directors when the latter holds equity in the concern as directors can take chance of the state of affairs. However old surveies have shown that this struggle can be reduced when direction holds more equity and it motivates directors to do more revelations as making a good image of the concern will be good to them.

Hypothesis 6: There is a positive relationship between the proportions of portions held by foreign ownership with the extent of corporate societal revelation.

Previous surveies revealed that corporate societal revelations in Mauritius are still by and large low. If a company has more contact with foreign stakeholders through ownership and trade, it may be encouraged more to follow the GRI Guidelines and unwrap CSR and this aid to pull more investors. Conversely, if a company keeps closer ties with its domestic spouses, it may be more loath to follow the merchandise of the Western construct, or merely less witting of it ( Granovetter 1973 ) . “ Internationally competitory industries seem to be much better able to introduce in response to environmental ordinance ” ( Porter and van der Linde 1995: 108 ; Chapple et Al. 2001 ) .

The Sample

The initial sample was the listed companies on the Stock Exchange of Mauritius which consists of 47 companies for the twelvemonth ended 2010. Then the graded sampling was used to find the concluding sample size. Out of 47 companies, merely 35 companies were used to stand for the concluding sample. The 12 companies excluded were those that did non hold a website whereby they could do extra CSR revelation. The sample consists of both fiscal and non fiscal companies. The survey will be based on secondary informations which will be collected from one-year studies and companies ‘ web sites. The one-year studies of selected companies will be examined after being collected from the different companies or downloaded from their several official web sites.

Dependent Variables

For this thesis, the content analysis was used that is a method of codifying the text or content of a study and this will depend on the choice standards ( Weber, 1988 ) . In fact content analysis has been used extensively in researches about CSR describing research ( Abbot and Monsen, 1979 ; Ernst & A ; Ernst, 1976 ; Guthrie and Matthews, 1985 ; Haniffa and Cooke, 2005 ) . Contented analysis has been defined by Abbot and Monsen ( 1979 ) as:

“ A technique for garnering informations that consists of codifying qualitative information in subjective and literary signifier into classs in order to deduce quantitative graduated tables of changing degrees of complexness. ”

When sing past surveies, preponderantly the surveies done by Ernst and Whinney ( 1978 ) , Hackstone and Mine ( 1996 ) , Haniffaa and Cooke ( 2005 ) , the disclosed points were classified into five classs which were environmental, community engagement, human resource/employee information, merchandise and energy.

The CSR revelation points were extracted from one-year study and companies ‘ web sites. The CSR revelation index was constructed after uniting both CSR revelation points disclosed in one-year study and companies web sites. The CSR revelation index ( figure of revelations made by companies ) was developed by adding all the points covering the five subjects, which were environment, community, human resource, energy and merchandise. This CSDI was developed by utilizing the dichotomous, which the tonss of ”1 ” , if the company unwrap the points and ”0 ” , if it is non. The procedure will add all the tonss and every bit weighted.

Independent Variables

The independent variables which were considered in this survey are as follows along with their description:

Independent Variables


Board size

Numbers of managers sit on the board

Board Independence

Percentage of non-executive managers to entire managers


A dichotomous variable will be used for the presence of double leading, where it will take the value of ”1 ” if the CEO is besides the Chairman of the board, and ”0 ” otherwise

Audit Committee Independence

Percentages of non-executive managers to number of managers sitting on audit commission

Managerial Ownership

Percentage of portions owned by executive managers to entire figure of portions issued

Foreign Ownership

Percentage of portions owned by foreign stockholders to entire figure of portions issued

Control Variables

Two control variables were used in this survey and they are:

Firms ‘ size i.e. entire assets and

Profitability i.e. returns on assets and return on assets.

These two variables has been extensively been used by past research workers in their survey. The motivation behind utilizing these two variables is that it will heighten the relationship between corporate administration and CSR revelation. This survey will utilize entire assets as a replacement to house ‘s size and ROE as a measuring for profitableness. These variables have been used by other researches ( Hackston and Milne, 1996 ; Ho and Wong, 2001 ; Eng and Mak, 2003 ; Barnea and Rubins, 2004 ; Eng and Mak, 2003 ; Mohd Nasir and Abdullah, 2004 ; Haniffa and Cooke, 2005 ) every bit good while making their research in CSR coverage.

Analysis of Datas

The information that was collected in this research was examined utilizing hierarchal arrested development method to cognize the consequence of corporate administration construction on CSR revelation index and the independent variables. Two theoretical accounts of arrested development were used in this survey. The first 1 has merely considered the consequence of the control variables on CSR revelation while the 2nd theoretical account integrates both the independent and control variables. The ground behind this is to happen out the degree of fluctuation which is merely caused by the CG elements in CSR revelation. The control variables were taken to be all other factors which could impact the degree CSR revelation.

In order to see if the theoretical account was appropriate several trials underlying the arrested development theoretical account viz. normality, one-dimensionality, and multicollinearity were carried out ( Roshima Said, Yuserrie Hj Zainuddin and Hasnah Haron ) . In proving the theoretical account, it is involved two crease that are proving the single independent variables and proving the overall relationship after theoretical account appraisal ( Hair et al. , 1998 ) .

The arrested development theoretical account is as follows:


CSD= I?0 + I?8ROA + I?9TA + E‡

Model 2:

CSD = I?0 + I?1BD SIZE + I?2NED + I?3DUAL + I?4AC + I?5MGR + I?6FRGN +I?7ROE + I?8ROA + I?9TA + E‡

Where CSD= CSR revelation index:

I?1BD SIZE: board size.

I?2NED: Percentage of non-executive managers to entire managers.

I?3DUAL: CEO dichotomy.

I?4AC: Proportion of non-executive managers to number of managers that sit in audit


I?5MGR: Managerial ownership.

I?6FRGN: Foreign ownership.

I?7ROE: Tax return on equity ( placeholder for profitableness ) .

I?8ROA: ROA ( placeholder for profitableness ) .

I?9TA: TA ( placeholder for size ) .

: Mistake term