J Bus Ethics (2011) 104:545558 DOI 10.

1007/s10551-011-0929-3

A Longitudinal Study of Corporate Social Disclosures in a Developing Economy

J. D. Mahadeo V. Oogarah-Hanuman T. Soobaroyen

Received: 7 August 2009 / Accepted: 3 June 2011 / Published online: 15 June 2011 Springer Science+Business Media B.V. 2011

Abstract This article examines corporate social disclosures (CSD) in an African developing economy (Mauritius) as provided in the annual reports of listed companies from 2004 to 2007. Informed by the countrys social, political and economic context and legitimacy theory, we hypothesise that the extent and variety of CSD themes (social, ethics, environment and health and safety) will be enhanced post-2004 and will be inuenced by protability, size, leverage and industry afliation. We nd a signicant increase in the volume and variety of CSD, although information in relation to social activities remains the most prominent form of disclosure. This is in contrast to previous studies which reported on the primacy of employee disclosures in developing countries. Using a pooled regression analysis, we also observe that size does explain variations in overall CSD and social disclosures, whilst leverage is positively related to changes in environmental and health and safety disclosures. There is no protability relationship, and the effects of industry afliation on CSD are non-signicant or contrary to expectations. Overall, we assert that legitimacy, as a strategic and managerially driven approach favouring symbolic actions, is the prevailing

motivation underlying the progression of CSD in Mauritius. Keywords Corporate social disclosures Developing economy Legitimacy theory Mauritius Annual reports

Introduction The voluntary nature of corporate social disclosures (CSD) and the observed variations noted in various empirical studies (e.g. Gray et al. 1995; Brammer and Pavelin 2004; Ratanajongkol et al. 2006; Branco and Rodrigues 2008; Reverte 2009) are central reasons underpinning a longstanding interest on why prot-making, shareholder-oriented entities disclose their societal engagement. Although competing theoretical explanations have been put forward, there appears to be support for the social and political perspectives with a particular focus on legitimacy theory (e.g. Campbell 2000; Deegan 2002; Parker 2005; Owen 2008; Holder-Webb et al. 2009). Yet there remains a lack of consensus on whether legitimacy can provide a comprehensive explanatory account of CSD (Gray et al. 1995; ODwyer 2002; Mobus 2005; Owen 2008), particularly in the case of developing countrieswhere there is a dearth of empirical evidence (Belal and Owen 2007; Jamali 2007). Compared to many Western developed countries (e.g. USA, UK, Western Europe and Australia), the context of developing countries reects a multitude of social, political, economic and cultural factors which translate into different arrangements such as, for instance, the patterns of corporate ownership, business law and regulation, state intervention in commercial activities, the inuence of religious or ethnic considerations, the degree of public concern about the environment, the prominence of civil

J. D. Mahadeo V. Oogarah-Hanuman Department of Management, Faculty of Law and Management, University of Mauritius, Reduit, Mauritius e-mail: j.mahadeo@uom.ac.mu V. Oogarah-Hanuman e-mail: v.hanuman@uom.ac.mu T. Soobaroyen (&) Centre for Research in Accounting, Accountability and Governance, School of Management, Faculty of Business and Law, University of Southampton, Higheld, Southampton SO17 1BJ, UK e-mail: t.soobaroyen@soton.ac.uk

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society and attitudes to philanthropy or social responsibility (Belal and Owen 2007; Jamali 2007). Our interest lies in explaining how CSD operates in, and in response to, such contexts, taking into account the view that notions of corporate social responsibility, sustainability reporting and triple bottom line are mainly drawn from Westernised and Anglo-Saxon traditions (Jamali and Mirshak 2007; Branco and Rodrigues 2008). In this respect, this article examines the CSD of listed companies in an African developing economy (Mauritius) through the lens of legitimacy theory and by relying on a quantitative analysis of the factors inuencing the level of disclosures. The motivations for this study are threefold. Firstly, we bring much needed contemporary evidence on the state of CSD in developing economies. Secondly, Haniffa and Cooke (2005, p. 394) argue that CSD, as a potential legitimacy-driven practice, needs to be placed in its national context to avoid a situation where disclosures are evaluated purely against the norms prevalent in an AngloSaxon culture. Indeed, there has been little attempt to explicitly link the context of developing economies with the implications of legitimacy theory when examining CSD patterns. Thirdly, many previous studies (e.g. Holder-Webb et al. 2009; Reverte 2009) rely on a short window of observation (e.g. annual report data for 1 year) and such reliance may lead to biased conclusions on the factors affecting CSD behaviour (Haniffa and Cooke 2005, p. 419). In this article, we adopt a longitudinal approach to examine CSD patterns over a 4-year period (20042007) and use pooled regression analysis to investigate the inuence of various rm-level factors on CSD. We rely on content analysis procedures to identify CSD themes and to measure the extent of CSD on a word count basis. In view of the fact that the local corporate governance code recommended that listed companies engage (from 2005) with practices of triple-bottom line reporting and integrated sustainability reporting (ISR), there is also an opportunity to consider the codes inuence on CSD on a pre/post basis. Overall, we nd a signicant increase in the volume and diversity of CSD. We also nd that size and leverage impact on the extent of CSD, whilst protability and industry afliation are not signicantly linked to CSD. The remainder of the article is organised as follows. First, we briey assess the evidence from developing countries and consider the tenets of legitimacy theory. Third, the Mauritian context is outlined and this is followed by the formulation of the hypotheses. Fourth, the research methods and model are explained. Fifth, ndings from the annual report study are presented along with the detailed results of the regression analysis. Finally, we discuss the results and consider their implications for future CSD research.

Literature Review CSD Evidence from Developing Countries Early studies provide a largely descriptive account of CSD in developing countries. For instance, Savage (1994) reported that 89% of surveyed companies in South Africa focused on employee-related disclosures compared to information on community involvement (72%) and the environment (63%). Similar ndings were reported in the case of Nigeria (Disu and Gray 1998) and Bangladesh (Belal 2001). Belal (2001, p. 281) concurred with the general belief that companies in developing countries focus on employee-related disclosures, and links the Bangladeshi evidence to the presence of a unionised labour force and to the governments strong emphasis on employee welfare (2001, p. 286; refer also to Imam 2000). In contrast, he found that only 13% of companies reported on community involvement. Gao et al. (2005), however, reported on a pattern of increasing community disclosures amongst Hong Kong companies from 1993 to 1997 but identied that CSD volume was related to size and was higher for companies operating in the utility sector. However, the authors did not consider whether changing political circumstances (e.g. imminent handover of Hong Kong to China) might have had an impact on CSD. Overall, the limited evidence suggests that companies do not appear to consider all CSD themes to be of equal importance and worthy of disclosure. Admittedly, this observation could equally apply to companies in the developed world (Brammer and Pavelin 2004) but certain themes predominate at various points in time e.g. higher environmental reporting in the UK as opposed to it being very low in developing countries. Finally, Jamali and Mirshak (2007, pp. 255258) contend that low (or nonexistent) levels of CSD (silent CSR) can be explained by managerial attitudes to CSR; i.e. philanthropic actions motivated by an altruistic outlook need not be disclosed. Whilst such explanation may indeed be plausible in certain contexts, the evidence broadly points to a heightened awareness of CSD in developing countries (Belal and Owen 2007). However, reasons for the variability in disclosure themes and volume remain to be fully ascertained, and the relevance of legitimacy theory is therefore considered. Legitimacy Theory and Relevant CSD Evidence This theoretical viewpoint contends that corporations are allowed by society to operate as economic entities as long as they adopt practices and policies deemed congruent with societal norms, values and beliefs (Suchman 1995). Dowling and Pfeffer (1975) and Suchman (1995) outline various legitimation strategies an organisation could adopt

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` to establish, maintain or restore its legitimacy vis-a-vis its relevant publics; namely by adapting operations to conform with existing societal expectations, by changing social norms so that they conform to existing corporate activities, or by engaging in communication to promote publicly its congruence with socially legitimate symbols, values and institutions (cited from Holder-Webb et al. 2009, p. 500). Within the legitimacy perspective, the disclosure of information (including CSD) does not primarily full functional tasks (e.g. by ensuring shares are adequately priced) but rather symbolic ones (Tolbert and Zucker 1983). Also, CSD is seen to be part of the organisationsociety interactions (Gray et al. 1995, p. 56) and seeks to reect a companys appreciation of societal imperatives. However, the voluntary (and largely unaudited) nature of CSD provides managers with the exibility to manage the information. Confronted with a choice of either adapting operations to meet societal norms (e.g. divest from protable but highly polluting activities) or engaging in more communication to convey an impression of congruence (e.g. disclose the sponsoring of environmental protection projects), the strategic approach to legitimacy (Suchman 1995, p. 576) suggests that managers will favour the exibility and economy of symbolism (e.g. provide more disclosures). Suchman identies three broad types of organisational legitimacy which rely on different dynamics; namely (a) pragmatic legitimacy, which rests on the self-interested calculations of an organisations most immediate audiencesoften involving a critical resource (nancial or otherwise) dependence between the organisation and audience, (b) moral legitimacy, which rests not on judgments about whether a given activity (e.g. providing a social report) benets the evaluator, but rather on judgments about whether the activity is the right thing to doin turn reecting beliefs about whether the activity effectively promotes societal welfare, as dened by the audiences socially constructed value system and (c) cognitive legitimacy, which goes beyond evaluation and selfinterest, and involves an afrmative backing, or a mere acceptance, of the organisation based on some taken-forgranted cultural account (1995, pp. 578582: refer also to Palazzo and Scherer 2006). From a quantitative analysis standpoint, however, one needs to operationalise such legitimacy expectations to test more specically for the determinants of CSD. For example, Haniffa and Cooke (2005, p. 395) use a number of proxies to test legitimacy theory such as ownership structure, listing status, size, ethnic representation, protability and leverage. In the case of Malaysian companies, the authors nd that size, protability and ethnic representation are positively related to CSD, whilst leverage is not observed to be a signicant variable. Haniffa and Cooke (2005) nd overall support for legitimacy theory but we

argue that the prominence of product-related CSD in Malaysian company annual reports seems to be quite unique and hence limits the validity of the ndings for other contexts and CSD themes. In a study of CSD in Thailand, Ratanajongkol et al. (2006) found a signicant increase in the level of disclosure that was associated to recent corporate governance developments. Major CSD themes were related to human resources (39%) and community (32%), and the themes/trends in disclosures differed signicantly across industries. Although they did not formulate legitimacy-based hypotheses, the authors assert there is partial support for the theory by referring to industry differences. This last study and those of other researchers (e.g. Gray et al. 1995; Raar 2007; Amran and Devi 2008; Branco and Rodrigues 2008) attach a signicant weight to industry afliations in that they proxy for varying levels of social visibility; i.e. companies in more sensitive sectors disclose more in relation to other sectors. However, ndings have not been conclusive (Haniffa and Cooke 2005; Amran and Devi 2008; Branco and Rodrigues 2008). Finally, the lack of disclosure on specic CSD themes can also be interpreted from a legitimacy viewpoint as argued by De Villiers and Van Staden (2006) in light of their ndings on the relative absence of environmental disclosures in South African companies. Overall, there are indications that the legitimacy perspective may be applicable to the broader constituency of developing economies but the evidence remains scant. Previous studies (except notably Haniffa and Cooke 2005; De Villiers and Van Staden 2006) rarely consider insights that can emerge from a deeper analysis of the countrys context and how these can inform legitimacy-based hypotheses regarding size, industry, protability and leverage effects on the extent (and variety) of CSD. In addition, greater appreciation of the context and its implications for CSD can be achieved through a longitudinal analysis of the disclosures. Social, economic or political circumstances do not neatly unfold over one nancial year and, with a longer window of analysis, the effect of CSD determinants may be identied more consistently. We therefore present these developments in relation to the Mauritian context and concurrently formulate our hypotheses.

Context, Firm Factors and CSDs: Development of Hypotheses Changing Political and Economic Context and Changes in CSD A former French and British island colony in the Indian Ocean, Mauritius, has a population of approximately 1.27

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million and covers 2,000 square kilometres. There is no recorded indigenous population, and Mauritians are mainly descendants of (a) Indentured labourers from India, (b) Chinese workers and traders, (c) African slaves, made to work in the sugar estates and (d) the initial European settlers and land owners. Since independence in 1968, political power has rested with the Hindu majority (of Indian descent), whilst the bulk of economic power and private business ownership has remained in the hands of the descendants of European settlers (Meisenhelder 1997). This state of affairs remains a central component of the social, economic and political narrative in Mauritius (e.g. refer to Miles 1999; Bunwaree 2002; National Committee on Corporate Governance 2004), and the private sector is often portrayed as an economic villain with unfair employment policies, opaque management practices and quasi-monopolies in certain industries/sectors (2004, p. 8). Also, particular ethnic groups (particularly descendants of African slaves) have been excluded from major economic progress and involvement in business (Meisenhelder 1997; Miles 1999; Bunwaree 2002). Following a post-colonial period marred by economic failures and high unemployment, Mauritius generally performed well1 in terms of economic growth, education, health and living standards. During this period of economic good times, Meisenhelder (1997, p. 286) asserts that local politicians in government gained much legitimacy amongst the electorate, whilst the local private companies were able to generate signicant returns for their shareholders. In the recent years, however, economic challenges have surfaced due to the dismantlement of various preferential trade agreements, competition from other exporting countries and declining foreign direct investment (e.g. refer to Sobhee 2009). In this increasingly difcult context, issues regarding wealth inequalities, quasi-monopolistic privileges enjoyed by local business groups and restricted access to land resources remain politically potent. The current government was elected in 2005 by successfully campaigning on the need to democratize the economy, whilst the losing party was perceived to have been too close and sympathetic to private sector demands. The new governments agenda and actions have ostensibly focused on addressing quasi-monopolistic practices in economic sectors by encouraging the implantation of foreign rms and setting up a Commission to control anti-competitive
1 According to the World Bank (2009), the per capita income for 2008 was US $6,400. Notwithstanding the effects of the economic difculties, Mauritius remains regularly highlighted as one of the most improving economies in Africa and it is currently ranked fth in terms of GDP per capita in the region. The recent report on Doing Business 2010 (World Bank 2010) ranked Mauritius as the best country in Sub-Saharan Africa (and 17th worldwide) in terms of the ease of doing business.

behaviours by businesses. In addition, since early 2006, a Commission for the Democratisation of the Economy was established by the government with a view to facilitate access to resources for businesses, to review the business regulatory framework and consider land ownership reforms (Government Information Service 2008). In conclusion, the corporate sector in Mauritius is facing a combination of pressures mainly driven by competition from abroad and by changing political attitudes at home. A number of the pressures mentioned above (e.g. fair business practices, restricted ownership and environmental concerns) are detailed in the Code of Corporate Governance (National Committee on Corporate Governance 2004) which requested companies to disclose their policies and practices regarding social, environmental, ethical, health and safety issues (National Committee on Corporate Governance 2004, p. 116). However, there is no evidence as to whether (and if so how) this has translated into particular changes in disclosure. In line with legitimacy theory, we contend that companies may resort to CSD as part of a strategy to restore and/or maintain their standing in society in the face of the changing economic and political circumstances. In light of the above, Hypothesis 1 There is a signicant increase in the level of CSD in the annual reports post 2004. Evolution in the Variety of CSD over Time The Code of Corporate Governance (National Committee on Corporate Governance 2004) highlights a number of key social responsibilities companies appear to have ignored; namely (i) addressing prejudicial behaviour patterns (based on ethnic or religious differences 2004, p. 8) in business, (ii) contributing to the maintaining of social harmony (2004, p. 113), (iii) developing a code of ethics and encouraging ethical behaviour (2004, pp. 110113), (iv) recognising the environmental issues arising from the countrys small geographical size, its high population density,2 the multiple demands on the land (e.g. agriculture, manufacturing, tourism and commercial), and how this impacts on local communities (2004, p. 112) and nally (v) acknowledging the importance of employee health and safety, particularly in light of new legislation (e.g. Occupational Safety & Health Act 2005) relating to the duties and responsibilities of companies towards their staff. Those companies reporting on how they meet the above expectations are deemed to be adopting the ISR framework since they focus on the social context, physical
2

The United Nations Population Division (2009) reports that Mauritius population density currently stands at 614 per square kilometrewhich places the country as the 18th most densely populated nation in the world.

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environment and community within which they operate (2004, p. 109). According to Painter-Morland (2006), ISR implies that companies must take a holistic view of social responsibility and CSD should communicate the direct or indirect implications to a diverse audience of stakeholders. For instance, civil society organisations have historically been active in Mauritius (mainly in the religious and labour relations domain; refer to Lange 2003), but non-governmental organisations in areas such as environmental protection, womens rights, poverty alleviation, local community groups, and consumer protection associations have also become prominent, structured and vocal in advocating their cause (e.g. refer to SNSM Report 2007; Yoon and Bunwaree 2008, p. 19). One of the main ndings from previous studies has been that CSD in developing countries tends to focus on one or two themes, but our reading of the changing local context is that local companies are now faced with a multiplicity of informed stakeholders (including government) whose expectations have to be managed. As a result, Hypothesis 2 There is a signicant increase in the variety of CSD themes in the annual reports post 2004. Size One of the most common indicators of public visibility is corporate size and it follows that the actions of larger entities are more prone to enquiry, criticism and/or attention by government authorities, media and civil society. Larger companies (in terms of assets or turnover) would also view legitimacy as a more important resource to manage in their dealings with multiple stakeholders and are expected to be involved in a more systematic way in the communication of their social responsibilities. Consistent with the ndings of previous research (Hackston and Milne 1996; Haniffa and Cooke 2005; Reverte 2009), we argue that: Hypothesis 3 There is a signicant positive relationship between size and overall level (and variety) of CSD. Protability

activities may generate economic benets in the future (Reverte 2009). The latter argument is tempered by the fact that the relevant publics in this case (e.g. lenders/existing shareholders) have wealth-maximising imperatives that cannot be easily overridden by a companys social involvement. In addition, the empirical evidence remains inconclusive with reports of positive (Haniffa and Cooke 2005) or non-signicant coefcients (Cowen et al. 1987; Branco and Rodrigues 2008; Reverte 2009). Hence, we formulate a non-directional hypothesis: Hypothesis 4 There is a signicant relationship between protability and overall level (and variety) of CSD. Leverage Leverage reects the degree of nancial risk a company is exposed to, and from a pragmatic legitimacy perspective, the company needs to manage perceptions of its closest stakeholders (lenders) to ensure its survival. Companies having a higher degree of risk are compelled to communicate more information (including CSD) to avert or delay a negative reaction by lenders (Haniffa and Cooke 2005; Reverte 2009). More CSD can also be used to demonstrate to other stakeholders that it takes into account societal concerns, as a valuable corporate citizen, in spite of the high nancial risk. Furthermore, one could view a companys actions as political ones; a strategic approach to maintain or restore legitimacy would involve symbolic actions (such as CSD) aimed at securing the increased support of one (or more) relevant public when faced with the potential decline in support from other stakeholders (due to higher nancial risks). Suchman (1995, p. 600) refers to this as a strategy of stockpiling legitimacy. However, the evidence in support of leverage is so far very mixed. For instance, Branco and Rodrigues (2008) report on a negative relationship, whilst Haniffa and Cooke (2005) and Reverte (2009) nd no signicant effect for leverage. Consequently, we formulate a non-directional hypothesis: Hypothesis 5 There is a signicant relationship between leverage and overall level (and variety) of CSD. Industry Differences

There are diverging views as to the relevance of protability (Neu et al. 1998; Haniffa and Cooke 2005: Branco and Rodrigues 2008; Reverte 2009) within the legitimacy paradigm. Firstly, a nancially successful company will be keen to manage its social stakeholders by reassuring them that nancial returns were not generated at the expense of social concerns (e.g. Haniffa and Cooke 2005). On the other hand, a low performing company may seek to divert attention away from its nancial difculties and/or convince its nancial stakeholders that its current social

Proponents of legitimacy theory (e.g. Gray et al. 1995; Belal and Owen 2007; Reverte 2009) argue that companies operating in business activities which are deemed to have a more visible and signicant impact on society will enhance their symbolic actions on specic CSD themes (e.g. social, ethical and environmental) to compensate for the implications of the nature of their business activity. Whilst there is intuitively support for an industry effect and an understanding of general patterns (e.g. extractive and chemical = more

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Country context (inc. code of corporate governance) post- 2004

H1 (+) H2 (+) H3 (+) Corporate Social Disclosure (CSD) Extent & Variety

Size (visibility)

Profitability (degree of financial success)

H4 (+/-)

Leverage (risk)

H5 (+/-)

Industry (different levels of visibility)

H6 (+/-)

Fig. 1 Factors inuencing corporate social disclosures

environmental disclosures; nancial and commerce = more social disclosures; manufacturing = more employee disclosures), some authors nd little or no consistent evidence of such effect (e.g. Haniffa and Cooke 2005; Ratanajongkol et al. 2006; Branco and Rodrigues 2008). In our view, the particular CSD theme of predilection in a country may well inuence which industry afliation is seen to be more socially visible, and as a result, which sector is thus more inclined to provide a higher level of CSD. This also links to our previous point on the primacy of the countrys context in determining the relevance of specic generic variables such as the type of business activity. In this regard, we formulate a general prediction: Hypothesis 6 There is signicant difference in CSD (overall and/or by themes) across industries. Figure 1 below summarises the legitimacy-based expectations outlined in this section and the inuence of the variables on the extent and variety of CSD.

annual reports were rst analysed to ascertain the existence (frequency) and variety (if any) of CSD. According to the Corporate Governance Code (2004, p. 116), there are four categories/themes which are part of integrated sustainability reporting (ISR): ethics, environment, health and safety and social. Whilst the rst three themes are selfexplanatory, the social category covers a wider set of community initiatives and projects (e.g. arts, education and health). We also collected rm-level data (size, protability, leverage and industry classication). Subsequently, content analysis was adopted for further investigation. This procedure involves the categorising of text and narratives using selected criteria with the end goal of transforming the material into quantitative scales, thereby permitting further (statistical) analysis (Branco and Rodrigues 2008, p. 691; Holder-Webb et al. 2009:504). In view of the rather unstructured nature of CSD, word counts were carried out for each type of disclosure since words lend themselves to a more exclusive, less subjective and more comparable form of analysis (Gray et al. 1995; Haniffa and Cooke 2005). Admittedly, the analysis of word counts is subject to criticism (Milne and Adler 1999) and categorisations of the same word can be problematic; e.g. the word environment can refer to both the physical and natural environments. Nonetheless, it is still considered to be a relevant and reliable measure of corporate attention to social responsibility (e.g. Haniffa and Cooke 2005; Campbell et al. 2006; Ratanajongkol et al. 2006). Empirical Model We initially chart the changes in CSD from 2004 to 2007, thereby addressing more specically Hypotheses 1 and 2. We subsequently carry out an in-depth statistical analysis using pooled regressions (Sayrs 1989; Chen et al. 2008; Park 2009) by assessing the relevance of the proposed determinants (Hypotheses 36) after the implementation of the corporate governance code (i.e. 20052007). The general form of the pooled model is as follows: CSDit b0 b1 SIZEit b2 PROFITit b3 LEVERAGEit b4 INDUSTRY1it b5 INDUSTRY2it b6 INDUSTRY3it b7 INDUSTRY4it b8 INDUSTRY5it b8 INDUSTRY6it eit ; where CSDit is the corporate social disclosure word count by company i in period t, SIZEit turnover of company i in period t, PROFITit prot margin (prot/turnover) of company i in period t, LEVERAGEit leverage ratio (long term debt divided by shareholders equity) of company i in period t, INDUSTRYit dummy variable for industry classication of company i in period t whereby 1 refers banks and insurance, 2 commerce, 3 industry and transport, 4

Methods Annual Report Data and Content Analysis We take the view that the annual report is an appropriate, but not complete, picture of corporate attitudes towards social involvement and it remains an important document for an organisations construction of its own imagery (Gray et al. 1995). We focus our attention on the annual reports of all companies listed on the Stock Exchange of Mauritius (SEM). The period 20042007 was selected since it coincided with the publication of the local Code of Corporate Governance (published in 2004 but made applicable from 2005). We examine disclosure patterns 1 year (2004) prior to the expected implementation of the Code and over the next 3 years (20052007). All 165 reports (40 in 2004, 41 in 2005 and 42 in 2006 and 2007) were received. The

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A Longitudinal Study of CSDs in a Developing Economy Table 1 Listed companies reporting per CSR category (20042007) 2004 N = 40 Freq. Ethics Social Environment Health and Safety 12 38 3 6 % 30 95 8 15 2005 N = 41 Freq. 18 40 11 16 % 44 98 27 39 2006 N = 42 Freq. 19 39 14 17 % 45 93 33 40 2007 N = 42 Freq. 21 40 14 19

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% 50 95 33 45

Table 2 Corporate social disclosures word count (20042007) Ethics 2004 (N = 40) 2005 (N = 41) 2006 (N = 42) 2007 (N = 42) Total number of words % of each theme in 2004 % of each theme 20052007 overall * Average word count per disclosing company 339 (28.3)* 621 (34.5) 507 (26.7) 855 (40.7) 2322 15 17 Social 1663 (43.8) 1638 (40.9) 1588 (40.7) 2845 (71.1) 7734 73 51 Environment 79 (26.3) 376 (34.2) 471 (34.2) 478 (34.1) 1404 3 11 Health and safety 200 (33.3) 824 (51.5) 749 (51.5) 994 (52.3) 2767 9 21 Total 2281 3459 3315 5172 14227 100 100

investment, 5 leisure and hotels, 6 sugar (excluded dummy variable3), b1 to b8 coefcients, and eit error term. The above model was run for each CSD theme (ethics, social, environmental, health and safety) and total CSD. The measurement of independent variables (size, protability and leverage) was based on previous studies (Haniffa and Cooke 2005; Amran and Devi 2008).

Findings Descriptive Findings Table 1 provides an initial picture of CSD by listed companies and the changes thereof during the period under review for the four CSR themes. Almost all listed companies provided social disclosures and there is thus little change in the number of companies disclosing such information since 2004. On the other hand, there was a noticeable increase in the number of companies
3

In accordance with dummy variable procedures in regressions and to address the issue of perfect multi-collinearity (e.g. refer to Cowen et al. 1987, p. 177; Haniffa and Cooke 2005) in the empirical model, one has to include one less dummy variable than the possible qualitative states in the data i.e. one less variable for industry classication. The industry classication is based on the one used by the local stock exchange. The same would apply to cases where the dummy variable relates to a particular period (e.g. 2005, 2006 or 2007).

providing ethics, environment and health and safety disclosures from 2005. However, by 2007, only about half of the companies have actually reported ethics and health and safety disclosures, whilst just one-third of companies have provided environment-related disclosures. This can be compared to the evidence from Portugal where 47% of companies provided environmental information in their 2003 annual reports (Branco and Rodrigues 2008, p. 692). Table 2 reects the word count per theme over the 4 years under review, and the average word count per company in each theme/year is also provided (average in parentheses and italics based on the actual number of disclosing companies). Table 2 indicates an overall increase in word count due to more companies introducing disclosures in their annual reports, whilst other companies have increased the extent of their CSD. An improvement in CSR disclosure per theme is apparent when one compares the overall (20052007) gures relative to those of 2004, although social disclosures remain the most extensive type of disclosure. Paired-sample t tests and Wilcoxon tests conrm that changes in word count per theme (from 2004 to 2005 and from 2004 to 2006) are only signicant (at 5% level or lower) for health and safety disclosures. Signicant changes (at 1% or less) are apparent for all themes only when comparing the 2007 word count to that of 2004. This means that the change in word count was not immediately apparent after the adoption of the Corporate Governance Code for ethics, environmental and social disclosures. At

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the same time, it is acknowledged that 3471 words on average per company per theme in 2007 remains a fairly tiny proportion of an annual reports content, and in comparison to the amount of words disclosed by companies in developed economies (e.g. 270300 words per company per theme as reported in Hackston and Milne 1996) and in some developing countries (e.g. Thailand, Ratanajongkol et al. 2006). On the other hand, these average word counts compare favourably with Hanniffa and Cookes (2005, p. 410) mean of 18 and 24 words for environmental and community disclosures, respectively. Furthermore, in 2004, the CSD word count pattern shows that companies focused primarily on social (73%) and ethical disclosures, but the degree of importance attached to the social category is relatively reduced thereafter (51%) with an increased attention given to health and safety (21%) and environmental information (11%). Overall, we nd evidence of a signicant increase in the quantity and variety of CSD after 2004. Admittedly, CSD in Mauritius remains focused on social disclosures and many companies have yet to disclose other themes in their annual reports. We can nonetheless report that the changing social, political and economic circumstances coupled with the contents of the code have led to a gradual evolution of CSD (in quantity and quality) by 2007 and, as a result, we argue that Hypotheses 1 and 2 are largely supported. Multivariate Analysis Due to slight changes to the ofcial list of companies on the stock exchange during the period under review, the ensuing statistical analysis relies on 39 companies which have been listed throughout the 3-year period (20052007; 117 observations). Table 3 reports the descriptive statistics for the dependent and independent variables (except for industry dummies). The skewness and kurtosis statistics (supplemented by the non-parametric KolmogorovSmirnov (KS) normality
Table 3 Descriptive statistics (pooled data 2005, 2006 and 2007) Mean Prot margin (%) Leverage ratio (%) Turnover (MUR Million) Ethics word count Social word count Environment word count Health and safety word count Total CSD word count N = 117 observations MUR Mauritius Rupees 18.56 33.49 221.7 15.99 48.91 9.15 19.66 94.28 SD 28.99 51.51 3355.11 21.16 41.77 19.73 37.23 93.97

test) indicate that the variables are not normally distributed. Using data transformation procedures outlined in previous studies, the natural log of turnover is calculated to proxy for size (e.g. Chen et al. 2008; Reverte 2009), whilst all other variables are transformed into normal scores by using Van der Waerdens transformation. The latter procedure has been advocated by Cooke (1998, p. 214) to ensure the data satisfy normality assumptions and to allow the meaningful interpretation of the regression statistics (F and T tests). A non-normal distribution for nancial ratios and other disclosure scores is a relatively common occurrence and this transformation yielded positive results in recent CSD studies (e.g. Haniffa and Cooke 2005; Amran and Devi 2008; Branco and Rodrigues 2008). In this case as well, the tests carried out on the transformed data showed the non-normality issues to have been satisfactorily addressed. A Pearson correlation matrix which maps the associations between the transformed variables is provided in Table 4. Evidence of signicant multicollinearity between independent variables can bring into question ones conclusions on the validity of a specic variable (coefcient) in the model. As suggested in Hanniffa and Cooke (2005, p. 414), only very high correlations ([0.8) are of concern and the correlation matrix does not reveal such correlations amongst independent variables. Table 5 provides the OLS results of the pooled regression models using the different themes (and overall level) of CSD as the dependent variable. The variance ination factors (VIF) are found to be within the acceptable range (below 3 according to Branco and Rodrigues 2008), thereby conrming the absence of signicant multicollinearity, and serial correlation is not considered to be an issue as conrmed by the DurbinWatson scores (i.e. close to 2). Finally, a review of the residuals plots and relevant tests does not reveal issues of heteroscedasticity (as recommended by Haniffa and Cooke 2005 and Amran and Devi 2008).

Min -74.00 0 14.66 0 0 0 0 0

Max 98.00 311.9 16569.24 109 201 99 193 418

Skewness 1.301 3.187 2.400 1.556 1.211 2.742 2.938 1.618

Kurtosis 2.297 12.711 5.965 3.119 1.324 7.927 10.129 2.639

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A Longitudinal Study of CSDs in a Developing Economy Table 4 Correlation matrix PROFIT PROFIT LEVERAGE SIZE CSD (Ethics) CSD (Social) CSD (Environment) CSD (Health and safety) CSD (Total) N = 117 Signicant correlations at 0.05 level (2-tailed) in italics and at 0.01 level in bold Table 5 Regression results of CSD word counts on the explanatory factors Independent variable (predicted sign) Intercept b0 SIZE (?ve) b1 PROFIT (?ve) b2 LEVERAGE (?ve) b3 INDUSTRY1 (-/?ve) b4 INDUSTRY2 (-/?ve) b5 INDUSTRY3 (-/?ve) b6 INDUSTRY4 (-/?ve) b7 INDUSTRY5 (-/?ve) b8 Adjusted R2 (%) F statistic (p value) VIF range DurbinWatson CSD (Ethics) 0.869 (0.437) -0.089 (0.429) -0.005 (0.959) -0.159 (0.142) 0.316 (0.010)** 0.050 (0.684) 0.198 (0.116) -0.267 (0.046)* -0.027 (0.816) 16 3.744 (0.001)** 1.3612.404 1.795 CSD (Social) -4.142 (0.001)** 0.365 (0.001)** 0.054 (0.563) 0.084 (0.842) 0.144 (0.206) -0.065 (0.571) -0.032 (0.784) -0.214 (0.087) -0.008 (0.939) 27.5 6.501 (0.000)** 1.3782.463 1.892 CSD (Envir) -1.532 (0.112) 0.187 (0.095) 0.025 (0.798) 0.205 (0.046)* 0.105 (0.486) -0.178 (0.146) -0.078 (0.530) -0.087 (0.509) 0.238 (0.039)* 18.3 4.240 (0.000)** 1.3782.463 1.809 CSD (Health and safety) -1.713 (0.099) 0.208 (0.062) 0.183 (0.063) 0.279 (0.009)** 0.025 (0.835) -0.149 (0.218) -0.026 (0.831) -0.243 (0.406) -0.072 (0.527) 19.6 4.545 (0.000)** 1.3782.463 1.850 1 20.423 -0.230 -0.021 -0.090 -0.015 -0.019 -0.077 1 0.421 -0.079 0.256 0.259 0.344 0.289 1 0.085 0.504 0.279 0.362 0.479 1 0.376 0.389 0.438 0.630 1 0.464 0.516 0.874 1 0.656 0.661 1 0.762 1 GEARING SIZE CSD (Ethics) CSD (Social) CSD (Envir) CSD (Health and safety)

553

CSD (Total)

CSD (Total) -3.085 (0.010)** 0.272 (0.008)** 0.078 (0.388) 0.121 (0.216) 0.162 (0.145) -0.069 (0.537) 0.025 (0.826) -0.308 (0.011)* 0.031 (0.766) 31.7 7.669 (0.000)** 1.3612.404 1.875

Signicance of coefcients in parentheses (* at 5% level or less and ** at 1% level or less) 1 banks and insurance, 2 commerce, 3 industry and transport, 4 investment, 5 leisure and hotels and excluding industry, 6 sugar

All ve regressions results have signicant F statistics with varying levels of explanatory power (adjusted R2) ranging from 31.7 to 16%. Firstly, the results show that the companies overall level of CSD in the period 20052007 is principally driven by size (b1 = 0.272) and this is in line with previous studies and the legitimacy perspective. However, it appears that the size effect is not necessarily

relevant for all types of CSD. Whilst there are strong links between social disclosures and size (b1 = 0.365), there are no signicant coefcients for the other themes. This suggests that large companies with a high public visibility appear to favour one type of CSD theme in Mauritius to manage societal concerns. Hence, we can only nd partial support for Hypothesis 3; i.e. a companys overall visibility

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(size) has led to an increase in CSD word count but not in terms of explaining greater CSD variety. Secondly, the results show no direct evidence of protability on the extent of CSD. This absence of relationship can be added to the growing body of evidence that nancial visibility (as reected by a high or low protability) does not translate into more social (or less) information. Hence, Hypothesis 4 is not supported. In contrast, there are more signicant results for leverage; i.e. a company with a higher debt/equity ratio will provide more environmental (b3 = 0.205) and health and safety (b3 = 0.279) disclosures. Hence, it appears that nancially riskier companies may be responding in part to stakeholder demands. Despite this, we would conclude that there is only partial support for Hypothesis 5 since a signicant relationship is not observed for the ethics and social themes. Finally, industry afliation is seen to have a uctuating, and in some cases paradoxical, effect on the level of CSD. When considering the overall CSD word count, the type of business activity is not seen to have a major impact on the extent of CSD. The exception is the case of investment companies which, relative to other sectors, are less inclined (b7 = -0.308) to provide CSD. Investment companies also provide less ethical disclosures (b7 = -0.267). On the other hand, there is a positive coefcient companies for ethical disclosure by banks and insurance companies (b4 = 0.316). In addition, environmental disclosures appear to be favoured by the leisure and hotel sector (b8 = 0.238). In the case of social and health and safety disclosures, there are no signicant coefcients for the industry dummies. We would argue there is very limited evidence of an industry effect deemed consistent with legitimacy expectations but, as mentioned in the hypothesis section, particular national contexts may inuence which sector(s) is (are) deemed more visible. We elaborate on the latter point in the subsequent section, but at this stage we contend there is no support for Hypothesis 6. We end this part by considering the statistical implications of pooled regressions. Sayrs (1989) commented that a pooled time series is seen to be particularly useful in situations when the periods for the time series are limited and the sample of cross-sections is limited in size. However, as mentioned by Chen et al. (2008) and Sayrs (1989), the OLS analysis we carried out assumes the observations are subject to a single effect that ts all cross-sections (companies) and time periods (referred to as a constant coefcients model). To ensure the results are not unduly inuenced by this assumption, we carry out the procedure outlined in Chen et al. (2008, p. 142); namely, the re-estimation of the models with dummy variables for the periods under review (20052007, with 2005 being the excluded dummy variable). Whilst the dummy variable for 2007 was signicant for the total CSD and social disclosure word count models,

the signicant coefcients for the independent variables (in all models) were similar to those reported in Table 5.

Discussion of Findings Firstly, our descriptive analysis indicates an increase in the number of disclosing companies and in CSD content/theme and this is consistent with Hypotheses 1 and 2. We present a CSD pattern that is markedly different from those highlighted in previous developing country studiessuch as Bangladesh (Belal 2001), Hong Kong (Gao et al. 2005), Malaysia (Haniffa and Cooke 2005) and, to some extent, Thailand (Ratanajongkol et al. 2006)notably in terms of the focus of companies on social disclosures. Hence, the claim (Savage 1994; Disu and Gray 1998; Belal 2001) that developing countries tend to privilege employee-led disclosures is not supported. Furthermore, and although the changes in CSD were not necessarily immediate (i.e. from 2005), this new pattern of disclosures does not support Jamali and Mirshaks (2007) comments on the practice of silent CSR in developing countries. Relatively speaking, the concentration of social disclosures in 2004 (73%) has declined in subsequent periods (to approximately 51%) as companies increase their emphasis on ethical, environmental and health and safety disclosures. We posit that there has been an increased awareness of the societal imperatives mirroring some of the expectations set out in the corporate governance code. In addition, the changing political agenda initiated in 2005 has actively challenged the current business establishment, whilst other stakeholders have taken a keener interest in the social effects of business activities. Faced with these multiple expectations, companies appear to respond with a higher extent, and a more varied set, of CSD. Historically, companies in Mauritius have been traditionally involved in philanthropy and they are known to be regular donors to social activities.4 The pragmatic form of legitimacy (Suchman 1995, p. 578) implies that organisations will respond to the needs of their most immediate social audience (i.e. recipients of social support, charitable donations and government) and, consequently, provide more social disclosures. In our opinion, this immediate social audience has now expanded and the increased variety of CSD can hence be seen as a response to this broader stakeholder base.

Recent evidence of how companies in Mauritius perceive their current CSR roles was obtained from a local trade association report (Mauritius Employers Federation 2007). Key ndings were that 69% of enterprises are engaged in external social activities with NGOs and government bodies for the benet of the wider community with an emphasis on donations, sponsorships, cultural activities and educational scholarships.

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Furthermore, there is a relatively lower interest in disclosing environmental information (only a third of companies in 2007 and lowest word count proportion). This low level of environmental disclosure is not surprising in the developing country context as reported by Imam (2000), Haniffa and Cooke (2005), Ratanajongkol et al. (2006) and De Villiers and Van Staden (2006). Although we will later consider the links between environmental disclosures and particular economic sectors, we would argue that this lack of environmental disclosure may stem from companies seeking to avoid scrutiny on the ecological implications of their business activities. Indeed, the mere acknowledgement of an environmental impact by a company might invite more (unwanted) attention and thus threaten organisational legitimacy. In a similar vein, De Villiers and Van Staden (2006, p. 767) contend that companies in South Africa do not focus on environmental disclosures, because they do not have a legitimating ability compared to other CSD themes. The authors argued that the populations concerns were more focused on social issues rather than environmental ones and we are inclined to consider that a similar situation may be at play in Mauritius. Hence, from a pragmatic legitimacy perspective, the organisations self-interested calculations about their most immediate audiences are that the environment is a relatively less important aspect for such audiences. As a result, legitimacy motivations may equally explain the lack of environmental disclosure. There is very little published evidence relating to ethical disclosures in developing countries; about half of the companies in Mauritius have provided ethical disclosures by 2007, and CSD represents 17% of the word count post 2004. One of the key criticisms levelled at the local business sector is the fact that it does not operate on a level playing eld and that it abuses its quasi-monopolistic position to favour insiders for employment and/or business opportunities. Our reading of ethical disclosures shows a consistent trend of statements claiming a commitment to ethical behaviour and mention that a code of ethics has been adopted. These are principally boilerplate ritualistic statements and as such project a symbolic appearance which is consistent with the legitimacy perspective (e.g. Neu et al. 1998; Reverte 2009). These disclosures are thus seen as an attempt by companies to gain cognitive legitimacy (Suchman 1995, p. 589) by demonstrating conformance to an established model or standard (i.e. a code of ethics). Consequently, public concerns about unfair business or employment practices can be (at least partially) rebuked by the fact that the company has adopted a code of ethics. Finally, in relation to health and safety disclosures, we observe that these represent about 20% of the CSD word count over the period 20052007. The new health and safety legislation has required more

accountability (for instance, an obligation to have joint employer-employee health and safety committees and proper recording of incidents) from companies. In disclosing their commitment to employee health and safety, we contend that companies seek to gain a moral form of legitimacy whereby the organisation makes a judgment that it wants to be seen to be doing the right thing (i.e. taking care of employees). This in turn reects beliefs that such activity (health and safety actions and policies) effectively promotes societal welfare as dened by the audiences socially constructed value system (Suchman 1995, p. 579). Secondly, we discuss the effects of the rm-based variables and analyse whether the results contribute to the legitimacy explanation. Insofar as size is concerned (Hypothesis 3), it is generally agreed that this variable proxies for social visibility (Hanniffa and Cooke 2005; Branco and Rodrigues 2008; Reverte 2009) and that larger companies will have a higher extent of CSD. Whilst we nd results in support of the size effect, it appears that larger companies in Mauritius still give more weight to social disclosures as legitimating mechanisms compared to the other CSD themes. Higher social visibility attracts more demands for donations and sponsorships and larger companies would face more consequences if they are not seen to empathise with such demands. In this respect, larger organisations are inclined to foster a transactional relationship to maintain this pragmatic form of legitimacy and this is best achieved though the enhanced use of social disclosures. In the case of protability, no signicant coefcients were observed for all models and as a result, Hypothesis 4 was not supported. As mentioned previously, competing interpretations exist on the relevance of economic success (proxied by protability), and recent empirical studies have also reported non-signicant results (e.g. Branco and Rodrigues 2008; Reverte 2009). Within the legitimacy perspective, Suchman (1995, p. 576) argues that managers will favour the exibility and economy of symbolism and adopt a ritualistic use of CSD instead of making substantial changes to company operations to gain/ maintain social acceptance. Hence, such decisions are not taken because they will improve short-term performance, and the economic rationale cannot be seen as the main motivation for CSD. This absence of relationship can thus be viewed as consistent with legitimacy theory since functional wealth-maximising outcomes cannot be expected from the increased provision of CSD (Tolbert and Zucker 1983, p. 26). Once companies have adopted CSD patterns inuenced by pragmatic, moral or cognitive legitimacy motivations, then it appears unlikely that periodic changes in short-term performance will disturb the dynamics of the communication with society. However, one may argue that longer-term trends in upward or downward protability may affect the organisations

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overall visibility thereby resulting in changes of CSD. Finally, with regard to the protability effect, one additional test could have involved the use of a dummy variable (i.e. protable vs. loss-making companies) to conrm whether or not CSD is linked to the social visibility generated by economic success or failure. However, the low number of loss-making companies in our data precluded us from carrying out the appropriate statistical analysis to conrm our conclusion.5 Insofar as leverage is concerned (Hypothesis 5), we nd a signicantly positive coefcient in the environmental and health and safety models. This is a signicant nding in light of the limited results reported previously (Haniffa and Cooke 2005; Branco and Rodrigues 2008; Reverte 2009). In our opinion, a high leverage ratio acts as a proxy for higher social visibility (akin to, but not the same as size) due to the inherent risk posed to society by a highly indebted company. For instance, a highly indebted company may be more inclined to cut costs such as maintenance, safety and environmental protection, potentially resulting in employee or environmental accidents. Bankruptcy risks may prompt concerns as to who will be responsible for environmental and health and safety issues. This will lead to increased scrutiny from not only lenders and shareholders but also from regulators, government agencies and unions. In this respect, environmental and health and safety disclosures seek to convey a message of normality to reassure stakeholders. As a means of maintaining pragmatic legitimacy, Suchman (1995, pp. 595596) refers to a strategy of protecting accomplishments by developing a defensive stockpile of beliefs, attitudes and accounts which would give periodic assurances of business as usual to constituents. The evidence suggests that environmental and health and safety disclosures may be part of an overall strategy of communicating normality and hence delaying any actions by concerned stakeholders. Finally, we nd no support for a coherent industry effect (Hypothesis 6), although we do offer reasons for the few signicant results. One explanation for the contrast between investment companies and banks and insurance companies in Mauritius is that the latter are subject to more regulatory scrutiny than companies involved in the former sector. As a result, the level of awareness of ethical standards is higher in the case of banks and insurance companies. In addition, banks and insurance companies deal to a signicant extent with individual customers, whilst investment companies interact mostly with corporate and institutional clients. This suggests that the customer proximity argument (Branco and Rodrigues 2008) as well as an adherence to a moral form of legitimacy (doing the right
5

We thank one of the reviewers for suggesting this approach.

thing) could inuence the banks and insurance companies disclosure levels as a means to maintain individual customers condence and trust in such institutions. Investment companies are also less socially visible compared to other sectors, and the negative coefcient (in the total word count model) conrms that investment companies are less inclined to use CSD as a legitimating tool. In the case of environmental disclosures, we also do not nd that environmentally sensitive companies provide more disclosures compared to less sensitive ones (also in Belal 2001; Branco and Rodrigues 2008). In the specic case of the leisure and hotel sector in Mauritius, we contend that the higher level of disclosures is related to concerns about the natural environment and its critical importance to the sun, sea and sand product marketed to a predominantly foreign tourist market. In this regard, the disclosures reect a stronger integration of environmental aspects in the business model of leisure and hotel companies which is reective of Spences (2007) arguments that there is a business case underlying environmental disclosures in this sector. Therefore, in this specic case, we do contend that such disclosures do not reect traditional legitimacy expectations of higher environmental disclosures by rms engaged in environmentally damaging activities (e.g. Gray et al. 1995; Ratanajongkol et al. 2006). In conclusion to the above discussion on the industry effect, we are compelled to question the validity of industry afliation as an explanatory variable for CSD disclosures and as proxy for social visibility. In spite of recent attempts at devising better measures (e.g. Raar 2007), there is a high reliance on value judgments to determine which particular sector is environmentally sensitive or close to individual customers (Gray et al. 1995; Campbell 2000; Haniffa and Cooke 2005; Branco and Rodrigues 2008; Reverte 2009). For instance, whilst it is accepted that companies operating in oil and gas, mining, chemicals and forestry are deemed to have more environmental impact than other sectors, it is, however, difcult to assess relatively the environmental sensitivity of other intermediate sectors such as manufacturing, shipping or the airline industry. Furthermore, there is an implicit assumption that the impact of a particular sector remains unchanged over time and is similar across countries. We contend that this generalisation may no longer be applicable. For example, with the heightened awareness about climate change and the impact of carbon emissions in developed countries, there is much scrutiny on the environmental impact (e.g. food miles and waste) of supermarket chains in the Western world (e.g. refer to Lang and Barling 2006) but this societal concern is arguably not (yet) as strong in developing countries. As a result, we question the uncritical use of industry categorisations to support legitimacy arguments. In our view, this may explain the lack of consistent results in our study and in previous research.

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Conclusion This article has contributed to the CSD literature in the following ways. Firstly, it brings much needed evidence on CSD from a developing country perspective and reveals a pattern of disclosures that are at odds with previous studies in other countries. Secondly, the longitudinal analysis and a pre-post design enabled us to tease out the effects of the CSR expectations contained within the local Code of Corporate Governance code and how companies reacted in terms of disclosure. As a result, we bring detailed evidence on the relevance (and dynamics) of the legitimacy perspective in developing countries; and in particular how CSD evolution and variety in Mauritius is mainly motivated by a combination of pragmatic, moral and cognitive forms of legitimacy. The article also incorporated Haniffa and Cookes (2005, p. 394) view that legitimacy needs to be placed in its national context rather than merely take for granted the so-called Anglo-Saxon norms and notions of legitimacy. Thirdly, and whilst we convey evidence on the inuence of size and leverage (and the absence of a profitability effect) in support of the legitimacy perspective, the statistical analysis does not support that disclosures vary signicantly across economic sectors and, more specically, that these are higher for companies involved in environmentally sensitive activities or in sectors that operate in proximity to individual customers. In light of the signicant number of mixed results highlighted in previous studies and from our own data, we recommend the following avenues for future research. Firstly, greater consideration should be given to the development of a composite measure of social impact for companies which would incorporate elements relating to the environment, proximity to customers and other aspects (such as media visibility) previously used in the literature (e.g. Brammer and Pavelin 2004; Branco and Rodrigues 2008). For instance, in the specic case of environmental disclosures, researchers could make use of publicly available databases (e.g. the US Toxics Release Inventory) which assess more rigorously the environmental impact of various economic sectors. Secondly, and whilst we nd no effect for the protability variable in our empirical models, we have not been able to consider the possibility that CSD may vary between protable and loss-making companies. Therefore, we suggest that future CSD research adopt this proxy in their empirical investigations and we also call for more longitudinal research on the effects of protability (and other measures of nancial success) on CSD. Thirdly, we contend that more research should focus on CSD in African countries by studying the specicities of African cultures and religions and how these interact with CSD. We single out the growing academic interest in the

Southern African concept of Ubuntu6 in management research (West 2006) and how it might inuence CSR and CSD behaviour. Finally, within a legitimacy or broader socio-political perspective, we acknowledge that a quantitative assessment of annual report disclosures (using only word counts) does not provide a complete account of corporate motivations. Therefore, we agree that the use of qualitative methodologies (e.g. interviews, in-depth case studies, discourse analysis) can tease out further theoretical and empirical insights on the practice of, and motivations for, communicating social involvement.

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Ubuntu is a communitarian principle of reciprocity and interdependence and is often presented as a moral principle to encourage people to help and support each other in society. It is seen as a form of African humanitarianism that includes alms-giving, being sympathetic, caring, sensitive to the needs of others, being respectful, considerate, patient and kind (cited from West 2006, p. 439).

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