Title

Do governance structure and financial performance matter in CSR reporting?

Document Type

Journal Article

Publisher

Universiti Putra Malaysia

School

Business and Law

Comments

This article was originally published as: Darus, F., Yusoff, H., Mohamed, N & Nejati, M.(2016) Do governance structure and financial performance matter in CSR reporting? International Journal of Economics and Management, 10(S2), 267-284. Original article available here

Abstract

The governance structure and financial performance of organizations have the potential to support the strategic direction of organizations in embedding social and environmental initiatives into their business activities. This is because CSR initiatives require top management commitment and support from stakeholders. In addition, the availability of financial resources could further enhance the CSR initiatives and influence strategic development. The aim of this study is to examine the influence of governance structure (specifically ownership and board structure) and financial performance on CSR reporting among Malaysian public-listed companies. The agency and signaling theories have been employed to underpin the theoretical perspectives of the study. The data for this research was sourced from content analyses of both the annual and sustainability reports of the top 100 public-listed Malaysian companies. The study reveals that board independence, board size, and the presence of women directors on the board significantly influence the reporting of CSR information. Nonetheless, government and foreign ownerships were not significant determinants of the reporting practice. In terms of financial performance, profitability was found to be significant in signaling the behavior of companies to disclose CSR information. Overall, the results of the study largely imply that board structure and profitability of organizations are critical towards the enhancement of CSR initiatives of companies. Social implications: Findings of this study indicate the positive role of women directors on the extent of CSR disclosure, which encourages diversity in the board of directors.

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