Corporate Social Responsibility Disclosure and Financial Performance: Moderating Role of Sub National Institutional Contingencies

Abstract

Over the past few decades, the disclosure about corporate social responsibility (CSR) activities has increased due to increased awareness. This study investigates moderating role of sub national institutional contingencies on the relationship between corporate social responsibility disclosure (CSRD) and financial performance (FP) and the relationship between environmental disclosure (ED) and FP in context of Pakistan. The study uses OLS (ordinary least squares) technique to draw interference from data. We use CSRD index which consist 40 items under the five main themes and for environmental disclosure this study develop an environmental index based on 10 items. Sub-national institutional contingencies (SNIC) consists four factors, ownership concentration, developed & non- developed regions, family ownership and group affiliation. FP measure in two way accounting measure and market measure.We find positive association in CSRD and financial performance and also positive relationship between ED and FP. We find reliable evidence that SNIC (family ownership, ownership concentration and regional development) have negative and significant impact on CSRD and ED but group affiliation have no effect on CSRD and ED. Moreover, SNIC moderate the positive and relationship between CSRD and FP and also in ED and FP. The relationship is stronger in non F own firm, own-con, less developed region and G-Aff as compare to their counterparts. From a practical point of view, the study shows that decision makers, executives and managers should avoid “one-and-for-all” strategy. By contrast, They need to be evaluated immediately effect of family ownership, ownership concentration, regional development and group affiliation characteristics. Considering the weak performance by the firms in family owned firms, non ownership concentration, regional development and non-group affiliation firms, policymakers and governments should increase information transparency, enact stricter regulations, and encourage these companies to improve their corporate social and environmental disclosure. It also provided insights into other emerging economies, especially those with special government intervention.