Accounting Organizations and Society, Vol.

17, No 6, pp 595--612, 1992 0361-3682/92 $5 00+ O0

Printed in Great Brttain Pergamon Press Ltd

DETERMINANTS OF CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE:

AN APPLICATION OF STAKEHOLDER THEORY

ROBIN W. ROBERTS
School o f Accountancy, University o f M i s s o u r i - C o l u m b i a

Abstract

A lack of sufficient theoreucal support for models destgned to explain corporate soctal responsibihty actisaty
led Ullmann (Academy of Management Rewew, 1985, pp. 540-577) to develop a framework for prechcting
corporate social activity based on a stakeholder theory of strategic management This study empirically tests
the ability of stakeholder theory to explain one s-Ix~ificcorporate social responsibility activtty - - social
responsibility disclosure. Results support this application, finding that measures of stakeholder power,
strategm posture, and economic performance are significantlyrelated to levels of corporate socml disclosure

UUmann ( 1 9 8 5 ) c r i t i c a l l y e v a l u a t e d p r i o r a c t i v i t y - - social r e s p o n s i b i l i t y disclosure. T h e

r e s e a r c h in t h e a r e a o f c o r p o r a t e social r e s p o n -
sibility a n d c o n c l u d e d t h a t s e v e r a l d e f i c i e n c i e s
e x i s t in t h e c u r r e n t b o d y o f c o r p o r a t e social
r e s p o n s i b i l i t y r e s e a r c h . F o r e m o s t in his c r i t i q u e
w a s t h e l a c k o f a c o m p r e h e n s i v e social r e s p o n -
sibility t h e o r y sufficient to e x p l a i n w h y corpora-
t i o n s e n g a g e in social r e s p o n s i b i l i t y e n d e a v o r s .
H e a r g u e s that this l a c k o f a c o m p r e h e n s i v e
t h e o r y is r e s p o n s i b l e for t h e c o n f l i c t i n g r e s u l t s
o f m a n y studies. A c o n c e p t u a l f r a m e w o r k w a s
d e v e l o p e d b y U l l m a n n ( 1 9 8 5 ) as sufficient to
e x p l a i n t h e r e l a t i o n s h i p s a m o n g social dis-
c l o s u r e , a n d social a n d e c o n o m i c p e r f o r m a n c e .
This f r a m e w o r k is b a s e d u p o n t h e s t a k e h o l d e r
approach to strategic management that was
f o r w a r d e d b y F r e e m a n ( 1 9 8 3 ) a n d o t h e r s , in
w h i c h c o n f l i c t i n g e x t e r n a l d e m a n d s o n t h e firm
m a y b e a d d r e s s e d . S o m e r e c e n t s t u d i e s in t h e
social r e s p o n s i b i l i t y a r e a h a v e r e c o g n i z e d t h e
r o l e o f s t a k e h o l d e r s in i n f l u e n c i n g c o r p o r a t e
d e c i s i o n s (e.g. M c G u i r e et al., 1988), b u t h a v e
n o t a t t e m p t e d t o e x p l i c i t l y test s t a k e h o l d e r
influences as d e t e r m i n a n t s o f t h e l e v e l o f
c o r p o r a t e social r e s p o n s i b i l i t y activity. T h e
p u r p o s e o f this s t u d y is to o p e r a t i o n a l i z e t h e
stakeholder framework presented by Ullmann
a n d e m p i r i c a l l y test t h e effect o f o v e r a l l firm
s t r a t e g y o n o n e t y p e o f social r e s p o n s i b i l i t y
present study improves on prior research by
p r e d i c t i n g t h e l e v e l o f c o r p o r a t e social dis-
closure within a comprehensive theoretical
f r a m e w o r k a n d b y a d o p t i n g i n d e p e n d e n t , third-
p a r t y e v a l u a t i o n s as m e a s u r e s o f t h e level o f
c o r p o r a t e social d i s c l o s u r e .
T h e r e m a i n d e r o f t h e p a p e r is o r g a n i z e d as
follows. T h e n e x t t w o s e c t i o n s discuss p r i o r
r e s e a r c h in t h e a r e a o f c o r p o r a t e social r e s p o n -
sibility a n d s t a k e h o l d e r t h e o r y . Thereafter,
c o n s i d e r a t i o n is g i v e n t o U l l m a n n ' s f r a m e w o r k
for analyzing social r e s p o n s i b i l i t y disclosures.
T h e social r e s p o n s i b i l i t y d i s c l o s u r e m o d e l de-
s i g n e d t o test Ullmarm's f r a m e w o r k is t h e n
e x p l a i n e d a n d t h e s a m p l e is d e s c r i b e d . T h e
r e s u l t s o f t h e e m p i r i c a l tests a n d t h e c o n c l u -
sions a n d l i m i t a t i o n s o f t h e s t u d y are p r e s e n t e d
in t h e final s e c t i o n s o f t h e p a p e r .
PRIOR RESEARCH O N CORPORATE SOCIAL
RESPONSIBILITY
P r i o r r e s e a r c h has d e f i n e d c o r p o r a t e social
r e s p o n s i b i l i t y activities as p o l i c i e s o r a c t i o n s
w h i c h i d e n t i f y a c o m p a n y as b e i n g c o n c e r n e d
w i t h s o c i e t y - r e l a t e d issues. Studies h a v e e x a m -
i n e d c o r p o r a t e social r e s p o n s i b i l i t y activities in

595
596 R w ROBERTS
many areas itfcluding the following categories:
( 1 ) the environment, ( 2 ) affirmative action
programs, ( 3 ) equal e m p l o y m e n t opportunity
policies, ( 4 ) c o m m u n i t y involvement, ( 5 ) pro-
duct safety, ( 6 ) policies toward South Africa,
(7) energy policies, and ( 8 ) social responsibility
disclosure (CEP, 1986; Cowen et al., 1987).
Studies of relationships among social disclosure,
social performance, and economic performance
of corporations include philosophical treatises
on businesses' inherent responsibilities to
society, research regarding the economic con-
sequences or information content of social
responsibility activities and studies of the
determinants of social responsibility disclosures. ~
Each stream of research is reviewed below.
The social responsibilities o f business
During the 1960s and 1970s the relationship
b e t w e e n business and society was re-examined
and with that re-examination e m e r g e d new
theories regarding corporate responsibilities to
society (Dierkes & Antal, 1986). Steiner (1972),
Davis (1973) and others proposed that diffusion
of corporate ownership made the traditional
m a n a g e r - o w n e r model of the business entity
misspecified. They argued that although busi-
ness is, fundamentally, an economic institution,
larger firms exert significant influence in society
and have responsibilities to use some e c o n o m i c
resources in an altruistic manner to aid in
meeting social goals
Keim (1978b) argued that social responsibility
activities may be consistent with wealth max-
imization motives of the firm. He stated that as
society changes societal constraints on business
activity also change. In a social environment
that expects all corporations to exhibit concern
for social goals, corporations that do not may b e
punished. Similar conclusions w e r e reached by
Belkaoui ( 1 9 7 6 ) and Watts & Z i m m e r m a n
(1978). Stakeholder theory provides an avenue
in which to integrate the hypotheses regarding
corporate social responsibility activities
In addition to developing a stakeholder framework for analyzingcorporate soctal responstbflttyacnvities, Ullmann(1985)
provides a detailed discussion of prior research m the area
forwarded by Keim, Belkaoui, and Watts and
Z i m m e r m a n into a model of corporate social
responsibility disclosure.
E c o n o m i c consequences a n d i n f o r m a t i o n
content studies
Studies on the effects of corporate social
responsibility activities on firm value have
p r o d u c e d mixed results. Some studies have
reported beneficial effects while others
have concluded that the effects are negative or
inconsequential. Belkaoui ( 1 9 7 6 ) investigated
the information content of pollution control
disclosures by developing portfolios of disclos-
ing and nondisclosing firms. His results supported
an ethical investor hypothesis that rewarded
companies for acting in a socially responsible
manner. The findings of some additional studies
p r o d u c e d results consistent with the notion
that corporate social responsibility activities
impact on the financial markets (Spicer, 1978a,
b; Anderson & Frankle, 1980; Shane & Spicer,
1983).
Some studies replicated earlier research and
found conflicting results. Frankle & Anderson
( 1 9 7 8 ) rejected Belkaoui's interpretation and
argued that nondisclosing firms had consistently
performed better than the market. In a similar
manner, Chen & Metcalf ( 1 9 8 0 ) d i s a g r e e d with
Spicer's conclusions arguing that the results
w e r e driven by spurious correlations. In re-
sponse, Spicer ( 1 9 8 0 ) stated that Chen and
Metcalf misinterpreted the purpose of his study
emphasizing that associations, not causal rela-
tionships, w e r e being investigated.
Ingrain ( 1 9 7 8 ) concluded that the informa-
tion content of social responsibility disclosures
was conditional upon the market segment with
which a firm is identified, while Alexander &
Buchholz ( 1 9 7 8 ) and Abbott & Monsen ( 1 9 7 9 )
found no significant relationship b e t w e e n a
corporation's level of social responsibility acti-
vities and stock market performance. Chugh et
al. (1978), Trotman & Bradley ( 1 9 8 1 ) and
 SOCIALRESPONSIBILITYDISCLOSURE
Mahapatra ( 1 9 8 4 ) concluded that corporate
social responsibility activities may lead to
increased systematic risk.
These studies w e r e c o n d u c t e d prior to
Ullmann ( 1 9 8 5 ) and are subject to his criticism
that empirical research in corporate social
responsibility has not developed a solid theo-
retical foundatiorL While some studies extended
earlier w o r k through methodological improve-
ments or b y sampling from a different popula-
tion of companies, theoretical advances w e r e
not substantial.
D e t e r m i n a n t s o f social responsibility
activities
Cochran & W o o d ( 1 9 8 4 ) used corporate
social responsibility rankings developed by
Moskowitz ( 1 9 7 2 ) to test the relationship
b e t w e e n corporate social responsibility activi-
ties and firm performance. After controlling for
industry classification and corporate age, a
weak, positive association b e t w e e n social re-
sponsibility activities and financial p e r f o r m a n c e
was found. Mills & Gardner ( 1 9 8 4 ) concluded
in their analysis of the relationship b e t w e e n
social disclosure and financial p e r f o r m a n c e that
companies are m o r e likely to disclose social
responsibility expenditures w h e n their finan-
cial statements indicate favorable financial
performance.
C o w e n et al. ( 1 9 8 7 ) examined the relation-
ships b e t w e e n several corporate characteristics
and specific categories of social responsibility
disclosures. C o m p a n y size, industry classifica-
tion, profitability, and the presence of a corporate
social responsibility c o m m i t t e e w e r e hypothes-
ized as potential influences on corporate social
disclosure. The results of a multiple regression
analysis concluded, in general, that c o m p a n y
size and industry classification are associated
with corporate social disclosures. McGuire et
al. ( 1 9 8 8 ) used Fortune magazine's ratings of
corporate reputations to analyze the relation-
ships between perceived corporate social respon-
sibility p e r f o r m a n c e and financial performance.
Prior financial p e r f o r m a n c e of the firms, as
measured b y both stock market returns and
accounting-based measures, w e r e found to be
597
m o r e closely related to corlx)rate social re-
sponsibility than was subsequent financial per-
formance. McGuire et al. ( 1 9 8 8 ) suggested that
financial p e r f o r m a n c e may b e a variable in-
fluencing social responsibility activities.
Conclusions drawn from this stream of
empirical research w e r e generally consis-
tent with the theoretical m o d e l developed by
Ullmann (1985), but none of the studies
provided a comprehensive theory to predict
corporate social p e r f o r m a n c e or disclosure.
McGuire et al. ( 1 9 8 8 ) reference stakeholder
considerations but do not incorporate measures
of stakeholder p o w e r or strategic posture into
their empirical tests.
STAKEHOLDER THEORY
The stakeholder concept
Freeman ( 1 9 8 4 ) defines a stakeholder as "any
group or individual w h o can affect or is affected
b y the achievement of the firm's objectives".
Stakeholders of the firm include stockholders,
creditors, employees, customers, suppliers,
public interest groups, and governmental bodies.
Ansoff ( 1 9 6 5 ) was the first to use the term
"stakeholder theory" in defining the objectives
of the firm. A major objective of the firm was to
attain the ability to balance the conflicting
demands of various stakeholders in the firm.
Freeman ( 1 9 8 3 ) categorized the develop-
m e n t of the stakeholder c o n c e p t into a cor-
porate planning and business policy model and
a corporate social responsibility model of
stakeholder management. The corporate plan-
ning and business policy m o d e l of the stake-
holder c o n c e p t focuses on developing and
evaluating the approval of corporate strategic
decisions by groups w h o s e support is required
for the corporation to continue to exist. The
behavior of various stakeholder groups is
considered a constraint on the strategy that is
developed b y m a n a g e m e n t to best match
corporate resources with its environment. In
this model stakeholders are identified as cus-
tomers, owners, suppliers and public groups
and are not adversarial in nature.
598 R. W ROBERTS
The corporate social responsibility model of
stakeholder analysis extends the corporate
planning model to include external influences
on the firm that may assume adversarial posi-
tions. The adversarial groups are characterized
as regulatory or special interest groups con-
cerned with social issues. The corporate social
responsibility model allows a strategic planning
model to adapt to changes in the social
demands of nontraditional p o w e r groups.
Freeman ( 1 9 8 3 ) discusses the dynamics of
stakeholder influences on corporate decisions.
A major role of corporate management is to
assess the importance of meeting stakeholder
demands in order to achieve the strategic
objectives of the firm. As the level of stake-
holder p o w e r increases the importance of
meeting stakeholder demands increases, also.
From Freeman's model, Ullmann ( 1 9 8 5 ) de-
veloped a conceptual model of corporate social
responsibility activities. Thus, Ullmann pro-
vides a conceptual basis for studying corporate
social responsibility activities in a stakeholder
framework. Ullmann concluded that stake-
holder theory provides an appropriate justifica-
tion for incorporating strategic decision
making into studies of corporate social respon-
sibility activities. The Ullmann model is dis-
cussed in detail in the next major section of the
paper.
Applications of stakeholder theory
Stakeholder theory has b e e n applied to
analytical and empirical analyses of the firm and
the environment in which the firm operates.
The proposition that stakeholder interests may
conflict was tested by Sturdivant (1979). He
used a survey to compare the social responsibility
attitudes of activist group leaders and corporate
managers. As hypothesized, there w e r e signifi-
cant differences b e t w e e n attitude scores of
activists and corporate managers. The scores
indicated that activists w e r e stronger in their
beliefs that businesses should be responsive to
social issues. Sturdivant concluded that cor-
porate management should not necessarily
change their beliefs to conform to those of
stakeholders, but managers should consider
conflicting stakeholder interests w h e n planning
corporate strategy.
In a study of strategic performance, Chakra-
varthy ( 1 9 8 6 ) discussed the inadequacy of
traditional profitability measures as indicators
of strategic performance and p r o p o s e d the use
of a stakeholder satisfaction measure. He argued
that well-adapted firms (i.e. firms whose strategic
performance is considered excellent) realize
that co-operation of a firm's multiple stake-
holder groups is a "necessary condition for
excellence". A Fortune magazine survey of
corporate reputations in which stakeholder satis-
faction was considered was cited by Chakravarthy
as supporting his contention.
Cornell & Shapiro ( 1 9 8 7 ) discuss the role of
stakeholders other than investors and managers
in the d e v e l o p m e n t of a firm's financial policy.
They contend that a firm issues "implicit
claims" to non-investor stakeholders that must
be considered w h e n developing a firm strategy
regarding capital structure. Implicit claims,
such as uninterrupted service to customers,
cannot be separated from a firm's business
dealings and impact a firm's total risk (i.e.
e x p e c t e d cash flows). Barton et al. ( 1 9 8 9 )
empirically tested Cornell and Shapiro's asser-
tion that stakeholder theory may be used to
explain cross-sectional variations in firms' capital
structures. Using a diversification strategy vari-
able to p r o x y for a stakeholder construct, they
found empirical results consistent with stake-
holder predictions. Their research, along with
the other studies reviewed, provides evidence
that stakeholder theory is a viable approach to
predicting and explaining management behavior.
ULLMANN'S FRAMEWORK
Ullmann ( 1 9 8 5 ) concluded that corporate
social responsibility models developed in prior
research are misspecified because the relation-
ship of firm strategy to the social responsibility
decision has not b e e n incorporated into the
empirical tests. He developed a contingency
framework for predicting levels of corporate
social responsibility activity and disclosure
 SOCIALRESPONSIBILITYDISCLOSURE
based on the stakeholder c o n c e p t formalized b y
Freeman (1984). Ullmann's f r a m e w o r k is con-
sistent with the conceptual view of corporate
social reporting discussed b y Dierkes & Antal
(1985), that publicly disclosed information
regarding corporate social responsibility activi-
ties provides a basis for dialogue with various
business constituencies.
Ullmann (1985) presents a three-dimensional
model as sufficient to explain almost all correla-
tions a m o n g social disclosure and social and
e c o n o m i c performance. Stakeholder p o w e r is
discussed as the first dimension of the model,
explaining that a firm will be responsive to the
intensity of stakeholder demands. A stakeholder's
(e.g. owners, creditors, or regulators) p o w e r to
influence corporate m a n a g e m e n t is viewed as a
function of the stakeholder's degree of control
o v e r resources required by the corporation
(Ullmann, 1985). The m o r e critical stakeholder
resources are to the continued viability and
success of the corporation, the greater the
expectation that stakeholder demands will be
addressed. If social responsibility activities are
viewed as an effective m a n a g e m e n t strategy for
dealing with stakeholders, a positive relation-
ship b e t w e e n stakeholder p o w e r and social
p e r f o r m a n c e and social disclosure is expected.
As will be discussed b e l o w evidence suggests
that social responsibility activities are useful
in developing and maintaining satisfactory rela-
tionships with stockholders, creditors, and
political bodies. Developing a corporate reputa-
tion as being socially responsible, through
performing and disclosing social responsibility
activities, is part of a strategic plan for managing
stakeholder relationships.
The second dimension of the m o d e l is the
firm's strategic posture toward corporate social
responsibility activities. Strategic posture de-
scribes the m o d e of response of a company's
key decision makers concerning social demands.
UUmann dichotomizes strategic posture as
active or passive. A c o m p a n y w h o s e manage-
m e n t tries to influence their organization's
status with key stakeholders through social
responsibility activities possesses an active
posture. If a c o m p a n y ' s m a n a g e m e n t is not
599
continuously monitoring its position with stake-
holders and is not developing specific programs
to address stakeholder influences, then the
c o m p a n y is perceived to possess a passive
strategic posture. Thus, the m o r e active the
strategic posture the greater the e x p e c t e d
social responsibility activities and disclosures.
The model's third dimension concerns the
company's past and current economic perfor-
mance. The importance placed on meeting
social responsibility goals may b e secondary to
meeting the e c o n o m i c demands that impact
directly on a company's continued viability.
Economic p e r f o r m a n c e directly affects the
financial capability to institute social responsi-
bility programs. Therefore, given certain levels
of stakeholder p o w e r and strategic posture,
the better the economic p e r f o r m a n c e of a
company, the greater its social responsibility
activity and disclosures.
THE SOCIAL DISCLOSURE MODEL
The empirical tests in this study use measures
of stakeholder power, strategic posture toward
social responsibility, and economic performance
to predict cross-sectional variations in one
corporate social responsibility activity J cor-
porate social responsibility disclosure. It is
also hypothesized that in constructing the
model, a time lag b e t w e e n measures of the
explanatory factors and social disclosure is
necessary. This lag is necessary due to: ( 1 ) the
dynamic nature of strategic planning, ( 2 ) the
focus of stakeholder theory on meeting the
long-term interests of stakeholders, ( 3 ) the
empirical findings of Cowen et al. ( 1 9 8 7 ) and
M c G u i r e e t al. (1988), and ( 4 ) the fact that
social disclosures relate primarily to past social
responsibility activities.
The empirical form of the model is:
SOCDISI,t = b0 + bl + b2 (PSHI,t-1)
+ b 3 (lnPACt,t_l) + b4 (DERATIO t,t-1)
+ b5 (PUBAFF~,t-I) + b6 (FOUNDs,t_,)
+ b7 (MGRROE~,t_~) + ba (BETA~.t-~)
+ b9 (AGEt,t-1) + blo (INDEFFt.t-I)
+ bit (lnSIZEt, t-I) + el,
600 R W ROBERTS

where: FOUND. 2 L o g a r i t h m i c t r a n s f o r m a t i o n s o f t h e
variables PAC a n d SIZE a r e u s e d w h e n estimat-
bo, b l = i n t e r c e p t terms;
ing t h e social d i s c l o s u r e m o d e l . T h e transfor-
SOCDIS = level o f c o r p o r a t e social r e s p o n -
m a t i o n is p e r f o r m e d b e c a u s e variables w i t h
sibility d i s c l o s u r e for firm i in
o b s e r v a t i o n s that are large in a b s o l u t e a m o u n t s
p e r i o d t; 0 -- p o o r , 1 = g o o d , 2 =
c a n o v e r w h e l m o t h e r variables d u r i n g t h e
excellent;
logistic r e g r e s s i o n i t e r a t i o n p r o c e s s . A c o m -
PSH = p e r c e n t a g e o f o w n e r s h i p in firm i
p l e t e d e s c r i p t i o n o f t h e variables u s e d in t h e
h e l d b y m a n a g e m e n t a n d share-
m o d e l is p r e s e n t e d in T a b l e 1.
h o l d e r s h o l d i n g m o r e t h a n 5% o f
c o m m o n s t o c k at p e r i o d t - 1;
D e p e n d e n t variable
PAC = d o l l a r s c o n t r i b u t e d b y firm i t o
T h e d e p e n d e n t v a r i a b l e for t h e social dis-
its c o r p o r a t e p o l i t i c a l a c t i o n c o m -
c l o s u r e m o d e l ( S O C D I S ) is a d a p t e d f r o m an
m i t t e e in p e r i o d t - 1;
e x t e n s i v e analysis o f t h e social r e s p o n s i b i l i t y
DERATIO = a v e r a g e d e b t to e q u i t y r a t i o for
activities o f 130 m a j o r c o r p o r a t i o n s that w a s
firm i in p e r i o d t - 1;
p u b l i s h e d b y t h e C o u n c i l o n E c o n o m i c Priori-
PUBAFF = a v e r a g e n u m b e r o f c o r p o r a t e
ties ( C E P ) in 1986. T h e CEP analysis r e s u l t e d in
p u b l i c affairs staff m e m b e r s
a rating of each corporation's level of disclosure
e m p l o y e d b y firm i in p e r i o d t - 1;
o f social r e s p o n s i b i l i t y activities f r o m 1984 to
FOUND = s p o n s o r s h i p o f a p h i l a n t h r o p i c
1986. This extensive search b y the CEP involved:
f o u n d a t i o n b y firm i in p e r i o d
( 1) direct communication with each company,
t - 1; FOUND = 1 if a c o r p o r a t e
( 2 ) a r e v i e w o f c o r p o r a t e a n n u a l r e p o r t s , 10K
p h i l a n t h r o p i c f o u n d a t i o n exists.
r e p o r t s , a n d p r o x y s t a t e m e n t s , ( 3 ) an i n - d e p t h
O t h e r w i s e , FOUND = 0;
s t u d y o f n e w s p a p e r s , magazines, a n d o t h e r
MGRROE --- a v e r a g e annual c h a n g e in r e t u r n
p u b l i c a t i o n s , a n d ( 4 ) an analysis o f s e c o n d a r y
o n e q u i t y for firm i in p e r i o d t - I;
i n f o r m a t i o n s o u r c e s s u c h as The Taft Corporate
BETA -- m a r k e t m o d e l m e a s u r e o f syste-
Giving Directory, the N a t i o n a l Directory o f
m a t i c risk for firm i at p e r i o d t - 1;
Corporate Charity, and the National Data Book.
AGE = age o f c o r p o r a t i o n at p e r i o d
T h e CEP e v a l u a t e d e a c h c o r p o r a t i o n ' s social
t - 1;
disclosure performance and a rating of a =
INDEFF -- p r e s e n c e o f firm i in a h i g h
e x c e l l e n t , c = g o o d , o r f -- p o o r w a s d e t e r -
profile i n d u s t r y at p e r i o d t - 1;
m i n e d . If a c o r p o r a t i o n i n c l u d e d in t h e s a m p l e
INDEFF = 1 if a c o r p o r a t i o n is p a r t
r e c e i v e d an "a" rating f r o m t h e CEP, t h e
o f a h i g h profile industry.
d e p e n d e n t v a r i a b l e SOCDIS is set e q u a l to 2. If a
O t h e r w i s e , INDEFF = 0;
c o m p a n y r e c e i v e d a CEP r a t i n g o f "c", SOCDIS
SIZE = a v e r a g e r e v e n u e s o f firm i in
is set e q u a l t o 1, a n d for an "f" r a t i n g SOCDIS is
p e r i o d t - 1.
set e q u a l t o 0.
In t h e e m p i r i c a l tests, p e r i o d t r e p r e s e n t s t h e W i s e m a n ( 1 9 8 2 ) f o u n d significant d i s c r e p a n -
y e a r s 1 9 8 4 - 1 9 8 6 . F o r t h e i n d e p e n d e n t vari- c i e s b e t w e e n s o m e c o r p o r a t e social d i s c l o s u r e s
ables PSH, BETA, AGE, a n d INDEFF, t -- 1 a n d a c t u a l c o r p o r a t e social r e s p o n s i b i l i t y activi-
r e p r e s e n t s 1984. F o r PAC, DERATIO, MGRROE, ties. This l e d U l l m a n n ( 1 9 8 5 ) t o c o n c l u d e t h a t
a n d SIZE, t - 1 r e p r e s e n t s t h e y e a r s 1 9 8 1 - voluntary corporate disclosures should not be
1984. T h e p e r i o d t - 1 r e p r e s e n t s t h e y e a r s u s e d as p r o x i e s for social r e s p o n s i b i l i t y per-
1 9 8 3 - 1 9 8 4 for t h e variables PUBAFF a n d formance. By evaluating m a n y alternative sources

2The National Directory of Corporate Public Affairs is the source for data relating to the variables PUBAFFand FOUND
This directory was not pubhshed before 1983. Therefore, PUBAFFand FOUND are limtted to two years of data
 SOCIAL RESPONSIBILITYDISCLOSURE 601

TABLE 1. Description of variables

Variable Data
name (expected sign) Description source
Dependent variable
SOCDIS (n a.) Evaluatton of corporate social disclosures 1984-1986 SOCDIS Council on
= 0 ff disclosure is poor, 1 if good, 2 if excellent Economic Prioritms
Independent vartables
Stakeholder power
PSH (--) % of corporatton owned by management and by individual Proxy statements
shareholders owning more than 5% of outstanding shares in 1984
PAC ( + ) Natural log of the dollars contributed by corporate PACs to Council on
pohttcal campaigns 1981-1984 Economic Priorittes
DERATIO ( + ) Average debt to equity ratio 1981-1984 Compustat
Strategm posture
PUBAFF( + ) Average size of corporate pubhc affairs staff 1983-1984 National Directory
of Corporate Public
Affairs
FOUND ( + ) FOUND = 1 if corporatton sponsors a phdanthroptc foundation National Directory
in 1983 & 1984, else FOUND = 0 of Corporate Public
Affairs
Economic performance
MGRROE ( + ) Average annual change m return on eqmty 1981-1984 Compustat
BETA ( - ) Beta for 1984 computed using market model voth 60 month Compustat
esttmatton period
Control variables
AGE ( + ) Age of corporation m 1984 Compustat
IN'DEFT( + ) INDEFF = 1 if corporation ts in the automobile, airline, or oil council on
industry, else INDEFF = 0 Economic Pnoritms
SIZE ( + / - ) Natural log of average revenues 1981-1984 Compustat

to c o r r o b o r a t i v e e v i d e n c e r e g a r d i n g c o r p o r a t e represents the potential stakeholder power of

social d i s cl o s u r e , t h e CEP ratings p r o v i d e an
i m p r o v e d measure of both the level and the
reliability o f c o r p o r a t e social r e s p o n s i b i l i t y
disclosure.
Independent variables
T h e i n d e p e n d e n t variables u s e d in t h e e m p i r -
ical tests r e p r e s e n t t h e l e v e l o f s t a k e h o l d e r
p o w e r , t h e s t r a t e g ic p o s t u r e t o w a r d social
r e s p o n s i b i l i t y activities, o r t h e e c o n o m i c per-
f o r m a n c e o f a corporation. T h e p r o x i e s s e l e c t e d
to r e p r e s e n t t h e s e h y p o t h e s i z e d i n f l u e n c e s o n
c o r p o r a t e social r e s p o n s i b i l i t y d i s c l o s u r e s are
d i s c u s s e d in this s e c t i o n .
Stakeholder pow e r variables, T h r e e stake-
h o l d e r p o w e r variables are i n c l u d e d in t h e
social d i s c l o s u r e m o d e l . T h e v a r i a b l e PSH
passive i n v e s t o r s (i.e. s t o c k h o l d e r s ) . T h e vari-
able PAC p r o v i d e s a m e a s u r e o f g o v e r n m e n t a l
(i.e. political, legislative, o r r e g u l a t o r y ) risks
f a c e d b y c o r p o r a t i o n s an d DERATIO p r o x i e s for
p o t e n t i a l c r e d i t o r influences. T h e r a t i o n a l e for
t h e s e l e c t i o n o f t h e s e p r o x i e s an d t h e i r relation-
ship to c o r p o r a t e social responsibility disclosures
is p r e s e n t e d b e l o w .
Stockholder power Keirn ( 1 9 7 8 a ) s t a t e d that as
the distribution of ownership of a corporation
b e c o m e s less c o n c e n t r a t e d , t h e d e m a n d s p l a c e d
o n t h e c o r p o r a t i o n b y share o w n e r s b e c o m e s
b r o a d e r . D i s p e r s e c o r p o r a t e o w n e r s h i p , espe-
cially b y i n v e s t o r s c o n c e r n e d w i t h c o r p o r a t e
social activities (e.g. social responsibility mutual
funds, c h u r c h an d c i v i c p e n s i o n plans, and
et h i cal i n v e s t o r s ) , h e i g h t e n s p r e s s u r e for
602 IZ w. ROBERTS
management to disclose social responsibility
activities (Ullmann, 1985). The variable PSH
represents the percentage of outstanding com-
m o n stock held by corporate management and
b y other individuals w h o o w n 5% or m o r e of
the stock. Following from Keim and Ullmann, it
is hypothesized that the wider the dispersion
of corporate ownership the better the corpora-
tion's social responsibility disclosures. Thus, an
inverse relationship is predicted b e t w e e n PSH
and the dependent variable SOCDIS.
Governmental and regulatory influences.
Freeman ( 1 9 8 4 ) discussed the role of legisla-
tive bodies as corporate stakeholders. Watts &
Z i m m e r m a n ( 1 9 7 8 ) developed a political costs
hypothesis to argue that corporations employ
social responsibility activities to reduce the risk
of governmental intrusions, such as regulation,
that may adversely affect firm value. The
political costs hypothesis and the stakeholder
c o n c e p t both recognize the ability of govern-
m e n t to have an impact on corporate strategy
and performance. Thus, government can be
viewed as a corporate stakeholder whose
interests must be addressed b y management.
Higher levels of perceived governmental in-
fluence on corporate activity would be ex-
pected to lead to a greater effort by management
to m e e t expectations of government. Social
responsibility disclosures may be used by
management as a strategy designed to satisfy
g o v e r n m e n t demands.
Prior accounting research has relied on a
corporate size variable to p r o x y for the impact
of political activity on corporate strategy. Size
has b e e n criticized as a p r o x y for political
exposure because it is correlated with many
other corporate characteristics. This study uses
corporate political action c o m m i t t e e contribu-
tions from 1 9 8 1 - 1 9 8 4 as an indicator of
g o v e r n m e n t stakeholder power. Corporate
political activity has b e e n described as a set of
managerial decisions designed to increase the
firm's competitive advantage in the political
arena, and political action c o m m i t t e e contribu-
tions have b e e n specifically discussed as a major
type of strategy (Keim & Zeithaml, 1986; Keim
& Baysinger, 1988). Keim & Zardkoohi ( 1 9 8 8 )
concluded that political action c o m m i t t e e con-
tributions may serve as protection against
future political risks or to influence enactment
of favorable legislation. In an analysis of environ-
mental regulation, Hahn ( 1 9 9 0 ) concluded that
environmental policy decisions result from a
struggle b e t w e e n key interest groups and
specified industry influences as a critical com-
p o n e n t in the process. Hahn's conclusions
provide further support for a comprehensive
approach to analyzing pollution control ex-
penditures and corporate social responsibility
activities.
These studies in corporate political activity
and environmental regulation infer that cor-
porate political action c o m m i t t e e contributions
result from a corporate strategy designed to
manage political risks. It follows that relatively
larger amounts of corporate political action
c o m m i t t e e contributions result from manage-
m e n t perceptions of higher regulatory and
political pressure, and that social responsibility
disclosures will m o r e likely be of interest to
regulatory agencies and political groups. Thus,
it is hypothesized that PAC is directly related to
the d e p e n d e n t variable SOCDIS.
Creditor influences. Creditors control access to
financial resources that may be necessary for
the continued operation of a corporation.
Ullmann ( 1 9 8 5 ) posited that if a corporation
perceives stakeholders as concerned with social
responsibility activities the corporation will
have greater incentives to disclose its activities.
Stakeholder analysis has b e e n used in prior
research to explain corporate decisions regard-
ing financial policies (Cornell & Shapiro, 1987;
Barton et al., 1989). The analyses concluded
that capital structure decisions are part of an
overall corporate stakeholder strategy and that
creditors are important stakeholders whose
influences should be managed.
It follows that the greater the degree to
which a corporation relies on debt financing to
fund capital projects, the greater the degree
to which corporate management would be
e x p e c t e d to respond to creditor expectations
 SOCIALRESPONSIBILITYDISCLOSURE
concerning a corporation's role in social re-
sponsibility activities. To test the hypothesis
that the level of c o r p o r a t e social responsibility
disclosure is directly related to the degree to
which a corporation is leveraged, the variable
DERATIO is included in the social disclosure
model. DERATIO is defined as the corporation's
average d e b t to equity ratio for 1981 to 1984.
The debt to equity ratio is chosen as a measure
of creditor stakeholder p o w e r because it cap-
tures the i m p o r t a n c e of creditors as stake-
holders relative to equity investors. DERATIO is
e x p e c t e d to have a direct relationship to the
level of c o r p o r a t e social disclosure.
Strategic posture variables. Hatten et al.
( 1 9 7 8 ) define corporate strategy as relating to
the goals and objectives of the firm regarding
the p r o d u c t s it offers, the markets it will serve,
and the e n v i r o n m e n t in w h i c h it will operate.
B o w m a n & Haire ( 1 9 7 5 ) discussed corporate
social responsibility from a strategic posture
perspective. Ullmann ( 1 9 8 5 ) discusses the role
of strategy in defining h o w a corporation may
respond to social demands. An active strategic
posture toward social demands is e x p e c t e d to
result in greater social responsibility activities. 3
T w o variables included in the social disclosure
model to test the relationship b e t w e e n strategic
posture toward social responsibility disclosure
and the level of corporate social responsibility
disclosures are discussed below.
Public affairs staff. Corporate public affairs
departments are developed to initiate and
m o n i t o r c o r p o r a t e policy regarding public
relations, community affairs, governmental affairs,
and issues m a n a g e m e n t (Marcus & Kaufman,
1988). Marx ( 1 9 9 0 ) and Blair ( 1 9 8 6 ) emphas-
ized the importance of integrating public affairs
m a n a g e m e n t into corporate strategic planning
decisions. Due to corporate public affairs
departments' success in helping maintain com-
3As a revtewer pointed out, an "active" strategic posture toward social responsibility could imply an overt pohcy of
minimizing corporate social activities. I use the term "acttve strategic posture" to define a corporate strategy m whtch the
corporation portrays a positive stance toward social responsibility actavities
603
petitive advantages, the public affairs function
has b e e n legitimized and corporate support
increased (Marcus & Kaufman, 1988). Public
affairs activities are designed to build long-term
rapport and goodwill with various stakeholders,
and to p r o t e c t or enhance revenues by control-
ling business and political risks.
Given h o w prior studies have defined the
mission of corporate public affairs departments,
it follows that corporations that assume an
active strategic posture toward social respon-
sibility activities would establish and support
a public affairs staff. The hypothesis that
corporations with relatively larger public affairs
departments will have higher levels of social
responsibility disclosure is tested through the
variable PUBAFF. PUBAFF represents the aver-
age size of the corporation's public affairs staff
during 1983-1984.
Philanthropic foundation. Corporate contri-
butions to charity are generally considered
social responsibility activities (Rosebush, 1987).
Navarro ( 1 9 8 8 ) developed a formal structural
model in which corporate contributions to
charity are also consistent with a profit maxim-
ization objective. Profit motives consistent with
charitable giving include: ( 1 ) p r o m o t i o n of the
firm's image in order to help insulate the firm
from unfavorable tax or regulatory policies; ( 2 )
educational support in order to increase the
long-run labor supply of skilled employees;
( 3 ) an increase in goodwill support by cus-
tomers; and ( 4 ) other promotional considera-
tions that may reduce operational and capital
costs (Navarro, 1988). The motives presented
above describe anticipated responses from key
stakeholders w h e n information concerning
corporate charitable contributions is disclosed.
Rosebush ( 1 9 8 7 ) argued that charitable
contributions are m o r e effective w h e n the
strategy for corporate giving is organized
and well executed. Corporate sponsored phil-
604
anthropic foundations are established for this
specific purpose. Because corporate charitable
giving can be considered a strategic tool for
managing stakeholders and organized giving
provides an effective method for monitoring
this activity, the existence of a corporate
sponsored charitable foundation is used as a
measure of corporate strategic posture towards
social responsibility disclosure. The indepen-
dent variable FOUND equals one if the firm
sponsors a foundation during 1 9 8 3 - 1 9 8 4 and is
expected to be directly related to a corpora-
tion's level of corporate social responsibility
disclosure.
E c o n o m i c p e r f o r m a n c e variables. Belkaoui
(1976), Ingram (1978), Mahapatra (1984),
McGuire et aL ( 1 9 8 8 ) and others have empiric-
ally tested the relationship between corporate
social disclosure and economic performance.
While some of the tests have controlled for firm
size, industry classification, or systematic risk,
the social disclosure/economic performance
association has not been investigated empirically
in a comprehensive social disclosure framework.
In this study, an accounting-based measure
(MGRROE) and a stock-market-based measure
(BETA) of economic performance are employed
to test the impact of prior economic performance
on a company's level of corporate social
responsibility disclosure.
Return on equity. Sustained growth in economic
returns to equity investors is a primary goal that
is c o m m o n to all corporate managers. Trends in
earnings-based measures of economic perform-
ance, such as return on equity, are frequently
used in evaluating the performance of corporate
officers. Given that in periods of low profitability
economic demands take priority over discre-
tionary social responsibility expenditures, satis-
factory financial performance has a definite
influence on the level of support top corporate
decision makers can commit to future social
responsibility activities (Ullmann, 1985). Thus,
stakeholder theory predicts a positive associa-
tion between accounting-based measures of
prior economic performance and corporate
R W ROBERTS
levels of social responsibility disclosure. The
average annual percentage change in a firm's
return on equity from 1981 through 1984
(MGRROE) is included in the social disclosure
model to test for this positive relationship.
Systematic risk. Systematic risk is defined as the
covariance between returns on a risky asset
(e.~ a corporation's c o m m o n stock) and market
portfolio, divided by the variance of the market
portfolio (Copeland & Weston, 1983). Corpo-
rations that have low measures of systematic
risk are expected to have higher levels of social
responsibility activities for at least two reasons.
First, corporations exhibiting low systematic
risk have a more stable pattern of stock market
returns. Given that economic considerations
influence corporate decision makers regarding
social responsibility activities, stable economic
performance should enhance a corporation's
ability to commit to involvement in social
responsibility endeavors. Second, because re-
search suggests that social responsibility activi-
ties may improve a firm's access to capital and
increase employee morale and productivity
(Moskowitz, 1972; McGuire et al., 1988),
market participants may view socially respon-
sible firms as better managed and, thus, less
risky. Disclosures of social responsibility activi-
ties would then provide information that the
market uses in establishing firm value.
For the reasons stated above, corporations
with low systematic risk are expected to have
higher levels of corporate social responsibility
disclosure. A measure of a firm's systematic risk
(BETA) is included in the estimation of the
social disclosure model. It is expected that
BETA is inversely related to SOCDIS.
Control variables. Results of prior studies
have found significant relationships between
company size, the age of a corporation, industry
classification, and social responsibility activities.
While no theory was forwarded to explain
these empirical associations, prior research
suggests that corporate size, industry classifica-
tion and corporate age are likely to act as
intervening variables and should be controlled
 SOCIALRESPONSIBILITYDISCLOSURE 605

for in empirical tests (Cochran & Wood, 1984;
Ullmann, 1985; C o w e n et al., 1987). In addi-
tion, arguments can be made that corporate age
and industry classification represent some aspect
of stakeholder power, strategic posture, and/or
e c o n o m i c performance.
Age. As a corporation matures, its reputation
and history of involvement in social responsibility
activities can b e c o m e entrenched. 4 Stakeholder
expectations regarding sponsorship and in-
volvement could make any drastic change in
corporate strategy very costly. Sponsorship
withdrawal could signal to stakeholders that the
corporation expects financial or managerial
disturbances. The age of each corporation in
1984 is included in the model through the
variable AGE and is expected to be directly
related to SOCDIS. 5
Industry classificatior~ Industry classifications
used in prior research may have captured some
systematic relation between broad industry
characteristics, such as intensity of competi-
tion, consumer visibility, or regulatory risk, and
social responsibility activities. Studies have
used samples from the metals, oil, chemical,
electronic computing, food processing, airline,
and numerous other industries in analyses of
corporate social disclosures either because of
data availability or because of a perception that
the particular industry faced unique social
pressures. In this study, as in prior studies, the
approach to controlling for possible industry
effects is rather a d hoc. Of the seven industries
included in the sample used in this study, the
automobile, airline, and oil industries have the
most intuitive appeal as industries with con-
sumer visibility, a high level of political risk, and
concentrated, intense competition. Thus, if a
sample c o m p a n y is identified with one of these
high profile industries, the variable INDEFF is
set equal to one. If a company belongs to the
food, health and personal products, hotel, or
appliance and household products industry,
INDEFF is set equal to zero. Corporations in
high profile industries are expected to have
higher levels of social responsibility disclosures.
Company size. Company size has been suggested
in several studies as a correlate of the level of
corporate social responsibility activity. These
studies posited that corporate size w o u l d be
related to social responsibility activities be-
cause larger companies are more likely to be
scrutinized by both the general public and
socially sensitive special interest groups. In
addition, larger companies ( 1 ) may have more
shareholders interested in corporate social
activity, and ( 2 ) are more likely to use formal
communication channels to relate results of
social endeavors to interested parties ( C o w e n
et al., 1987).
Although Ullmann ( 1 9 8 5 ) does not incorpo-
rate company size into his stakeholder frame-
work, variables used to represent stakeholder
p o w e r or strategic posture dimensions (e.g. size
of public affairs staff, dollars contributed to
corporate political action committees) may be
correlated with company size. To control for
possible corporate size effects, the variable SIZE
is included in the logistic regression. SIZE is
defined as the corporation's average revenues
during 1981-1984.
SAMPLE SELECTION AND DESCRIPTION
Companies used to estimate the social dis-
closure model are drawn from 130 major
corporations that were investigated in 1984,
1985 and 1986 by the Council on Economic

4 Navarro (1988) uses Texaco's sponsorshtp of the Metropolitan Opera broadcasts and AT & T's support of the pubhc
affairs program, the MacNeil--LehrerNews Hour, as examples of well-known corporate sponsorshtp

5A precise measure for the age of a corporation ts difficult due to the posstbthty of mergers, reorgamzations, and/or
signLtiCant changes in business activltmS. The Compustat measure supplies a conststent applicataon of an age calculation
method
606 R W. ROBERTS

Priorities (CEP). The CEP studies focus o n large
F o r t u n e 500 c o m p a n i e s because, in general,
t h e s e c o m p a n i e s are influential i n establishing
c o r p o r a t e t r e n d s i n t h e social r e s p o n s i b i l i t y
area. Seven industry categories w e r e represented:
( 1 ) the a u t o m o b i l e industry, ( 2 ) the food
industry, ( 3 ) t h e h e a l t h a n d p e r s o n a l care
industry, ( 4 ) the airline industry, ( 5 ) the oil
industry, ( 6 ) t h e h o t e l industry, a n d ( 7 ) the
a p p l i a n c e a n d h o u s e h o l d p r o d u c t s industry.
T h e results o f t h e i r s t u d y w e r e p u b l i s h e d in a
book entitled R a t i n g America's Corporate
C o n s c i e n c e ( 1 9 8 6 ) . Previous CEP r e p o r t s have
b e e n u s e d e x t e n s i v e l y i n social r e s p o n s i b i l i t y
r e s e a r c h (Spicer, 1978; C h e n & Metcalf, 1980;
Shane & Spicer, 1983). This s t u d y is the first to
use the 1986 CEP r e p o r t i n e v a l u a t i n g levels of
c o r p o r a t e social disclosure. As discussed pre-
viously, the CEP investigators rated t h e level
of c o r p o r a t e social r e s p o n s i b i l i t y disclosures
for each c o m p a n y i n c l u d e d i n t h e i r study. Data
for the d e p e n d e n t variable i n the social dis-
c l o s u r e m o d e l (SOCDIS) w e r e t a k e n from the
1986 CEP report.
I n a d d i t i o n to the i n f o r m a t i o n p r o v i d e d b y
the CEP, financial a n d o w n e r s h i p data w e r e
r e q u i r e d to test the social d i s c l o s u r e model.
Financial s t a t e m e n t i n f o r m a t i o n was t a k e n from
t h e 1981, 1982, 1983, a n d 1984 COMPUSTAT
files and used to calculate the variables DERATIO,
MGRROE, AGE, a n d SIZE. T h e m o n t h l y stock
p r i c e data n e c e s s a r y to c o m p u t e a m e a s u r e of

TABLE 2 Descriptive statistics for independent variables by level of social responstbihty disclosure
Part A: Continuous variables
Companies with poor Companies voth good Compantes with excellent
Independent Variable soctal disclosure soctal disclosure social disclosure
variables name (n = 26) (n = 14) (n = 40)
Mean S.D Mean S.D Mean S.D.
Percentage of ownership held PSH 17 488 26.943 11.659 16.403 9.417 16.588
by management and principal
shareholders m 1984
Contributions to corporate PAC 57,652 85,292 89,221 65,854 83,982 88,149
politmal action committee for
1981-1984 ($)
Average debt/equtty ratio for DERATIO 1.719 1 395 0.941 1 767 1.967 5 108
1981-1984
Number of pubhc affairs staff PUBAFF 8.731 10 332 14 143 8.465 14.188 12.642
members m 1984
Average growth m return on MGRROE --22.519 131 352 7918 20.920 27 835 111 032
equity for 1981--1984 (%)
Market model measure of BETA 0.860 0 338 0.715 0 299 0 693 0.293
systematic rtsk (beta) in 1984
Age of corporation from AGE 53.346 25.197 65.785 28.412 71 075 23 314
reception to 1984 (years)
Average revenues 1981-1984 SIZE 5500 4 9482 6 13,271.0 17,O75.4 10,479.4 19,665.4
(million $)
Part B: Indicator variables
Companies voth poor Compames with good Companies with excellent
Independent Vataable social disclosures social disclosures social disclosures
variables name (n = 26) (n =- 14) (n = 40)
Number (%) Number (%) Number (%)
Corporate sponsor of a FOUND 8 (31) 11 (79) 29 (73)
philanthropic foundation
High profile industry status INDEFF 11 (42) 8 (57) 20 (50)
 SOCIALRESPONSIBIUTYDISCLOSURE 607

TABLE 3 Pearson correlation coeflioents

SOCDIS PSH PAC DERATIO PUBAFF FOUND MGRROE BETA AGE INDEFF
PSH* - 0 172t
(O 12)
PAC 0 172 --0 226
(0 12) (0o4)
DERATIO 0037 0083 0086
(0.73) (045) (0.44)
PUBAFF 02O6 -O269 0356 -0.090
(006) (002) (0.01) (043)
FOUND 0361 -0031 0138 --0220 0.256
(001) (0.78) (0.22) (0o5) (002)
MGRROE 0203 0097 -0312 -0.105 -0036 0 161
(007) (0 38) (001) (035) (074) (0.15)
BETA -0231 0390 0036 0286 -0058 --0 176 --O.O64
(003) (0.01) (074) (001) (061) (0 11) (0.56)
AGE O 303 -O 020 - 0 029 - 0 184 0 163 0 216 0 033 -0.152
(001) (085) (079) (0.10) (0 14) (005) (0.76) (0 17)
INDEFF OO61 -0.003 0.012 - 0 108 - 0 190 --O 173 --0 041 -0.144 - 0 142
(0.59) (097) (091) (0.34) (009) (0 12) (072) (020) (0.21)
SIZE 0.120 -0.274 0.386 -0O89 0 727 0 156 --0 101 -0.155 0 177 - 0 104
(0.29) (001) (001) (043) (0.01) (0 17) (0.37) (0 17) (0.12) (0 36)
* See Table 1 for a complete description of the variables.
t The top number represents the degree of correlation and the bottom number represents the level of slgmficance

each firm's systematic risk (BETA) was t a k e n All bivariate c o r r e l a t i o n s b e t w e e n SOCDIS

from the COMPUSTAT files, also. T h e data for
t h e variable PSH w e r e g a t h e r e d f r o m each
c o m p a n y ' s 1984 p r o x y statements, and the 1986
CEP report c o n t a i n e d the information necessary
for t h e variables PAC a n d INDEFF I n f o r m a t i o n
for PUBAFF and FOUND c a m e from the National
Directory o f Corporate Public Affairs ( C l o s e &
Colgate, 1983, 1984). O f t h e 130 c o r p o r a t i o n s
profiled b y t h e CEP, 8 0 m e t the data r e q u i r e -
m e n t s o f the study. T w e n t y - s i x o f the c o m p a n i e s
i n c l u d e d i n t h e s a m p l e w e r e r a t e d b y the CEP
as h a v i n g p o o r social disclosure. F o u r t e e n of t h e
c o m p a n i e s r e c e i v e d g o o d social d i s c l o s u r e
ratings and 40 c o m p a n i e s w e r e rated as excellent.
T a b l e 2 p r e s e n t s the d e s c r i p t i v e statistics for
the i n d e p e n d e n t variables for each c a t e g o r y of
social disclosure. T a b l e 3 p r e s e n t s the bivariate
c o r r e l a t i o n s b e t w e e n the CEP e v a l u a t i o n of
c o r p o r a t e social d i s c l o s u r e a n d m e a s u r e s of
s t a k e h o l d e r p o w e r , strategic p o s t u r e t o w a r d
social r e s p o n s i b i l i t y activities, e c o n o m i c per-
f o r m a n c e , a n d c o n t r o l variables.
a n d the i n d e p e n d e n t variables possess the
e x p e c t e d sign. T h e strategic p o s t u r e variables
PUBAFF and FOUND, the e c o n o m i c performance
variables MGRROE a n d BETA, a n d the c o n t r o l
variable AGE are all significantly c o r r e l a t e d ( p
value < 0 . 1 0 ) w i t h the d e p e n d e n t variable.
C o r r e l a t i o n s b e t w e e n i n d e p e n d e n t variables
p r o v i d e n o i n d i c a t i o n that an u n a c c e p t a b l e
level of m u l t i c o l l i n e a r i t y is p r e s e n t i n t h e data.
Farrar & G l a u b e r ( 1 9 6 7 ) c o n c l u d e d that harm-
ful levels of m u l t i c o l l i n e a r i t y w e r e n o t p r e s e n t
u n t i l bivariate c o r r e l a t i o n s r e a c h e d 0.8 o r 0.9.
I n this s t u d y n o c o r r e l a t i o n s b e t w e e n i n d e p e n -
d e n t variables r e a c h this level, h o w e v e r , the
c o r r e l a t i o n b e t w e e n c o m p a n y size (SIZE) a n d
the n u m b e r of public affairs p e r s o n n e l (PUBAFF)
is 0.727. T o f u r t h e r test for p o t e n t i a l multi-
c o l l i n e a r i t y p r o b l e m s a n OLS r e g r e s s i o n was
u s e d to g e n e r a t e v a r i a n c e inflation factors for
the i n d e p e n d e n t variables i n the social dis-
c l o s u r e model. M a r q u a r d t ( 1 9 7 0 ) c o n c l u d e d
that m u l t i c o l l i n e a r i t y is a p o t e n t i a l p r o b l e m if a
6O8 R W. ROBERTS

TABLE 4 Logtsttc regression results for the soctal responmbfllty dtsclosure mode l
Dependent variable = ratmg of corporate social responsibility disclosures for 1 9 8 4 - 1 9 8 6
Independent Variable Expected Parameter Standard Cht-square
variable name sign estimate error stat~stm
Percentage of own ershtp held by PSH -- --0 013 O 015 0 74
m a n a g e m e n t and p n n c t p a l
shareholders for 1984
Cojntrlbutmns to corporate PAC + 0 058 0 033 3.02**
political actton c o m m i t t e e for
1981-1984
Average debt/equity ratio for DERATIO + 0.166 0 105 2 51"
1981-1984
Corporate p u b h c affatrs staff PUBAFF + 0.048 0 038 1 63
m e m b e r s m 1984
Corporate sponsor of a FOUND + 1 255 0 545 5 30***
philanthropic foundation
Average g r o w t h m r eturn on MGRROE + 0 007 0 004 3 41 **
equity for 1 9 8 1 - 1 9 8 4
Market mo del measure of BETA - --1 118 0 872 1 64*
systematic rtsk ( b e t a ) for 1984
Age of corporation since AGE + 0 030 0 O11 7 63***
inceptton as of 1984
High profile mdustry status INDEFF + 1 033 0 548 3 55**
Average rev enues 1 9 8 1 - 1 9 8 4 SIZE +/- - 0 413 0 330 1 56
bo n.a 0 931 2 613 0 13
bl n.a - 0 132 2 611 0 O0
Model chvsq uare = 34.29 w i t h 10 d f., stgnificant at less than the 0.001 level; R = 0 296
One-tailed tests ( e x c e p t for intercept terms): *** significant at 0 O1 level; ** stgntficant at 0.05 level, *stgntficant at 0 10
level

variance inflation factor exceeds 10.0. In this
analysis, the variance inflation factors for the
SIZE and PUBAFF variables were 2.33 and 2.36,
respectively. The OLS findings mitigate, to some
extent, multicollinearity concerns.
ANALYSIS OF THE RESULTS
Estimation o f the social disclosure m o d e l
The empirical model was estimated using
logistic regression and is significant at the 0.001
level with a Chi-square score statistic of 34.29.
The coefficient of correlation for the logistic
regression (R) is 0.296 and is interpreted in a
manner similar to that in OLS regression. The
estimation of the model is presented in Table 4.
As can be seen by analyzing Table 4, all three
stakeholder p o w e r variables (PSH, PAC, and
DERATIO) possess the expected signs. PAC is
significant at the 0.05 level and DERATIO at the
0.10 level. The strategic posture variables
(PUBAFF and FOUND) have the expected
positive relationships to levels of corporate
social disclosure, with PUBAFF significant at the
0.10 level and FOUND significant at the 0.01
level. MGRROE and BETA, the economic per-
formance variables, are significantly related to
SOCDIS at the 0.05 and O.10 level, respectively.
Of the model's three control variables, AGE and
IND have the expected positive relationship to
SOCDIS and are significant at the 0.01 and 0.05
level. MSALES possesses a negative sign and is
not significant.
 SOCIALRESPONSIBILITYDISCLOSURE
Discussion o f research findings
The results of the empirical tests are of
interest for several reasons. First, the significance
of the m o d e l provides evidence that stake-
holder theory is an appropriate foundation for
empirical analyses of corporate social dis-
closure and that factors other than e c o n o m i c
p e r f o r m a n c e are important in social respon-
sibility disclosure research. Second, the results
support the argument that current period levels
of social responsibility disclosure relate to prior
period measures of e c o n o m i c performance,
stakeholder power, and strategic posture to-
w a r d social responsibility activities. Also, the
significance of individual variables supports
arguments regarding relationships between social
disclosures and specific empirical measures of
Ullmann's constructs.
Given that prior research views corporate
political action c o m m i t t e e contributions as a
major part of corporate political strategy (Keim
& Zeithaml, 1986; Keim & Baysinger, 1988),
the significance of PAC suggests that corpora-
tions confronted with a high level of political
e x p o s u r e are m o r e likely to disclose social
responsibility activities. It suggests that social
responsibility disclosures and political action
c o m m i t t e e contributions may be aspects of an
overall corporate strategy for managing govern-
ment stakeholders. The significance of DERATIO
c o m p l e m e n t s the empirical findings of Barton
et aL (1989) regarding stakeholder considera-
tions in planning corporate financial policy. In
addition, it supports the contention that social
responsibility disclosures may be viewed b y
m a n a g e m e n t as a way to m e e t certain creditor
stakeholder expectations. The lack of significance
for the stockholder p o w e r variable PSH does
not support the proposition that widespread
stock ownership increases corporate incentives
to make social responsibility disclosures. The
finding that dispersion of stock ownership is not
significantly related to the level of social
disclosure may b e explained by limitations of
the PSH measure. O t h e r measures of dispersion
of stock ownership could p r o d u c e a different
outcome.
The significance of the strategic posture
609
variables representing corporate sponsorship of
a philanthropic foundation (FOUND) and the
size of the corporation's public affairs depart-
m e n t (PUBAFF) implies that an active posture
toward social responsibility leads to greater
levels of social disclosure. This finding supports
arguments forwarded in the fifth section that
w e r e based on Rosebush ( 1 9 8 7 ) and Navarro
(1988).
The results also indicate that corporations
exhibiting relatively strong e c o n o m i c per-
formance in prior periods, as measured by
growth in return on equity (MGRROE), are
m o r e likely to have high current levels of social
disclosure. This is consistent with Ullmann's
notion that acceptable levels of e c o n o m i c
performance are necessary before c o m p a n y
resources will be devoted to meeting social
demands. The significant, negative relationship
found b e t w e e n the level of corporate social
disclosure and systematic risk (BETA) provides
evidence that companies with less stable pat-
terns of stock market returns are relatively less
likely to c o m m i t resources to social activities.
The results of this study concerning the
relationship b e t w e e n e c o n o m i c performance,
systematic risk, and social responsibility dis-
closure also support the empirical findings of
McGuire et aL (1988).
Suggestions that corporate age and industry
classification may act as intervening variables in
empirical tests regarding social responsibility
activities are supported by the results pre-
sented in this study (Ullmann, 1985; Cochran &
Wood, 1984). These findings may be explained
in part by the arguments that age and industry
status are macro-level proxies for aspects of
stakeholder power, strategic posture toward
social responsibility, or e c o n o m i c performance.
Additional w o r k is needed to improve our
understanding of the empirical associations
b e t w e e n corporate age and industry classifica-
tion and levels of social disclosure.
CONCLUSIONS AND LIMITATIONS
The p u r p o s e of this study was to empirically
test a stakeholder theory analysis of the deter-
610 1L W ROBERTS

m i n a n t s o f c o r p o r a t e social r e s p o n s i b i l i t y dis- levels o f c o r p o r a t e social d i s c l o s u r e c o u l d

closure. The empirical results support a stakeholder
t h e o r y a p p r o a c h to analyzing c o r p o r a t e social
d e c i s i o n s a n d a r e c o n s i s t e n t w i t h t h e frame-
work developed by Ullmann (1985).
T h e r e s u l t s o f this s t u d y p r o v i d e s t r o n g
evidence that applications of stakeholder
t h e o r y t o e m p i r i c a l c o r p o r a t e social r e s p o n -
sibility r e s e a r c h c a n m o v e f u t u r e r e s e a r c h in
this a r e a b e y o n d a d h o c analyses r e l a t i n g
c o r p o r a t e social responsibility actions to s e l e c t e d
corporate characteristics. Stakeholder theory
f o r m s a t h e o r e t i c a l f o u n d a t i o n in w h i c h t o
analyze t h e i m p a c t o f p r i o r e c o n o m i c per-
f o r m a n c e , s t r a t e g i c p o s t u r e t o w a r d social re-
s p o u s i b i l i t y activities, a n d t h e i n t e n s i t y o f
s t a k e h o l d e r p o w e r o n levels o f c o r p o r a t e social
d i s c l o s u r e . T h e e m p i r i c a l results m a y e n h a n c e
t h e d e s c r i p t i v e p o w e r o f f u t u r e m o d e l s de-
s i g n e d t o p r e d i c t o r e x p l a i n c o r p o r a t e social
r e s p o n s i b i l i t y a c t i o n s b y p r o v i d i n g insights i n t o
social, political, a n d e c o n o m i c e x t e r n a l pres-
s u r e s that p r o b a b l y i n f l u e n c e c o r p o r a t e social
r e s p o n s i b i l i t y decisions.
Several n e w d i r e c t i o n s for f u t u r e r e s e a r c h are
s u g g e s t e d b y t h e findings o f this study. First, t h e
influence o f o t h e r t y p e s o f s t a k e h o l d e r s o n
b e tested. In a d d i t i o n to s h a r e h o l d e r s , c r e d i t o r s ,
a n d legislative b o d i e s , F r e e m a n ( 1 9 8 4 ) in-
c l u d e d c u s t o m e r s , suppliers, a n d s p e c i a l in-
t e r e s t g r o u p s as c o r p o r a t e s t a k e h o l d e r s . This
s t u d y c o u l d also b e r e p l i c a t e d u s i n g d i r e c t
m e a s u r e s o f c o r p o r a t e social p e r f o r m a n c e as
t h e d e p e n d e n t variable. Finally, t h e s t a k e h o l d e r
m o d e l c o u l d b e a d a p t e d to i n v e s t i g a t e specific
t y p e s o f social d i s c l o s u r e a l o n g t h e lines
s u g g e s t e d b y C o w e n et al. ( 1 9 8 7 ) .
T h e findings o f this s t u d y a r e s u b j e c t to
s e v e r a l limitations. W h i l e e x t e n s i v e efforts
w e r e m a d e t o d e v e l o p a c c u r a t e p r o x i e s for
the stakeholder power, strategic posture,
and e c o n o m i c p e r f o r m a n c e d i m e n s i o n s o f t h e
social d i s c l o s u r e m o d e l , d a t a c o n s t r a i n t s m a y
limit t h e c o n s t r u c t v a l i d i t y o f t h e s e l e c t e d
variables. Likewise, t h e e m p i r i c a l tests w e r e
p e r f o r m e d o n large, U.S.-based c o r p o r a t i o n s
a n d m a y limit t h e g e n e r a l i z a b i l i t y o f t h e
findings. Finally, g i v e n t h e e x c e e d i n g l y c o m -
plex nature of the business environment, there
are i n h e r e n t limits in t h e ability o f p o s i t i v e
e m p i r i c a l r e s e a r c h to c a p t u r e all o f t h e d i m e n -
sions that influence c o r p o r a t e social r e s p o n -
sibility d e c i s i o n making.

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