Corporate Social Responsibility Disclosures and Its Consequences on Firm Value in a Developing Economy

Abstract

The impact of corporate organizations activities on society is a growing global concern. As a result, the expectations of stakeholders on the role of businesses in society have increased over the last decade. To this end, greater attention has been given to CSR activities and its subsequent disclosures (Corporate Social Responsibility Disclosure). The disclosure of corporate social responsibility activities of corporations provides information to the public regarding corporate activities that relate to society, such as about effort to reducing environmental impact, improving waste management, compliance with environmental regulations, and efforts to protect employees. The study presented a framework based on legitimacy theory that explained the determinants of CSD in terms of both quantity and quality of CSRD of listed firms on the Ghana stock exchange and also examined the consequence of CSRD on firm value. The study sampled 33 firms listed on the Ghana stock exchange over a six year period. The study adapted a disclosure index by Hackstone & Milne (1996) as adapted by Deegan et al. (2002) and Hassan (2014) and used content analysis to extract social information from the firm’s annual report. The results of the panel regression showed that, quantity of CSRD, and to lesser extent quality of CSRD, are determined by the following variables: corporate size, type of activity, foreign ownership, degree of multinational activity, proportion of non-executive directors, the presence of social responsibility committee on the board and ownership diffusion. Profitability was significantly related to the quality of CSRD but not the quantity of CSRD. With regards to the consequence of CSRD, the empirical results show that CSRD has no significant relationship with firm value. The implication of the results is that, CSRD has no direct financial benefit to firms listed on the Ghana Stock Exchange.