Ashfaq 2018

Social Responsibility Journal
Revisiting the relationship between corporate governance and corporate social and environmental
disclosure practices in Pakistan
Khurram Ashfaq, Zhang Rui,
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Khurram Ashfaq, Zhang Rui, (2018) "Revisiting the relationship between corporate governance and corporate social and
environmental disclosure practices in Pakistan", Social Responsibility Journal, https://doi.org/10.1108/SRJ-01-2017-0001
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Revisiting the relationship between
corporate governance and corporate
social and environmental disclosure
practices in Pakistan
Khurram Ashfaq and Zhang Rui
Abstract Khurram Ashfaq and

Purpose – This study aims to revisit the corporate social and environmental disclosure (CSED) practices Zhang Rui are both based
of Pakistani companies using unique CSED index which measures the CSED through three dimensions at the School of
such as theme, news type and nature of information. In addition, the effect of board composition, Accountancy, Jiangxi
ownership structure and corporate characteristics on CSED was tested through performing multiple University of Finance and
regression analysis.
Economics, Nanchang,
Design/methodology/approach – For this purpose, data were collected from annual reports of top 120 China.
companies’ selected based on market capitalization for three years period of 2013-2015.
Findings – Based on the descriptive statistics, the results found that overall level of CSED in Pakistan is
moderate. However considering CSED using three dimensions, the results demonstrate that highest level
of disclosure on the basis of theme is reported in terms of human resource category as compared to other
categories where, as in terms of news type and nature of information, analysis shows that companies in
Pakistan feel resistant to disclose bad news, monetary and non-monetary aspect of CSED information.
Using multiple regression analysis, the results found that all the variables have hypothesized relationship
with CSED except government and institutional ownership. The variables such as chairman as non-
executive director, board diversity, appointment of independent director as audit committee chairman,
CSR committee, industry type and firm size are found to have significant influence on the CSED practices
in Pakistan.
Research limitations/implications – These results imply that the CSED phenomenon is still lacking
behind. Under individual categories of CSED, descriptive statistics found that environment is still not a
matter of concern for companies operating in Pakistan. In addition, the results demonstrate that CSED
practices are only performed by very few companies in Pakistan based on standard deviation. In
addition, appointment of non-executive and independent director as chairman of board and audit
committee and representation of foreigners on the board should be encouraged in order to improve
CSED practices in Pakistan.
Originality/value – This study contributes to the existing literature in developing country like Pakistan
through using unique CSED index and also making comparison of financial versus non-financial sectors.
The author suggests that regulatory authorities in Pakistan must take reasonable steps to make the
company’s operations environment-friendly.
Keywords Ownership structure, Content analysis, Corporate social responsibility,
Audit committee chairman, Social responsibility committee
Paper type Research paper
1. Introduction
Received 1 January 2017
Corporate social responsibility (CSR) is related with the concept of how firms interact with Revised 13 August 2017
13 January 2018
the environment in which it operates. So in wider terms, it can be described as performing Accepted 21 February 2018
DOI 10.1108/SRJ-01-2017-0001 © Emerald Publishing Limited, ISSN 1747-1117 j SOCIAL RESPONSIBILITY JOURNAL j
actions which are good for the society. Considering this phenomenon, companies believe
that they can only achieve long-term success through returning something back to
the society in which these operate. This argument made by companies is based on the
legitimacy theory. This theory emphasizes that companies must respond in accordance
with expectations of society. The concept of corporate social and environmental disclosure
(CSED) has evolved in parallel with the development of the concept of CSR (Frederick,
1994). According to Baskin (2006), different pressure groups have come up together to
force companies to engage in social and environmental sustainability of their operations. So
to tackle this concern, CSED contains a number of disclosures which include human
resource issues, training and development, employees health and safety, consumers- and
products-related information, environmental friendly activities and society welfare programs
(Willis, 2003).
Many researchers have tried to investigate the type and extent of CSED practices in annual
reports, while others have investigated how different variables affected variations in CSED.
Much of research on CSED has been conducted in the context of developed countries. The
results of these studies have shown that there is an increasing trend in the number of
companies engaged in CSED over the period of time (Guthrie and Parker, 1990; Gray et al.,
1995; Mathews, 1997; Adams et al., 1998; Adams, 2002). Contrary to this, the trend of
CSED is very low in the context of developing countries. According to Imam (2000), the
CSED level in Bangladesh is very low. As far as Pakistan is concerned, Sajjad and Eweje
(2014) have also reported that CSED is also relatively underdeveloped in Pakistan.
Corporate governance can be considered as a mechanism to balance the interest of
company economic and social objectives and thus balancing shareholder’s interest with
community. Different corporate governance factors such as existence of non-executive
directors, foreign ownership, government ownership and CSR committee can perform a
significant role in safeguarding stakeholder’s interest during the decision-making process.
Considering the CSR reporting requirements internationally, it has been found that these
requirements vary from voluntary to mandatory based on country level. In some countries
such as Sweden, Norway, The Netherlands, France, Australia and Denmark, there are
mandatory requirements for companies regarding reporting of CSR activities. However in
countries where CSR reporting is voluntary in nature, companies are still under pressure to
ensure that they have been performing their operations as responsible citizens and also
reporting on CSR activities. An international survey on CSR reporting was conducted by
KPMG in 2013 which has found the highest growth in the percentage of companies in India
regarding CSR reporting from 20 per cent in 2011 to 73 per cent in 2013. In addition to this,
results of survey also have found that the trend to report CSR activities has also increased
dramatically in the Asia-Pacific region from 49 per cent in 2011 to 71 per cent in 2013.
Taking into account CSR developments in India, Section 135 of Companies Act 2013 makes
it mandatory for certain class of companies to spend 2 per cent of their average profit of
past three preceding years on CSR activities. Further the Companies Act also makes it
mandatory for companies to constitute a CSR committee composed of three or more
directors. Thus through this new legislation, India has become the first country which
requires companies to reveal CSR spending through a statutory provision. Likewise in
Pakistan, a very first initiative was taken by Securities and Exchange Commission of
Pakistan (SECP) through issuing a general order on CSR in 2009 which required public
listed companies to disclose CSR activities in descriptive and monetary terms at each year-
end in the director’ report to shareholders. However this order did not specify about the
format of description and the level of CSR details; rather, this matter has been left at the
discretion of the companies. The lack of guidelines on these elements made it difficult for
stakeholders to assess the company’s position regarding priority areas of CSR, evaluation
of resources utilization and implementation effects.
j SOCIAL RESPONSIBILITY JOURNAL j

To increase accountability of companies, SECP has issued voluntary guidelines on CSR
through exercising its powers under Section 506B of Companies Ordinance 1984. These
guidelines are totally voluntary in nature, providing guiding information to all companies
regarding the internal mechanism of CSR. This mechanism includes governance of CSR,
implementation structure, resources allocation for CSR and finally CSR assurance through
external experts as well. Further these guidelines also require companies to prepare a
separate CSR report which may include details relating to CSR policy, objectives, activities,
impact, risks, opportunities and challenges. The policy relating to CSR must be endorsed
by the board of directors, thus reflecting their commitment to CSR and must also be
incorporated into vision, code of ethics and strategy of company. These guidelines also
require companies to execute this process through the existing CSR committee or through
the formation of a new CSR committee led by a CSR expert. The standard terms of
reference of this CSR committee has also been specified by SECP as part of CSR
guidelines 2013.
Regarding guidelines on allocation of resources for CSR activities, companies are expected
to develop a specific criteria in this respect based on proportion of profit and that criteria
must be endorsed duly by the board and also forms part of CSR policy. To increase
reliability of CSR reporting in annual reports, companies may appoint an external party as
expert to obtain assurance that whether the CSR report presented by the management
provides reasonable presentation of performance. Further this assurance report by external
expert may form part of CSR report as well.
The main objective of this study is to examine CSED practices of companies listed on
Pakistan Stock Exchange (PSX) following CSR guidelines by SECP using data sample of
120 companies based on market capitalization from 19 different sectors over the periods
from 2013-2015. In addition to this, this study also aims to investigate the impact of different
corporate governance variables, i.e. CEO duality, non-executive director as chairman, CSR
committee, audit committee chairman, government, institutional and foreign ownership,
foreign nationals on board and corporate characteristics, i.e. firm size, foreign listing,
foreign activity and industry type on CSED practices of sample companies. The study fills
gaps in the literature through the following ways, i.e. this is the first comprehensive study in
Pakistan on CSR reporting conducted following CSR guidelines which has used number of
sentences to measure CSED in annual reports and this technique is more reliable than
techniques used previously. Second this study has measured CSED using three
dimensions such as theme, news type and nature of information. Third we have used wider
data sample of 120 top companies from 19 different sectors including financial sector
companies such as commercial banks, insurance companies and investment banks. So
through this way, CSED practices of non-financial sector companies will be compared with
financial sector companies which are not yet tested in the context of Pakistan. Finally this
study will contribute to the literature through investigating the impact of CEO duality, non-
executive director as chairman, audit committee chairman, CSR committee, government
ownership, foreign ownership, foreign listing and foreign activity on CSED practices which
have not been yet tested in the context of Pakistan.
2. Literature review
This study aims to evaluate the CSED practices of Pakistani companies and determine how
different corporate governance and firm characteristics affect the extent of CSED practices
of these companies. So this section presents the relevant literature of developing countries
regarding how the extent of CSED was affected from corporate governance and firm
characteristics. According to Culpan and Trussel (2005), stakeholder theory is based on the
assumption that companies should be responsible to all stakeholders owing to moral
reasons. Further reason for supporting stakeholder theory is that companies need the
support from all stakeholders for being successful and surviving in the long term. Further

Sternberg (1997) stated that companies should be accountable to not only shareholders
but also the wider category of stakeholders. So in this respect, the objective of the
management should be to balance the competing interest of all stakeholders including
achieving company’s objectives. Freeman (1984) defined the term stakeholders as anyone
who can affect or be affected from the company. Linking the stakeholder theory with
disclosure practices, Gray et al. (1996) suggested that CSED can be used by companies
for managing stakeholder’s perception to obtain their support and approval. So in this way,
management of companies has motivation for disclosing CSED to powerful stakeholders to
satisfy that these have been operating according to expectations.
Legitimacy theory also supports the arguments made by stakeholder’s theory which
states that companies must operate through means of social contract (Hossain and
Taylor, 2007). According to this contract, companies must conduct socially desirable
actions for obtaining approval by the society (Guthrie and Parker, 1989). The concept of
corporate governance can be related to the legitimacy concept because companies
must legitimize its actions in order to get acceptance in the society. In countries like
Pakistan having a weak enforcement system, the role of corporate governance becomes
more critical to ensure that the companies have been performing its operations taking
into account the interest of wide category of stakeholders. As mentioned in introduction

section, CSR guidelines of SECP also recognize the importance of board of directors in
order to implement these guidelines.
Considering other countries regarding the relevant literature on CSED, Haniffa and Cooke
(2005) investigated the effect of culture and different corporate governance factors on the
extent of CSED through selecting data sample of 139 Malaysian firms covering two periods
of 1996 and 2002. The author found significant relationship between corporate governance
attributes such as board dominated by executive directors and Malay directors, foreign
ownership and chairman with cross directorship and CSED. Further corporate
characteristics such as firm size, profitability, foreign listing and industry type were found to
be significantly affecting CSED. Another study was conducted by Said et al. (2009) using
data sample of 150 companies in 2006. The study found government ownership and audit
committee (AC) to have positive significant effect on CSED in Malaysia.
As regarding the Bangladesh economy, Sobhani et al. (2009) analyzed CSED practices of
100 listed companies using the period of 2006/2007. Based on descriptive statistics, the
author found improvement in the level of CSED over the past ten years, however, still
lagging behind in the context of global perspective. The highest involvement of companies
was seen in human resource disclosure, followed by community disclosure, consumers’
disclosure and environmental issues. Following this, an empirical study was conducted by
Khan (2010) to investigate CSED practices in commercial banks of Bangladesh for 2007
and 2008. The author was able to find a significant positive impact of foreign ownership,
profitability, firm size and independent directors on CSED. However no significant
relationship was found in respect of women directors. In Indonesia, Veronica Siregar and
Bachtiar (2010) investigated the effect of firm size, profitability, leverage, board size and
foreign ownership on CSED using data of 87 listed companies in 2003. The study found only
board size and firm size as having a positive significant relationship with CSED.
Oh et al. (2011) investigated how ownership structure in Korea affected CSED using data
sample of 118 large firms in 2006. As regarding institutional and foreign ownership,
significant positive relationship was found, but in the case of director’s shareholdings,
relationship was significantly negative. Hussainey et al. (2011), using data sample of 111
Egyptian companies for the period 2005-2010, examined the effect of profitability, liquidity,
leverage, firm size and ownership structure on CSED. The study found that level of CSED in
Egypt was moderate as only 66 per cent companies engaged in disclosing mean 10-50
CSR statements. In addition, only profitability was found to be significantly positively
affecting CSED. Contrary to the results of this study, Soliman et al. (2013) found a positive

significant effect of institutional and foreign ownership on CSED using data sample of 42
highly active Egyptian listed firms. While a negative relationship was found in the case of
directors’ shareholdings.
In the context of Arab countries, Bukair and Rahman (2015) conducted a study using data
sample of 53 Islamic banks from six Gulf Cooperation Council countries for 2008. The
authors found that average disclosed sentences in respect of CSED are 83.3. In addition, all
governance variables such as board size, independent directors, CEO duality were found
insignificant. However in case of firm size, relationship was positively significant. Following
this study, Das et al. (2015) used all 29 listed banks of Bangladesh in order to investigate
CSED practices for the periods from 2007-2011. As per results of study, there was an
increase of 17.85 per cent in mean CSED over the periods from 2007 to 2011. In addition to
this, authors found that firm size, board size, independent directors and ownership structure
were positively significantly associated with CSED. However in case of profitability and firm
age, negative relationship was found.
There are also some studies so far conducted in Pakistan that have tried to explain the
CSED phenomenon. The very first notable study on CSED was conducted by Mian (2010)
to investigate CSED practices of three fertilizer companies. Following this study, Sharif
and Rashid (2014) investigated CSED practices of financial sector companies through
choosing a sample of 22 commercial banks for the period from 2005 to 2010. The results
of study were that the level of CSED in commercial banks was not low. In addition to this,
the authors investigated that how board composition such as proportion of non-executive
directors and foreign directors and corporate attributes such as firm size, gearing and
profitability affected the extent of CSED of commercial banks. The study found that the
proportion of non-executive directors has a positive effect on CSED of commercial
banks. Majeed et al. (2015) also investigated the effect of corporate governance on
CSED of KSE 100 index companies in Pakistan through taking data sample from 2007 to
2011. For this purpose, corporate governance variables such as board size, proportion
of independent directors, female directors, foreign nationals, ownership concentration
and institutional ownership variables were tested along with control variables such as
firm size and profitability. The authors found the level of CSED as moderate, and a
significant positive effect of board size, firm size, institutional and concentrated
ownership on CSED was found. While negative relationship was found for female and
foreign directors on board.
The very recent study on CSED has been conducted by Lone et al. (2016) with twofold
purposes. First was to check whether there is an increase in CSED practices in Pakistan
following the issuance of CSR guidelines in 2013 by SECP. Secondly, effect of industry
type, board size, independent directors, female directors, firm size, leverage and
profitability on CSED was tested by collecting data from 50 listed companies comprising
eight sectors for the period from 2010 to 2014. The study found that there is significant
increase in mean CSED following CSR guidelines in 2013 by SECP. In addition, authors
found industry type, board size, independent directors, female directors and firm size to be
positively related to CSED.
The common limitation in all these four studies is regarding the technique used to record
CSED, as all these studies have recorded CSED by 0 or 1 technique except the study by
Majeed et al. (2015) which has used the word count approach. The major problem with this
0 or 1 technique is that it fails to record the extent of CSED because it does not differentiate
between companies which disclosed only one sentence on CSED as compared to other
company disclosing 40 sentences in annual reports. The word count approach is also
subject to problem of deciding whether this particular word is relevant to CSED or not. As
Hackston and Milne (1996) stated, using sentences to record CSED is more reliable
measure than words.

With respect to the limitation of individual studies, Mian’s (2010) study is only descriptive in
nature which covers only three fertilizers companies. The study by Sharif and Rashid (2014)
has limitation of using a small data sample of 22 commercial banks and also considering
only financial sector companies. Although, Majeed et al. (2015) have used a wider data
sample of KSE 100 index companies but not considered all important corporate
governance variables. Finally the study by Lone et al. (2016) is also subject to limitation of
using a small data sample of only 50 companies covering nine commercial banks from the
financial sector companies which is not a representative sample from the financial sector. In
addition to this, they did not investigate all aspects of CSR reporting guidelines such as
CSR committee, assurance from external experts, allocation of resources for CSR and
reporting of CSR activities in descriptive and monetary terms.
Our study is unique in the sense that first it covers major limitation of all previous studies
regarding method selection for recording CSED as we have used a number of sentences
for measuring CSED in annual reports. In addition, we have measured CSED on the basis of
three dimensions such as theme, news type and nature of information which will give a
clearer picture of the CSED phenomenon in Pakistan. Second this study has used wider
data sample of 120 companies listed on PSX from 19 sectors based on market
capitalization, and this method is consistent with the methodology proposed by Guthrie and
Parker (1990). So far there is no comprehensive study yet conducted in Pakistan covering
this wider data sample of both financial and non-financial sectors at the same time following
CSR guidelines by SECP. Thus this study will contribute through comparing CSED practices
of non-financial sector companies with the financial sector. Finally this study will also
contribute toward literature through investigating the effect of CSR committee, CEO duality,
non-executive director (NED) as chairman, audit committee chairman, government
ownership, foreign ownership, foreign listing and foreign activity on CSED which has not
been yet tested in the context of Pakistan.
3. Hypothesis development
3.1 Non-executive director as chairman
Non-executive directors are to be considered as an important mechanism to balance the
interest of shareholders and different stakeholders. In today global environment,
company prestige and social responsibility is also a major concern for many companies
(Zahra and Stanton, 1988). In this context, non-executive directors play the role of
mediators between owners and managers for resolving conflicts if any (Fama and
Jensen, 1983). In addition, if the chairman is the non-executive director, then his role can
be more influential in this respect. Further SECP guidelines on CSR reporting also
recognize the role of board of directors as being more critical for influencing CSR
reporting. Thus it can be hypothesized that non-executive director as chairman can
maintain the balance between shareholder’s interest and social values. Keeping this
argument in mind, first hypothesis of study is:
H1. Existence of chairman as non-executive director is positively associated with CSED
practices in Pakistan.
3.2 CEO duality

According to the codes of best corporate governance, there should be segregation of
duties. Elzahar and Hussainey (2012) stated that CEO duality can negatively affect a
company’s policies regarding disclosure practices. Supporting this argument, Haniffa
and Cooke (2002), Abdel-Fattah (2008) and Said et al. (2009) also found a negative
effect of role duality on disclosure. So based on this, we also developed a second
hypothesis as follows:

H2. CEO duality is negatively associated with CSED practices in Pakistan.
3.3 Board diversity

The representation of a foreign national on board is a practice being exercised very
frequently these days. The inclusion of foreign national on board adds to the experience
and also promotes innovation and heterogeneity. Thus representation of a foreign
national on board can positively affect the extent of CSED practices (Haniffa and Cooke,
2005). Contrary to this, Branco and Rodrigues (2008) found that foreign directors have no
relationship with CSED practices. So based on this conflicting relationship, our
hypothesis is:
H3. Presence of a foreign national on board is associated with CSED practices in
Pakistan.
3.4 Foreign ownership

Shareholders’ demand regarding disclosure in annual reports may be affected by their

nationality. Like in case of foreign shareholders, this demand may be greater if they hold
greater proportion of ordinary shares (Schipper, 1981; Craswell and Taylor, 1992; Bradbury,
1991). Considering this argument, foreign shareholdings can influence company policy
regarding CSR engagement (Chapple and Moon, 2005). So following this, our fourth
hypothesis is:
H4. The proportion of shares held by foreigners is positively associated with CSED
3.5 Institutional ownership

The literature regarding the influence of institutional ownership on disclosure presents two
conflicting views. One view, which is based on efficient monitoring hypothesis, claims that
institutional investors can effectively perform monitoring role over management decisions
including disclosure-related decision because of extensive experience and resources
(Abdel-Fattah, 2008; Aburaya, 2012). The other view states that institutional investors may
have short-term interest in company and thus prioritize only their own interest. So this
phenomenon may motivate institutional investors to be less interested in CSED practices.
Following these two conflicting arguments, our hypothesis is:
H5. There is relationship between institutional ownership and CSED practices in
Pakistan.
3.6 Government ownership

The government is also an important member in Pakistan Stock Market, as it owns
shareholdings in many private entities as well. The ownership by the government actually
represents indirect holdings by general public. So in this case, it may be expected that
companies with government ownership tend to engage in more socially responsible
activities to make their existence legitimate. Mohd Ghazali (2007) conducted a study in
Malaysia and found that government ownership has significant influence on the extent of
CSED practices. Following this, our sixth hypothesis is:
H6. The proportion of shares held by government is positively associated with CSED

3.7 Audit committee chairman
The establishment of audit committee can be used as a medium to assure the quality of
financial reporting (Fama and Jensen, 1983). The literature also supports the view that
effective audit committee can improve company disclosure quality. Obviously effectiveness
of audit committee depends on the number of factors such as frequency of meetings, audit
committee independence, financial experts on audit committee, etc. However
independence of audit committee chairman can be one of the crucial factors when
evaluating audit committee effectiveness. As appointment of independent director as an
audit committee chairman will influence the overall functioning of the audit committee. So
we used this variable to measure audit committee effectiveness. Thus based on this, we
hypothesize that:
H7. The appointment of an independent director as audit committee chairman is
positively associated with CSED practices in Pakistan.
3.8 CSR committee

The codes of corporate governance state that there should be some form of board
committees such as risk committee, shareholders committee and audit committee, etc.
which should be responsible for dealing with issues mentioned in their duties. Likewise this,
some companies in developed countries have the practice of establishing a CSR committee
to govern its social and environmental activities. Considering the Asian region, India has
made it mandatory for certain class of companies to establish a separate CSR committee.
The guidelines on CSR by SECP also require companies in Pakistan to establish a separate
CSR committee led by a CSR expert. Further as per codes of corporate governance,
establishing a separate committee shows top management commitment to perform this task
effectively. Thus our hypothesis is:
H8. The establishment of CSR committee is positively associated with CSED practices.
3.9 Foreign listing

The company listed in a foreign country may face different pressure as compared to
company listed only nationally. In many developing countries, there are no formal consumer
and interest groups which can force a company to engage in socially responsible activities
as compared to developed countries. Thus on this argument, it can be hypothesized that
companies listed in developed countries will be more socially responsible. Haniffa and
Cooke (2005) found a significant impact of foreign listing on CSED practices in Malaysia. So
our hypothesis is:
H9. The listing on foreign stock exchange is positively associated with CSED practices in
Pakistan.
3.10 Industry type

Industry nature can be identified as a potential determinant to affect CSED practices.
Dierkes and Preston (1977) stated that CSED practices are likely to be different across
industries on the basis of whether these modify the environment. Kelly (1981) found that
primary and secondary industries tend to engage in more CSED practices as compared to
tertiary industries. In addition, Haniffa and Cooke (2005) also found a significant relationship
between industry type and CSED practices. So our hypothesis is:
H10. There is relationship between type of industry and CSED practices in Pakistan.

3.11 Foreign activity
Companies may engage in selling its product either locally or at internationally. The
customers from developed countries may demand increased disclosure as compared to
local customers. Haniffa and Cooke (2002) found that companies engaged in foreign
activities tend to disclose more voluntary information disclosure in annual reports. Thus
through this way, it can be inferred that foreign customers can demand company to perform
its activities in more socially responsible way. So our hypothesis is:
H11. There is positive relationship between foreign activities and CSED practices in
Pakistan.
3.12 Firm size

The size of firm can be an important variable to influence CSED practices in Pakistan. The
reason for this is that larger companies have enough resources to engage in socially
responsible activities. In addition to this, larger companies have much more visibility and
more pressure from stakeholders groups. Thus we hypothesize that:
H12. The size of firm is positively associated with CSED practices in Pakistan.
4. Research methodology
4.1 Data and sample
The purpose of current study is to investigate corporate social and environmental reporting
behavior in a developing country like Pakistan from 2013 to 2015. So for this purpose, all
companies listed on Pakistan Stock Exchange (PSX) have been considered. The total
number of companies listed on PSX at this point in time was 579. However out of these
companies, a total of 206 companies have been excluded owing to non-availability of
annual reports, making the total number of sample as 373. The final sample for analysis has
also been scrutinized based on two criteria, e.g. companies must not have borne loss
during the three-year period and data regarding all desired variables must be available in
annual reports. So considering these two factors, a sample of 120 top companies listed on
PSX was selected based on market capitalization. The sample companies were divided
among 19 sectors as per PSX. So in some sectors, there were fewer than six companies
which were too small. Considering this issue, sectors having fewer than six companies were
added to a new sector called “Miscellaneous” sector. So after implementing this criterion,
19 sectors were confined to 9 sectors. Table I reports segregation of sample companies
across nine sectors along with their percentages.
Table I Sample companies classiﬁcation

No. Industry type Total sample Sample (%)
1 Banks 17 14
2 Chemical and pharmaceutical 16 13
3 Cement 15 13
4 Automobile 11 9
5 Oil, gas and refinery 10 8
6 Textile 7 6
7 Insurance 6 5
8 Fertilizer 6 5
9 Miscellaneous 32 27
Total 120 100

4.2 Dependent variable-CSED index
To measure CSED, content analysis technique has been used in this study which was
widely used in many previous social responsibility studies (Abbott and Monsen, 1979;
Guthrie and Mathews, 1985; Guthrie and Parker, 1990). The most common measure used in
content analysis is based on recording each element of CSED which company has reported
related to particular item. This technique is very common, and all previous studies in
Pakistan have used this technique to record CSED. But this approach to record CSED
contains certain limitations as it fails to report CSED in a disaggregated manner and also do
not differentiate between companies which has reported one sentence related to CSED in
comparison with another companies which have reported 40 sentences in their annual
report. Both these companies will be treated equally under this technique. To overcome this
problem, we have measured CSED through a number of sentences which is a more
sophisticated approach and is able to differentiate among companies. This technique is
also preferable over other techniques for measuring disclosure such as word count
approach and number of pages. The word count approach is subject to problem of
interpreting whether this particular word is related to CSED or not. While, the number of
pages as the measurement unit varies from author to author owing to size of paper and
printing and also column size. In addition, Hackston and Milne (1996) also reported that
measuring disclosure through sentences is more reliable than using words.
The CSED index has been adapted from the study by Sobhani et al. (2009) in Bangladesh
who have measured CSED by its theme, news type and nature of information. We think that
as this study also relates with a developing country like Pakistan, so this index is more
reasonable to adopt in this context. According to this index, CSED will be recorded under
three dimensions such as on the basis of theme, news type and nature of information. As
per theme dimension, CSED practices have been divided into five categories, namely,
human resource disclosure, consumer and product disclosure, community disclosure,
environment disclosure and general disclosure. Each of these five themes contains six
items, and thus, these in total make 30 CSED items. Considering CSED by news type, CSR
information will be categorized as good news, bad news or neutral from stakeholder’s point
of view. Finally CSED information will be categorized as monetary, non-monetary or
declarative based on nature of information.
4.3 Independent variables

This study uses combination of corporate governance variables along with some corporate
characteristics to investigate their impact on CSED in Pakistan. The corporate governance
variables are composed of variables related to board composition such as CEO duality,
non-executive director as chairman, foreign national on board, audit committee chairman
and CSR committee and ownership structure variables such as government ownership,
foreign ownership and institutional ownership. Whereas corporate characteristics include
variables such as firm size, foreign listing, foreign activity and industry type. Table II shows
details about these variables along with their measurement basis.
5. Data analysis
5.1 Descriptive statistics of CSED
CSED has been considered using five categories, namely, human resource disclosure,
product and consumer disclosure, environmental disclosure, community disclosure and
general disclosure. Table III reports results of descriptive statistics of CSED. These results
have been explained in terms of number of companies making at least one disclosure and
number of disclosed sentences along with their corresponding percentages. In addition,
this information has been categorized in terms of not only theme but also evidence and
news. So far previous studies in Pakistan have only considered incidence rate of CSED and

Table II Variable and measurement
Symbols Definition Measurement
CSED Corporate social and CSED index measured using number of sentences reported in annual reports
environmental disclosure
CEO_Duality CEO duality A dummy variable which equals 1 if one director is both CEO and chairman and
0 otherwise
NED_chairman Non-executive director as A dummy variable which equals 1 if non-executive director is chairman of board
chairman or 0 otherwise
Board_diversity Foreign national on board A dummy variable which equals 1 if foreign national is member of board or 0
otherwise
CSR_comm CSR committee A dummy variable if company has CSR committee or 0 otherwise
For_own Foreign ownership Percentage of ordinary shared held by foreigners
Inst_own Institutional ownership Percentage of ordinary shares held by financial institutional
Gov_own Government ownership Percentage of ordinary shares held by government institutions
AC_chairman Audit committee chairman A dummy variable if independent director is chairman of audit committee or 0
otherwise
Firm_size Firm size A variable measured through taking log of total assets
For_listing Foreign listing A dummy variable which equals 1 if firm is also listed on foreign stock exchange
or 0 otherwise
For_activity Foreign activity A dummy variable which equals 1 if firm is engaged in foreign activities or 0
otherwise
Ind_type Industry type A dummy variable which equals 1 if the firm is related to industries such cement,
chemical and pharmaceutical, oil, gas and refinery, automobile, textile, banks,
fertilizer and miscellaneous. So total of eight dummies will be created
Table III Descriptive statistics of CSED of sample companies

Disclosing companies Disclosing companies Disclosed sentences as
(making at least one as a percentage of total No. of disclosed a percentage of total
disclosure) sample sentences disclosed sentences
Theme 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015
Human resource disclosure 118 118 118 98 98 98 3,193 2,900 3,022 31.16 28.63 28.27
Consumer and product disclosure 86 83 84 72 69 70 1,896 2,176 2,293 18.5 21.48 21.45
Community disclosure 78 108 108 65 90 90 2,058 1,986 2,088 20.09 19.61 19.53
Environmental disclosure 77 84 87 64 70 73 1,393 1,383 1,491 13.59 13.65 13.96
General disclosure 116 115 115 97 96 96 1,707 1,684 1,795 16.66 16.63 16.79
Total 1,0247 1,0129 1,0689 100% 100% 100%
Evidence
Monetary 114 115 114 95 96 95 606 568 621 5.91 5.71 5.81
Non-monetary 81 85 83 68 71 69 746 662 682 7.28 6.54 6.38
Declarative 120 119 119 100 99 99 8,895 8,899 9,386 86.81 87.85 87.81
Total 10,247 10,129 10,689 100% 100% 100%
News
Good 120 120 120 100 100 100 7,576 7,493 7,881 73.93 73.97 73.73
Bad 16 11 14 13 9 12 35 24 36 0.35 0.24 0.34
Neutral 109 108 109 91 90 91 2,636 2,612 2,772 25.72 25.79 25.93
Total 10,247 10,129 10,689 100% 100% 100%
not presented CSED information in a disaggregated manner on the basis of theme,

evidence and news. The problem with the incidence rate approach of recording CSED is
that it may lead to misleading results because it fails to differentiate among companies
which have reported one sentence on CSED in annual reports in comparison with another
company which disclosed 40 sentences on CSED.

The second column of Table III presents information about the number of companies which
have reported at least one sentence about each theme of CSED along with news type and
evidence. Considering second column, the results report that 118 (98 per cent) companies
have reported at least one sentence about human resource disclosure consistently over the
three-year period followed by general disclosure by 116 (97 per cent) in 2013 and by 115
(96 per cent) in 2014 and 2015. The third element which has been most frequently reported
by companies in Pakistan is consumer and product disclosure, ranging from 69 per cent to
72 per cent over a three-year period. The frequency of companies in terms of community
disclosure comes fourth as company’s disclosure percentage is 65 per cent in 2013
followed by 90 per cent in 2014 and 2015. The environment disclosure comes last, as only
64 per cent companies have reported at least one sentence about this theme in 2013
followed by 70 per cent and 73 per cent in 2014 and 2015, respectively.
Likewise third and fourth columns of table report total number of sentences reported by
sample companies in the three-year period along with its corresponding percentages. So
human resource disclosure again ranks number one consistently over the three-year period
as 31.16 per cent, 28.63 per cent and 28.27 per cent sentences have been reported in
2013, 2014 and 2015, respectively, with respect to this theme followed by community
disclosure (20.09 per cent), consumer and product disclosure (18.5 per cent), general
disclosure (16.66 per cent) and environment disclosure (13.59 per cent). However in 2014,
sample companies have reported 21.48 per cent sentences with respect to consumer and
product being ranked second followed by community disclosure (19.61 per cent), general
disclosure (16.63 per cent) and environment disclosure (13.65 per cent). These rankings of
2014 are also consistent in year 2015 as the disclosed sentences’ percentage is 28.27 per
cent in terms of human resource disclosure followed by consumer and product disclosure
(21.45 per cent), community disclosure (19.53 per cent), general disclosure (16.79 per
cent) and environment disclosure (13.96 per cent).
These results infer that human resource element has been considered as the most
important stakeholder by companies in Pakistan as compared to other stakeholders. These
results match with the study conducted by Sobhani et al. (2009) in developing country like
Bangladesh and also with developed countries like USA and UK. The next element ranked
second is consumer and product disclosure which indicates that like developed countries,
the consumer is well aware of market situation and thus should be carefully accounted for
by companies in Pakistan. The community has been reported as the third most important
stakeholder based on the number of sentences disclosed in 2014 and 2015, respectively.
Also considering number of companies disclosing at least one sentence about community
disclosure, there is a 15 per cent increase in the number of companies disclosing
community disclosure from 2013 to 2014. This increase clearly indicates that a greater
number of companies have started considering the community as an important stakeholder
with the passage of time. Finally environmental disclosure comes last on the basis of
disclosed sentences percentage consistently over three years period which means that
environmental compliance is not yet a matter of concern for companies operating in
Pakistan. Considering disclosure trend over the three-year period, there is almost stability in
disclosed sentences percentage for all themes except human resource disclosure where
marginal decrease of 2.53 per cent occurred which is not so significant.
On the basis of evidence dimension, results report that 100 per cent companies tend to
disclose declarative nature of information followed by 68 per cent companies as non-
monetary information and 95 per cent companies report monetary information in 2013. This
company’s percentage has been almost consistent in terms of each evidence dimension in
2014 and 2015. This means that almost all companies tend to report CSED through
declarative statements in annual reports which are quite good in the context of the
developing country. Similarly based on the percentage of disclosed sentences, declarative
statements percentage is 86.81, 87.85 and 87.81 per cent followed by non-monetary as

7.28, 6.54 and 6.38 per cent and monetary as 5.91, 5.71 and 5.81 per cent in 2013, 2014
and 2015, respectively. This means that a greater part of CSED that forms part of
declarative statements and percentages regarding monetary and non-monetary information
has not been satisfactory, as it is very low consistently over three years period in
comparison with developed and developing countries. So companies in Pakistan have
been resistant in reporting monetary and non-monetary part of CSED which is quite
shocking.
Finally on the basis of news type, companies have reported almost 74 per cent sentences
as good news followed by 26 per cent as neutral news and 0.35, 0.24 and 0.34 per cent as
bad news in 2013, 2014 and 2015, respectively. Thus it can be inferred that most part of
CSED forms part of good news followed by neutral news and bad news as being least. It is
important to mention that authors have carefully analyzed each particular sentence from
stakeholder’s point of view to determine whether that particular sentence has been related
to good news, bad news or neutral. The sample companies have been also resistant in
reporting bad news relating to CSR to stakeholders. This bad news percentage is quite
similar with the percentage reported by Sobhani et al. (2009) regarding Bangladesh which
is 0.37 per cent. However this bad news percentage is quite low in the context of developed
countries based on study by Hackston and Milne (1996). Comparing these results with
previous CSED studies in Pakistan is very difficult because the study by Sharif and Rashid
(2014) used index of 0 or 1 to report whether companies disclose CSED in annual reports.
Likewise Majeed et al. (2015) and Lone et al. (2016) have also used this approach to record
CSR information relating to each company. So in this context, these studies have failed to
report CSED in disaggregated manner and thus cannot be compared with this study.
5.2 Descriptive statistics of human resource disclosure

Tables IV and V report descriptive statistics of category wise and overall human resource
disclosure of sample companies for a three-year period. The average mean HR disclosure
by sample companies in 2013, 2014 and 2015 are 30, 25 and 26 sentences, respectively.
While considering this mean HR disclosure by industry type, fertilizer sector ranks number
one in 2013, as it has disclosed 90 mean sentences but it decreased to 35 sentences in
2014 and 2015, respectively which is quite surprising. The textile and cement sectors rank
on the lowest side in terms of mean HR disclosure in all three years consecutively. However
banking and insurance sectors mean HR disclosure are also not satisfactory in the sense
that the HR element is considered the most important in the financial sector as compared to
the non-financial sector. The average disclosed sentences by these sectors were less than
mean disclosed HR disclosure of overall sample companies. Considering the individual
category of HR disclosure, Table IV reports that only 23 (19 per cent) companies in the
Table IV Category-wise human resource disclosure

Training and Health and Employee Corporate
Sector (n) Appreciation development safety welfare directory Others
Years (2000) 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15
Automobile (11) 4 5 5 7 7 7 8 8 8 11 11 11 0 0 1 7 7 8
Cement (15) 1 1 1 3 6 4 8 9 10 14 14 14 1 1 1 7 8 10
Chemical and Pharmaceuticals (16) 3 4 2 10 9 11 10 10 11 16 16 16 1 0 1 11 11 10
Miscellaneous (32) 5 6 5 18 18 18 22 23 23 31 31 31 2 1 2 19 19 20
Fertilizer (6) 2 0 0 5 5 5 5 5 5 6 6 6 1 1 1 6 6 6
Oil, gas and refinery (10) 2 2 3 8 8 8 10 10 10 10 10 10 1 1 1 9 9 9
Textile (7) 0 0 0 2 2 2 6 5 6 7 7 7 0 0 0 4 4 5
Insurance (6) 2 2 2 6 6 6 4 4 5 5 6 6 1 1 1 5 5 6
Banking (17) 4 3 4 10 9 10 5 3 5 12 10 12 1 2 1 13 12 13
Total (120) 23 23 22 69 70 71 78 77 83 112 111 113 8 7 9 81 81 87

Table V Descriptive statistics of human resource disclosure
Mean disclosed sentences Range SD
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 24.36 25.27 26.18 71 71 71 24.08 23.52 24.1

2 Cement 15 11.86 13.13 14.2 66 66 65 17.94 17.58 17.45
3 Chemical and Pharmaceuticals 16 37.25 35.37 36.18 230 237 243 60.7 59.35 61.21
4 Miscellaneous 32 23.93 21.78 22.74 124 68 71 29.81 21.65 22.17
5 Fertilizer 6 89.83 35.5 35.5 273 71 71 98.41 23.72 23.72
6 Oil, gas and refinery 10 40.6 45.3 46.6 77 115 115 23.25 33.25 33
7 Textile 7 13.28 12.71 12.71 40 40 40 14.68 14.97 14.97
8 Insurance 6 19.5 20.16 23.33 38 37 31 12.91 12.86 10.4
9 Banking 17 13.52 16.82 17.76 49 80 68 13.5 22.59 20.34
Total (n) 120 30.46 25.11 26.13 107.55 87.22 86.11 32.81 25.5 26.26
sample have appreciated their employees in annual report consistently over a three-year
period and this phenomena is even poor across all sectors companies. So like developed
countries, “employee appreciation” culture is still lagging behind. The information related to
“training and development” category has been reported by almost 58 per cent sample
companies in the three-year period, while under the fertilizer and oil and gas sectors, more
than 80 per cent companies have reported about training and development in annual
reports. The 65 per cent companies tend to disclose some information about “employee
health and safety” in the annual report followed by 93 per cent companies about “employee
welfare” which is the highest percentage among all categories of HR disclosure. The
disclosure of “corporate directory” in Pakistan is very poor, as only 7.5 per cent companies
have disclosed information about this item.
5.3 Descriptive statistics of consumer and product disclosure

As per Tables VI and VII, consumer and product disclosure are not as good as HR
disclosure, as mean sentences disclosed for consumer and product disclosure are 16 in
2013 followed by 18 and 19 sentences in 2014 and 2015, respectively. Considering sector-
wise consumer and product disclosure, banking sector ranks number one consistently over
the three-year period. Under individual categories of consumer and product disclosure,
“consumer relation” and “product information” disclosure ranked number one consistently
over the three-year period. However “environment-friendly” disclosure has least percentage
Table VI Category-wise consumer and product disclosure

Consumer Product Product Environment-
Sector (n) relation Appreciation information quality friendly Others
Years (2000) 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15
Automobile (11) 5 5 6 1 1 1 1 1 2 6 6 6 3 3 4 4 4 4
Cement (15) 4 3 4 1 0 1 3 3 2 6 4 4 0 0 0 2 2 2
Chemical and
Pharmaceuticals (16) 7 8 7 0 0 1 13 12 13 8 10 11 3 4 4 3 3 3
Miscellaneous (32) 15 16 17 1 1 1 15 15 15 14 13 13 5 4 5 7 6 6
Fertilizer (6) 5 3 3 1 0 0 4 5 5 2 3 3 0 0 0 0 0 0
Textile (7) 2 2 2 0 0 0 3 3 3 3 3 3 0 0 0 0 0 0
Insurance (6) 5 5 5 1 1 1 5 5 5 2 2 2 0 0 0 2 2 3
Banking (17) 9 10 11 0 0 2 10 12 12 5 6 6 1 3 0 11 13 11
Total (120) 58 58 61 5 3 7 58 60 62 50 52 54 13 15 15 30 31 30

Table VII Descriptive statistics of consumer and product disclosure
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 17.81 17.81 20 71 71 71 26.13 26.13 25.95

2 Cement 15 3 3.33 2.86 23 23 23 5.89 6.55 6.04
3 Chemical and Pharmaceuticals 16 22 26.62 28.25 104 104 104 24.77 29.63 27.68
4 Miscellaneous 32 13.47 13.9 13.93 63 62 59 17.8 17.75 17.08
5 Fertilizer 6 20 26.66 27 37 48 48 17.73 17.42 17.34
6 Oil, gas and refinery 10 17 17.3 21.8 64 65 69 23.19 23.61 24.68
7 Textile 7 8.85 9 9 39 38 38 14.35 14.08 14.08
8 Insurance 6 17.66 17.83 20.16 46 46 49 15.98 16 16.7
9 Banking 17 24.29 32.7 33.41 138 164 168 33.47 39.86 42.12
Total (n) 120 16 18.35 19.6 65 69 69.89 19.92 21.22 21.29
of companies making such disclosure which is quite surprising. The minimum percentage
of consumer and product disclosure across all categories is in cement and textile sectors
over the three-year period. Finally there is no trend among sample companies regarding
disclosure of “consumer appreciation” and “environment friendly” information based on
minimum company’s percentage.
5.4 Descriptive statistics of community disclosure

According to Table IX, mean sentences of sample companies in terms of community
disclosure are 18 in 2013 followed by 16 in 2014 and 2015. In terms of sector-wise
community disclosure, the fertilizer sector ranks number one consistently over the three-
year period. The reason for greater involvement in community programs by fertilizer sector
is that this sector falls under environment-sensitive industries. Surprisingly the banking
sector company’s involvement in community programs is also quite surprising as mean
disclosed sentences under the banking sector is greater than sample companies mean
disclosed sentences. Using results of Table VIII for individual categories of community
disclosure, “donation” comes first followed by “others” and “sponsorship” while “poverty
alleviation” comes last consistently over the three-year period. So there is a greater trend in
Pakistan to support the community either through donation or sponsorship as a company’s
percentage is quite satisfactory in this respect. The sample company’s contribution to
“develop women” has an increasing trend over the three-year period, although the
individual sector’s percentage is quite low (Table IX).
Table VIII Category-wise community disclosure

Poverty Women
Sector (n) Donation Sponsorship alleviation development Sports Others
Years (2000) 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15
Automobile (11) 10 10 10 4 5 6 0 0 1 0 0 0 1 1 1 6 6 7
Cement (15) 9 9 9 5 6 7 0 0 0 2 2 4 2 2 2 10 10 12
Chemical and Pharmaceuticals (16) 10 11 11 7 8 6 1 1 1 2 2 2 0 1 0 9 10 9
Miscellaneous (32) 22 24 26 15 14 15 2 2 2 7 8 11 1 3 3 22 24 23
Fertilizer (6) 6 6 6 4 2 4 2 1 2 2 2 2 1 1 1 4 5 5
Textile (7) 3 4 4 1 1 1 0 0 0 2 2 2 0 0 0 1 1 1
Insurance (6) 4 4 4 1 1 2 1 1 2 0 0 0 3 2 2 5 5 5
Banking (17) 16 17 17 10 11 11 4 7 7 4 4 5 6 8 8 12 15 14
Total (n) 88 93 95 51 52 57 11 13 16 22 24 30 16 20 19 78 85 85

Table IX Descriptive statistics of community disclosure
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 18.18 18.9 21 71 71 71 24.49 23.74 23.86

2 Cement 15 10.46 12.4 13.67 58 61 58 14.61 15.11 14.58
3 Chemical and pharmaceuticals 16 12.93 11.18 10.43 70 67 69 21.58 16.37 17.26
4 Miscellaneous 32 17 15.34 16.32 96 63 64 24.13 15.21 15.87
5 Fertilizer 6 53.67 26.67 27.83 172 47 47 60.66 20.3 19.18
6 Oil, gas and refinery 10 17.6 19.8 20.7 39 53 61 14.6 16.82 18.69
7 Textile 7 4.14 4.43 4.57 20 20 20 7.17 7.09 7.11
8 Insurance 6 5.5 6.33 7.66 10 15 18 3.62 5.32 6.22
9 Banking 17 22.88 29.11 25.62 90 104 61 22.92 24.33 17.51
Total (n) 120 18.04 16.01 16.42 69.55 55.66 52.11 21.53 16.03 15.58
5.5 Descriptive statistics of environment disclosure

As per Table XI, mean sentences disclosed for environment by sample companies are 13 in
2013 and 2015 followed by 12 in 2014, which is the lowest mean value across all theme of
CSED in all the three years. Further there is no such increasing trend of mean disclosure for
environment category based on sample companies and also across all sectors. It means
that environment element is the least concern for sample companies in Pakistan as part of
their CSR strategy. This situation is very common in developing countries where
environmental regulations are not very strict. Looking into individual categories of
environment disclosure, Table X reports that again very few companies are engaged in all
categories of environment as compared to other theme’s categories. The highest number of
companies are 48, 54 and 55 in the three-year period which have disclosed “environmental
policy” or other statements by top management under “others category”. Following “others
category,” “protective measures category” comes second followed by “compliance
category” in all three years. The category of “waste recycling” and “tree plantation” comes
last which means that waste recycling is not considered as a matter of concern for sample
companies in Pakistan. Finally companies in Pakistan do not consider themselves as
important elements of society to protect environment through tree plantation (Table XI).
5.6 Descriptive statistics of general disclosure

The final category of general disclosure includes all those items of CSED which cannot be
considered as part of all previous themes. As per Table XIII, average reported sentences
Table X Category-wise environmental disclosure

Pollution Protective Waste
Sector (n) Compliance control measures recycling Tree plantation Others
Years (2000) 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15
Automobile (11) 3 3 3 3 3 3 6 6 7 3 3 4 6 7 6 5 5 5
Cement (15) 4 3 4 3 4 3 5 4 6 2 4 4 3 4 8 7 11 12
Chemical and pharmaceuticals (16) 5 6 6 4 4 5 6 6 6 7 7 7 4 2 4 6 5 5
Miscellaneous (32) 10 12 11 11 8 8 12 15 14 6 6 6 7 9 10 13 14 13
Fertilizer (6) 4 4 4 0 2 2 5 4 4 4 3 3 4 2 2 3 1 1
Textile (7) 2 2 2 0 1 1 1 2 2 1 2 2 1 2 2 3 4 4
Insurance (6) 0 0 0 0 0 0 3 3 4 0 0 0 0 0 0 0 0 0
Banking (17) 0 0 0 3 3 3 2 3 4 0 0 0 0 1 1 4 6 7
Total (n) 32 34 34 28 29 29 49 51 55 26 28 30 26 28 35 48 54 55

Table XI Descriptive statistics of environmental disclosure
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 23.9 24.63 26.54 127 127 127 39.54 39.27 38.9
2 Cement 15 7.53 8.73 11.6 62 62 74 15.82 15.86 18.54
3 Chemical and pharmaceuticals 16 15.44 16 19.18 86 87 106 28.11 28.44 32.45
4 Miscellaneous 32 10.72 11.68 10.58 77 64 39 17.16 14.81 11
5 Fertilizer 6 37.33 24 23.66 138 61 61 50.97 24.89 24.55
7 Textile 7 4 6 7.28 22 22 27 8.14 9.64 11.85
8 Insurance 6 2.66 2.66 3.83 9 9 10 3.56 3.56 3.81
9 Banking 17 1.64 1.64 2.87 10 9 16 3.26 2.78 5.04
Total (n) 120 12.92 11.93 13.15 60.77 50.77 52.88 19.23 16.13 16.84
under this category by sample companies are 14 in the three-year period. Analyzing results
of individual categories of this theme is quite interesting. According to Table XII, more than
80 per cent companies have reported CSR as part of their vision and also reported “CSR as
separate title” over the three-year period. It means that majority of companies claim CSR as
part of their long-term strategy. These results are very much positive in the context of a
developing country like Pakistan. Almost 50 per cent of sample companies have reported
different CSR pictures to explain their involvement in different CSR activities which is the
most convenient way for stakeholders to understand company’s engagement in CSR
activities. The final category of “CSR award dimension” reports that 25 per cent companies
have disclosed different CSR award presented to them by different national and
international organizations over the three-year period (Table XIII).
5.7 Descriptive statistics of CSED by industry type

Tables XIV and XV report descriptive statistics of mean disclosed sentences related to
CSED and mean CSED index along with range and standard deviation overall and by
industry type. As per descriptive results of Table XIV, mean disclosed sentences disclosed
by sample companies are 91 in 2013 followed by 85 and 90 sentences in 2014 and 2015,
respectively. Further based on range and standard deviation, there is almost stability in
average disclosed sentences related to CSED in annual reports by sample companies.
However when considering these mean disclosed sentences by industry type, the highest
mean disclosed sentences are 228 which are to be disclosed by sample companies from
the fertilizer sector in 2013. However quite surprisingly, there is a decrease of 93 sentences
in the mean disclosure value of CSED related to fertilizer sector in 2014. So except the
Table XII Category-wise general disclosure

Sector (n) CSR in vision CSR as title CSR theme CSR pictorial CSR awards Others
Years (2000) 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15 13 14 15
Automobile (11) 11 10 10 7 8 8 6 7 7 7 8 8 2 2 3 3 3 3
Cement (15) 11 11 11 10 10 9 5 4 6 9 9 10 3 3 4 6 6 8
Chemical and pharmaceuticals (16) 12 12 12 12 12 12 9 9 9 10 10 10 7 6 6 9 8 8
Miscellaneous (32) 26 24 25 23 23 22 17 17 17 18 18 17 6 6 7 16 16 14
Fertilizer (6) 5 5 5 4 4 5 3 4 5 5 4 4 3 3 3 4 5 5
Textile (7) 6 6 6 3 3 3 3 3 3 0 0 0 0 0 0 3 3 3
Insurance (6) 4 4 4 5 5 5 3 3 3 2 2 3 5 5 4 6 6 6
Banking (17) 13 11 12 17 17 17 14 12 9 14 9 9 1 1 1 15 15 16
Total (n) 95 90 92 91 92 91 69 68 68 72 67 68 30 29 31 70 70 71

Table XIII Descriptive statistics of general disclosure
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 15.63 15.45 16.36 51 52 52 15.18 14.6 15.73

2 Cement 15 9.4 9.73 12.53 34 21 29 8.86 6.76 9.6
4 Miscellaneous 32 12.34 11.71 12.53 61 57 72 12.96 12.38 15.87
5 Fertilizer 6 27.5 22.83 23.16 40 51 51 13.63 18.39 18.47
7 Textile 7 4 4.28 4.28 11 11 11 3.87 3.77 3.77
8 Insurance 6 9.83 9.83 10.66 15 15 15 6.21 6.21 5.75
9 Banking 17 21.11 21.41 21.35 64 43 43 15.41 14.04 14.12
Total (n) 120 14.3 13.94 14.75 38.55 36.44 39 10.74 10.92 11.78
Table XIV Descriptive statistics of CSED by industry type


S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 99.9 102 110 384 387 387 123.7 122 122.7
2 Cement 15 42.27 47 54.8 225 215 231 58.41 55.82 58.88
3 Chemical and pharmaceuticals 16 104 106 112.5 460 456 469 123.97 114.56 120.3
4 Miscellaneous 32 77.5 74 76 369 273 213 84.48 66.85 63.7
5 Fertilizer 6 228 135 137 643 242 235 222.7 87.79 86.56
6 Oil, gas and refinery 10 100.7 108 115 128 164 159 50 55.6 53.36
7 Textile 7 34 36 37.85 94 102 111 40.64 43.56 45.86
8 Insurance 6 55 56.8 65.66 78 80 72 27.61 27 23.48
9 Banking 17 83 101.7 101 290 339 349 69.73 78.73 83.12
Total (n) 120 91.6 85.17 89.97 296.77 250.88 247.33 89.02 72.43 73.10
Table XV Descriptive statistics of mean CSED index by industry type

Mean CSED index Range SD
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 0.56 0.58 0.61 0.8 0.8 0.90 0.29 0.30 0.33
2 Cement 15 0.46 0.48 0.52 0.7 0.7 0.70 0.20 0.21 0.21
3 Chemical and pharmaceuticals 16 0.57 0.58 0.57 0.93 0.97 0.97 0.26 0.26 0.27
4 Miscellaneous 32 0.54 0.56 0.56 0.83 0.83 0.80 0.22 0.22 0.22
5 Fertilizer 6 0.71 0.67 0.69 0.67 0.53 0.40 0.25 0.22 0.19
6 Oil, gas and refinery 10 0.68 0.68 0.71 0.4 0.37 0.40 0.13 0.13 0.12
7 Textile 7 0.39 0.42 0.42 0.63 0.63 0.63 0.23 0.24 0.24
8 Insurance 6 0.58 0.58 0.63 0.27 0.30 0.23 0.11 0.11 0.09
9 Banking 17 0.56 0.57 0.59 0.77 0.77 0.77 0.19 0.20 0.20
Total (n) 120 0.56 0.57 0.59 0.67 0.65 0.64 0.21 0.21 0.21
fertilizer sector, there is an almost increasing trend of mean sentences of CSED in all
sectors. The lowest reported mean sentences are disclosed by companies from the textile
sector as being 34 in 2013 followed by 36 and 38 sentences in 2014 and 2015, respectively.
The banking sector ranks fifth out of nine sectors over the three-year period which is also
quite surprising. While considering Table XV, mean CSED index by sample companies is

0.56 in 2013 followed by 0.57 and 0.59 in 2014 and 2015, respectively. This value indicates
that sample companies in Pakistan tend to disclose consistently almost 56 per cent CSED
items in annual reports over the three-year period. However across industries, the lowest
percentage of CSED items disclosed by textile sector in 2013 is 39 per cent followed by 42
per cent in 2014 and 2015 as well. While the highest percentage of CSED items disclosed
consistently over three years period is from fertilizer companies.
Based on range and standard deviation value in each year, there is wider variation in mean
sentences related to CSED in all three years within each sector companies and also among
all sectors. This phenomenon indicates that only some sample companies in each sector
tend to disclose much more CSED as compared to other companies in that sector. So it can
be inferred that industry type is one of the most important factor to explain variation among
companies regarding CSED in Pakistan but other reasons for variation of CSED within
sector companies also need to be investigated which will be tested in next empirical
section.
5.8 Descriptive statistics of CSED based on news type

Considering CSED by news type, disclosed sentences can be categorized as good news,
bad news or neutral from stakeholder’s point of views. In this respect, each year, mean
CSED are divided into good news, bad news or neutral. So out of 92 mean sentences of
CSR in 2013, sample companies have reported 68 (74 per cent) sentences as good news
for stakeholders, less than 1 per cent as bad news and 24 (26 per cent) sentences as
neutral. Thus all sample companies in Pakistan are resistant in reporting bad news related
to CSR in annual report, while majority of CSED forms part of good news along with some
reasonable percentage of neutral news which are useless for stakeholders. Only fertilizer
companies have reported 2.5 mean sentences as bad news in annual reports in only 2013
followed by 0 sentences in 2014 and 2015 (Tables XVI-XVIII).
5.9 Descriptive statistics of CSED based on nature of information

Finally Tables XIX-XXI report CSED on the basis of nature of information that whether
reported CSR sentence is monetary, non-monetary or declarative in nature. So like results of
news type, there is also almost stability in mean disclosed sentences in all three categories,
i.e. monetary, non-monetary and declarative, over the three-year period. Considering 2013,
more than 86 per cent mean disclosed sentences are declarative in nature in comparison
with only 7.6 per cent as non-monetary and 5.43 per cent as monetary. So there is very less
trend of reporting monetary and non-monetary information in Pakistan consistently over the
three-year period. Considering this phenomenon across industries, fertilizer companies
Table XVI Descriptive statistics based on type of news (good news)

S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 77.81 79 86 283 286 286 93 91 92.86

2 Cement 15 32 36 42 165 157 170 42.48 41 43.7
3 Chemical and pharmaceuticals 16 76 75 80 371 373 390 100 92.88 99.8
4 Miscellaneous 32 58 55 56 270 201 159 65 48.83 46
5 Fertilizer 6 168 100 101 474 193 189 165 73.4 72.87
6 Oil, gas and refinery 10 74 80 85 101 144 139 36 43 40.83
7 Textile 7 23 24 26 60 74 83 25.73 29.4 31.86
8 Insurance 6 42 43 51 52 54 47 19.9 19.3 16.3
9 Banking 17 60 75 72 213 279 251 54.16 64.52 61
Total (n) 120 67.86 63 66.55 221 195.66 190.4 66.8 55.92 56.13

Table XVII Descriptive statistics based on type of news (bad news)
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 0.27 0.27 0.36 2 2 3 0.65 0.65 0.92

2 Cement 15 0.067 0.067 0.067 1 1 1 0.26 0.26 0.26
4 Miscellaneous 32 0.187 0.15 0.258 2 3 3 0.59 0.63 0.72
5 Fertilizer 6 2.5 0 0 14 0 0 5.65 0 0
7 Textile 7 0 0 0 0 0 0 0 0 0
8 Insurance 6 0 9 0 0 0 0 0 0 0
9 Banking 17 0.23 0.176 0.50 1 2 5 0.44 0.53 1.41
Total (n) 120 0.42 1.17 0.23 2.67 1.89 2.44 0.97 0.50 0.67
Table XVIII Descriptive statistics based on type of news (neutral news)

S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 22 23 23 100 100 100 30.84 30.6 30.46

2 Cement 15 10 11 13 60 58 51 16.25 15.71 16.6
3 Chemical and pharmaceuticals 16 28 31 32 90 84 80 25.88 25.4 24.54
4 Miscellaneous 32 19 19 20 98 73 66 21.98 19.32 19.2
5 Fertilizer 6 58 35 36 155 49 46 53.2 16.42 15.6
6 Oil, gas and refinery 10 26 27 30 58 60 61 18.15 18.77 18.54
7 Textile 7 12 12 12 38 38 39 15.22 14.96 15.26
8 Insurance 6 14 14 14 26 26 25 9 8.91 8.57
9 Banking 17 23 27 29 78 60 98 18.74 17.58 24.19
Total (n) 120 23.55 22.11 23.22 78.11 60.89 62.89 23.25 18.63 19.22
Table XIX Descriptive statistics based on nature of information (monetary news)

S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 4 4 4 8 8 8 2.32 2.34 2.34

2 Cement 15 2 3 3 4 7 14 1.04 1.6 3.18
3 Chemical and pharmaceuticals 16 4 3 3 12 12 12 3.34 2.9 2.91
4 Miscellaneous 32 4 3 3.03 33 10 10 6.08 2.69 2.6
5 Fertilizer 6 13 8 8 29 11 11 10.7 4.45 4.62
6 Oil, gas and refinery 10 5 5 5 10 8 8 3.1 2.74 2.74
7 Textile 7 2 2 2 2 3 3 0.76 1.07 1.07
8 Insurance 6 3 3 3 4 4 4 1.67 1.67 1.63
9 Banking 17 11 12 12 60 55 49 14.88 15 12.88
Total (n) 120 5.33 4.78 4.78 18 13.11 13.22 4.88 3.83 3.77
have reported the highest percentage of monetary and non-monetary information as 5.7 per
cent and 13 per cent in 2013, respectively, but there is a decreasing trend of reporting this
information in subsequent years. So sample company’s practices in terms of reporting
monetary and non-monetary information are quite disappointing in comparison with
developed and developing countries.

Table XX Descriptive statistics based on nature of information (non-monetary news)
S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 10 11 11 40 40 40 15.2 15.26 15.21

2 Cement 15 0.93 1.2 7 5 5 7 1.39 1.47 2.6
3 Chemical and pharmaceuticals 16 6 6.7 7.75 46 56 69 12.12 14.24 17.28
4 Miscellaneous 32 6 4.4 4.06 72 47 27 13.91 8.46 5.6
5 Fertilizer 6 30 13.33 13.33 136 46 46 52.37 16.93 16.93
6 Oil, gas and refinery 10 5 5.8 6.3 11 11 11 3.79 3.32 3.27
7 Textile 7 1 1.42 1.43 5 5 5 2.03 2.44 2.44
8 Insurance 6 2 2 2 3 3 3 1.17 1.17 1.21
9 Banking 17 5 7.17 6.81 21 42 32 4.81 9.84 8.26
Total (n) 120 7.32 5.89 6.63 37.67 28.33 26.67 11.86 8.12 8.09
Table XXI Descriptive statistics based on nature of information (declarative news)


S.N Sector Sample 2013 2014 2015 2013 2014 2015 2013 2014 2015
1 Automobile 11 86 87.72 95.54 342 345 345 110.23 109.06 109.5

2 Cement 15 39 43.4 49.93 220 210 226 57.17 54.36 57.58
3 Chemical and Pharma 16 94.43 96.06 101.5 429 427 439 111.78 104.34 108
4 Miscellaneous 32 67.84 66.94 69.25 265 219 200 68.76 59.89 58.85
5 Fertilizer 6 185.67 114 115.67 478 199 191 161.79 73.93 72.6
6 Oil, gas and refinery 10 90 97 103.8 116 154 149 45.91 52.04 50
7 Textile 7 31.42 33.14 34.57 88 94 103 38.18 40.34 42.62
8 Insurance 6 50.33 52 60.66 73 75 69 25.76 25.15 22.9
9 Banking 17 67.52 82.75 82.31 252 276 294 59.11 66.86 73.33
Total (n) 120 79.13 74.78 79.25 251.44 222.11 224 75.41 65.11 66.15
5.10 Multiple regression analysis
5.10.1 Results of regression analysis for overall CSED index. Table XXII reports descriptive
statistics of independent variables which are continuous in nature. As per value of
ownership structure variables, it has been reported that foreign shareholders have mean
shareholdings of 21.7 per cent in 2013 and 2014 followed by 23.1 per cent in 2015.
Following foreign ownership, mean values of shareholdings by financial institutions are 17.6
per cent in 2013 followed by 17 per cent and 16.6 per cent in 2014 and 2015, respectively.
As per mean values, government also owns significant stake in companies in Pakistan, i.e.
10 per cent in 2013 followed by 9.7 per cent and 7.5 per cent in 2014 and 2015,
respectively. Finally to empirically test the effect of different determinants on CSED
practices of Pakistani companies, multiple regression analysis has been performed with
Table XXII Descriptive statistics of independent variables (continuous)

Mean Minimum Maximum SD
Variables 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015
Firm size 7.3738 7.4210 7.445 5.697 5.785 5.834 9.206 9.2343 9.2711 0.73 0.73 0.711
For_own 0.217 0.217 0.231 0.000 0.000 0.000 0.99 0.989 0.989 0.30 0.30 0.156
Govt_own 0.10 0.097 0.075 0.000 0.000 0.000 0.93 0.934 0.842 0.187 0.187 0.31
Ins_own 0.176 0.17 0.166 0.000 0.000 0.000 0.989 0.99 0.99 0.213 0.211 0.207

year fixed effect, industry fixed effect and year and industry fixed effect. Before performing
regression analysis, independent variables have been also checked for multicollinearity. For
this purpose, correlation analysis has been performed among all independent variables and
the value of correlation among all variables has been found within limits, with the maximum
correlation value being 0.62 and VIF is 2.48. Table XXIV shows the results of industry fixed
effects, year fixed effect and industry and year fixed effects. As per results of the industry
fixed effect, the results show that all variables have hypothesized relationship with CSED in
Pakistan except institutional ownership and government ownership which has been
negatively associated with CSED. This means that government and financial institutions of
Pakistan do not bother about CSR disclosure practices of companies in which they invest,
rather they consider short-term interest while making investment decisions. However
variables such as firm size, board diversity and establishment of CSR committee have been
found to be highly significantly positively associated with CSED based on p-values of less
than 1 per cent. These results match with study conducted by Ibrahim and Hanefah (2014)
who also found board diversity to be positively associated with CSED. Considering industry
type, results have found that companies from banking, cement and textile sectors tend to
disclose significantly less CSED as compared to other companies in the sample. Finally
appointment of non-executive director as chairman and appointment of independent

director as audit committee chairman have also emerged as important variables to
significantly influence CSED positively.
Based on second column of Table XXIV which describes results of regression model with
year fixed effects, it has been shown that time cannot be considered as significant variable
to influence CSED practices in Pakistan. So based on p-values of greater than 10 per cent
for year dummies, it can be stated that there is consistency in CSED practices over the
three-year period by sample companies in Pakistan. Beside this, all variables have
hypothesized relationship with CSED as shown in the table except foreign activities and
institutional ownership as being negative. However like in a previous model, variables such
as board diversity, firm size, CSR committee and appointment of independent director as
audit committee chairman have been again found to be positively significantly affecting
CSED practices.
Finally in third model, authors have performed regression analysis with both year and
industry fixed affects. Based on the third column of Table XXIII, again all variables have
been found to have hypothesized relationship with CSED except government and
institutional ownership. In addition to this, all three models have been found as good fit
based on p-value of F-statistic (Table XXIV).
5.10.2 Results of regression analysis for individual categories. According to Table XX, only
the CSR committee has emerged as an important variable to positively influence these
disclosures in annual reports. Considering the industry effect, results report that companies
from cement, textile, fertilizer, banking and oil and gas sectors tend to disclose significantly
less information as compared to other sectors. Based on results of Model (3) for community
disclosure, it has been observed that majority companies from all sectors have been
involved in disclosing such information in annual reports except textile sector. As per Model
(4) of this table for environmental disclosure, results report that presence of foreign national
directors (board diversity) has a positive significant effect on disclosure of environmental
disclosure. Further in terms of industry effect, companies from banking sectors have
disclosed significantly less information about environment as compared to companies from
other sectors. Finally for general disclosure about CSR information, again CSR committee
and presence of foreign national on board have a positive significant effect on disclosure of
such information (Model 4). In terms of industry effect, majority of companies from almost all
sectors have not disclosed about all items of general disclosure regarding CSR (Table XX).
5.10.3 Results of regression analysis based on CSR dimensions. Table XXVI reports the
results of regression analysis based on three CSR dimensions such as theme, news type

Table XXIII Variance inﬂation factor test of multicollinearity
Variance inflation factor test
Variables VIF 1/VIF
Misc_sector 5.84 0.171180

Bank_sector 5.04 0.198417
Cement_sector 4.30 0.232358
ChemPharma_sector 4.26 0.234638
Firm_size 3.64 0.274659
Auto_sector 3.17 0.315156
OilGas_sector 3.11 0.321282
Textile_sector 2.53 0.394817
Ferti_sector 2.22 0.450514
NED_as_chairman 1.88 0.530844
CEO_duality 1.79 0.557698
Govt_own 1.74 0.573732
For_own 1.72 0.580362
Board_div 1.66 0.603141
Year_2013 1.40 0.712099
AC_chairman 1.36 0.734685
Year_2014 1.36 0.736439

For_activity 1.33 0.750968
For_listing 1.29 0.774507
CSR_committee 1.22 0.817924
Inst_own 1.20 0.831644
Mean VIF 2.48
Table XXIV Results of regression analysis for overall CSED index

Industry fixed effects Year fixed effects Industry and year fixed effect
Beta t-Stat Beta t-Stat Beta t-Stat
NED_chairman 0.05 (1.683)* 0.033 (0.992) 0.057 (1.667)*

Inst_own 0.025 (0.476) 0.022 (0.398) 0.025 (0.464)
Gov_own 0.006 (0.081) 0.094 (1.351) 0.004 (0.059)
For_own 0.0437 (1.018) 0.019 (0.461) 0.043 (1.01)
For_listing 0.032 (0.569) 0.082 (1.409) 0.033 (0.574)
For_activity 0.035 (1.514) 0.0056 (0.259) 0.035 (1.511)
Firm_Size 0.204 (7.838)*** 0.089 (5.057)*** 0.204 (7.724)***
CSR_comm 0.201 (3.672)*** 0.236 (4.328)*** 0.201 (3.662)***
CEO_duality 0.01 (0.293) 0.02 (0.441) 0.014 (0.299)
Board_diversity 0.076 (2.883)*** 0.118 (4.552)*** 0.077 (2.884)***
AC_chairman 0.05 (1.753) * 0.056 (1.928)* 0.051 (1.757) *
Auto_sector 0.006 (0.099) – – 0.006 (0.102)
Bank_ sector 0.318 (4.928)*** – – 0.317 (4.883)***
Cement_ sector 0.106 (1.715)* – – 0.106 (1.708) *
Chempharma_ sector 0.055 (0.911) – – 0.054 (0.905)
Ferti_ sector 0.11 (1.621) – – 0.11 (1.604)
Misc_ sector 0.056 (1.032) – – 0.056 (1.031)
Oil, gas_ sector 0.08 (1.274) – – 0.081 (1.271)
Textile_ sector 0.19 (2.838)*** – – 0.190 (2.829)***
Year2013 – – 0.0213 (0.81) 0.0025 (0.101)
Year2014 – – 0.0195 (0.749) 0.008 (0.328)
Constant 0.978 (4.804)*** 0.164 (1.251) 0.971 (4.661)***
Observations 358 358 358
Adjusted R2 0.3518 0.2238 0.3095
F-statistics 9.1479 8.3524 8.2749
Significance 0.0000 0.0000 0.0000

Table XXV Results of regression analysis for individual categories
Human Resource Consumer and Product Community Environmental General
disclosure disclosure disclosure disclosure disclosure
Model (1) Model (2) Model (3) Model (4) Model (5)
Beta t-Stat Beta t-Stat Beta t-Stat Beta t-Stat Beta t-Stat
Govt_own 0.108 (1.33) 0.033 (0.36) 0.038 (0.49) 0.174 (1.78) 0.030 (0.31)
Inst_own 0.058 (1.01) 0.117 (1.82) 0.058 (1.07) 0.043 (0.63) 0.040 (0.60)
For_own 0.107 (2.26)** 0.046 (0.88) 0.047 (1.04) 0.048 (0.85) 0.003 (0.05)
Ac_chairman 0.016 (0.62) 0.007 (0.23) 0.036 (1.47) 0.069 (2.22)** 0.032 (1.06)
For_listing 0.100 (1.60) 0.041 (0.59) 0.056 (0.94) 0.097 (1.30) 0.034 (0.46)
For_activity 0.039 (1.53) 0.051 (1.77) 0.004 (0.17) 0.019 (0.63) 0.087 (2.90)***
NED_chairman 0.083 (2.19)** 0.062 (1.47) 0.042 (1.17) 0.049 (1.08) 0.003 (0.08)
Board_diversity 0.069 (2.35)** 0.018 (0.57) 0.020 (0.71) 0.147 (4.22)*** 0.116 (3.38)***
CEO_duality 0.010 (0.19) 0.044 (0.77) 0.006 (0.12) 0.038 (0.61) 0.045 (0.75)
CSR_comm 0.203 (3.36)*** 0.254 (3.75)*** 0.130 (2.26)** 0.093 (1.28) 0.234 (3.30)***
Firm_Size 0.143 (4.97)*** 0.200 (6.23)*** 0.175 (6.42)*** 0.211 (6.12)*** 0.158 (4.71)***
Auto_sector 0.124 (1.84) 0.105 (1.39) 0.017 (0.26) 0.406 (5.02)*** 0.170 (2.15)**
Cement_sector 0.260 (3.78)*** 0.273 (3.55)*** 0.037 (0.57) 0.308 (3.75)*** 0.266 (3.31)***
Chempharma_sector 0.113 (1.70) 0.039 (0.53) 0.002 (0.04) 0.371 (4.66)*** 0.093 (1.20)
Misc_sector 0.190 (3.16)*** 0.135 (2.01)** 0.001 (0.02) 0.271 (3.77)*** 0.229 (3.26)***
Ferti_sector 0.171 (2.29)** 0.310 (3.71)*** 0.047 (0.67) 0.187 (2.09)** 0.198 (2.26)**
Oil, gas_sector 0.177 (2.53)** 0.286 (3.66)*** 0.047 (0.71) 0.260 (3.11)*** 0.179 (2.19)**
Textile_sector 0.209 (2.81)*** 0.271 (3.26)*** 0.209 (2.96)*** 0.255 (2.86)*** 0.421 (4.84)***
Bank_sector 0.522 (7.37)*** 0.301 (3.80)*** 0.062 (0.92) 0.228 (2.69)*** 0.305 (3.67)***
Constant 0.498 (2.22)** 1.085 (4.33)*** 0.937 (4.40)*** 1.567 (5.84)*** 0.493 (1.88)
Observations 358 358 358 358 358
Adjusted R-square 0.294 0.218 0.287 0.289 0.231
F-statistics 8.81 6.23 8.56 8.63 6.63
Significance 0.000 0.000 0.000 0.000 0.000
and nature of information. Based on results of Model (1) for CSR theme, it has been found
that holdings by financial institutions have significant negative effect on the disclosure of
different categories of CSR which is quite surprising. However CSR committee and
appointment of non-executive director as chairman have significant positive effect on
disclosure of different categories of CSR. Finally for industry effect, results report that only
companies from banking sector have been disclosing significantly less different categories
of CSR as compared to companies from other sectors. Considering results of Model (2) for
CSR information based on news type, CSR committee and presence of foreign national on
board have positive significant effect on disclosure of CSR information based on all news
type (good, bad and neutral). For industry effect, no significant differences have been
observed across different industries. Finally for results of Model (3) based on nature of CSR
information, CSR committee and involvement of companies in foreign activities have
positive significant effect on disclosure of CSR information based on nature (monetary, non-
monetary and declarative). However based on industry type, it has been found that
companies from almost all sectors have been disclosing significantly less CSR information
based on all three nature except fertilizer and oil and gas sectors.
5.10.4 Disclosure analysis based on public versus private companies. The final analysis is
related to investigating how public companies in Pakistan have reacted to the disclosure of
CSR information as compared to private companies in response to CSR guidelines from
SECP. Based on results of Table XXVI, it has been reported that companies from private
sector have disclosed significantly more information about CSR as compared to public
companies. Considering these results based on individual categories of CSED index,
similar significance differences have been observed in case of only community disclosure,
human resource disclosure and general disclosure. Further considering the analysis of CSR

Table XXVI Results of regression analysis based on CSR dimensions
Theme News Type Information type
Beta t-Stat Beta t-Stat Beta t-Stat
Model (1) Model (2) Model (3)
Govt_own 0.031 (0.45) 0.007 (0.12) 0.021 (0.32)

Inst_own 0.100 (2.06)** 0.042 (1.06) 0.010 (0.22)
For_own 0.056 (1.39) 0.051 (1.57) 0.063 (1.70)
Ac_chairman 0.016 (0.71) 0.013 (0.73) 0.025 (1.21)
For_listing 0.063 (1.19) 0.058 (1.36) 0.038 (0.78)
For_activity 0.017 (0.78) 0.014 (0.80) 0.080 (4.01)***
NED_chairman 0.064 (2.02)** 0.025 (0.96) 0.018 (0.62)
Board_diversity 0.032 (1.30) 0.067 (3.32)*** 0.032 (1.41)
CEO_duality 0.038 (0.88) 0.020 (0.57) 0.014 (0.34)
CSR_comm 0.124 (2.42)** 0.107 (2.56)** 0.095 (2.01)**
Firm_Size 0.175 (7.22)*** 0.044 (2.21)** 0.061 (2.73)***
Auto_sector 0.001 (0.03) 0.022 (0.48) 0.160 (3.02)***
Cement_sector 0.012 (0.21) 0.016 (0.33) 0.234 (4.35)***
Chempharma_sector 0.092 (1.64) 0.046 (1.00) 0.156 (3.00)***
Misc_sector 0.001 (0.02) 0.007 (0.18) 0.146 (3.09)***
Ferti_sector 0.076 (1.21) 0.002 (0.04) 0.059 (1.01)

Oil, gas_sector 0.012 (0.20) 0.019 (0.40) 0.067 (1.22)
Textile_sector 0.121 (1.93) 0.067 (1.31) 0.265 (4.54)***
Bank_sector 0.252 (4.20)*** 0.004 (0.08) 0.169 (3.04)***
Constant 0.498 (2.63)*** 0.339 (2.20)** 0.499 (2.84)***
Observations 358 358 358
Adjusted R-square 0.227 0.11 0.205
F-statistics 6.51 3.33 5.85
Significance 0.000 0.000 0.000
Table XXVII Disclosure analysis based on public versus private companies

Categories No. Public sector Private sector p-Value
Mean CSED index 358 176.41 245.59 (P < 0.000)

Human resource disclosure 358 177.19 228.94 (P < 0.05)
Consumer and product disclosure 358 177.89 213.81 (P > 0.10)
Community disclosure 358 176.46 244.47 (P < 0.000)
Environmental disclosure 358 178.61 198.59 (P > 0.10)
General disclosure 358 176.51 243.50 (P < 0.05)
News type 358 177.75 217.00 (P < 0.05)
Nature of information 358 176.72 239.00 (P < 0.000)
information based on news type (good news, bad news & neutral news), results report that
again private companies have disclosed significantly about CSR based on all news type as
compared to public companies. Finally similar results have been found in case of analysis
of CSR information based on nature (monetary, non monetary and declarative information).
So this analysis clearly indicates that performance of public sector companies in terms of
disclosure of CSR information based on either theme, news type and nature of information
has been significantly poor despite the fact that disclosure of these items is subject to
guidelines from SECP.
6. Conclusion, recommendations and directions for future research

The main objective of this study was to investigate CSED practices of Pakistani companies
following CSR guidelines by SECP with larger data sample based on market capitalization

over three-year period from 2013 to 2015 using a unique CSED index which measured
CSED through three dimensions such as theme, news type and nature of information. So
first we analyzed descriptive statistics regarding CSED through these dimensions. The
results find that the overall level of CSED in Pakistan is moderate as sample companies
have reported 56 per cent CSED items in 2013 followed by 57 per cent and 59 per cent in
2014 and 2015, respectively. Considering CSED items percentage across industries, the
textile sector has consistently reported the lowest percentage of CSED items in their annual
report over the three-year period. Analyzing CSED on the basis of individual categories,
results have found that human resource disclosure has the highest percentage in terms of
the number of sentences disclosed as compared to other categories of CSED. This means
that companies in Pakistan consider human resource as one of the most important
stakeholders. However the level of disclosure in terms of environment is quite poor, either in
terms of number of sentences disclosed or percentage of companies involved in
environmental disclosure over the three year-period. So based on this, it can be inferred
that the environment is not still a matter of concern for companies in Pakistan.
In terms of CSED based on news type, results state that companies in Pakistan prefer to
report only goods news related to CSED followed by neutral news and bad news. This trend
is consistent across industries and also over a three-year period. This bad news percentage
is quite similar with percentage reported by Sobhani et al. (2009) regarding Bangladesh
which is 0.37 per cent. However this bad news percentage is quite low in the context of
developed countries based on the study by Hackston and Milne (1996). Finally considering
CSED on the basis of nature of information, results demonstrate that highest percentage of
CSED information forms part of declarative statements followed by non-monetary
information and monetary information. These results are shocking as the level of reporting
non-monetary information and monetary information is quite low on average and also across
industries over three-year period. Thus performance of Pakistani companies regarding
disclosure of non-monetary and monetary information is not satisfactory in comparison with
developing and developed countries despite the fact that SECP general order on CSR
requires companies to reports CSR activities in terms of descriptive and monetary terms.
The position of financial sector companies in terms of CSED has been found quite
satisfactory in comparison with overall mean CSED index.
Secondly CSED practices of sample companies have been analyzed in terms of sub-
categories of CSED items across industries over three-year period. The authors find that
across industries, textile sector has reported consistently lowest percentage of mean HR
sentences as compared to other sectors. While across sub-categories of HR disclosure,
“corporate directory” has been reported as last which indicates that very few companies in
Pakistan have a culture of disclosing corporate directory in annual reports. In terms of sub-
categories of “consumer and product disclosure,” results state that very few companies
have reported information regarding measures taken by them to make product which are
environment-friendly.
The authors have found increasing trends in terms of community disclosure which means
that companies in Pakistan have started to consider society as their important
stakeholder with the passage of time. In terms of environmental disclosure, results are
shocking across industries and also across sub-categories of environmental disclosure.
It means that environmental element is the least concern for sample companies in
Pakistan as part of their CSR strategy. This situation is very common in developing
countries where environmental regulations are not strict. Looking at results of CSED items
of general disclosure, results state that more than 75 per cent companies have reported
CSR as part of their corporate vision. These results contradict with CSED practices of
companies in Pakistan based on standard deviation and range as mean disclosed
sentences under all themes of CSED are significantly different among sectors and also
within sector companies. In addition to this, only very few companies are involved in

CSED to a greater extent as compared to other companies across sectors and within
sector companies. In light of this, claim by more than 75 per cent companies to report
CSR as part of their vision is quite questionable.
The second objective of this study was to investigate how board composition, ownership
structure and corporate characteristics influence CSED practices of Pakistani companies.
The authors have found that all variables have hypothesized relationship with CSED
practices except government ownership and institutional ownership which are found to be
negatively associated with CSED practices. On the basis of this, we can interpret that
financial institutions in Pakistan do not consider CSR as an important element while making
investment decisions. In addition, government institutions in Pakistan are not performing
their role to promote CSR in business decisions. These results regarding institutional
ownership contradict with results of study by Majeed et al. (2015) who have found
institutional ownership to be significantly positively associated with CSED practices in
Pakistan. The reasons for contradicting results may be being different study period, sample,
CSED index and measurement basis.
In terms of corporate governance variables such as board diversity, CSR committee
and appointment of non-executive director as chairman of board are found to be
significantly positively associated with CSED practices in Pakistan. So establishment of

CSR committee can demonstrate actual management philosophy regarding
consideration of CSR as part of their decision-making as per CSR guidelines of SECP.
In addition, separate CSR committee can effectively design company’s CSR policy and
action plan to implement this policy under top management guidelines. Finally
appointment of non-executive director as chairman can affirm that management will
keep a balance among different stakeholder’s interests while making board decisions.
The results regarding board diversity match with the study conducted by Ibrahim and
Hanefah (2014) who also found board diversity as being positively associated with
CSED. However these results regarding board diversity contradict the results of the
study by Majeed et al. (2015) who found a negative relationship between board
diversity and CSED practices in Pakistan which is quite surprising. So based on our
study results, we can claim that increased representation of foreign directors on board
in Pakistan can positively influence CSED practices. The results have also found
appointment of independent director as audit committee chairman to be significantly
positively associated with CSED practices in Pakistan. Thus audit committee chairman
can also influence management to increase CSED information quality in annual reports.
Finally in terms of corporate characteristics, authors have found firm size and industry type
as significant variables to influence CSED practices. The results regarding firm’s size and
industry type match with studies by Ahmed Haji (2013), Giannarakis, (2014), Habbash
(2015) Lone et al. (2016). In terms of industry type, results demonstrate that companies
from banking, cement and textile sectors tend to disclose less CSED information in annual
report as compared to other sectors companies in Pakistan.
These results have number of implications for policy makers in Pakistan. First considering
descriptive statistics, results imply that environment is not a matter of concern for
companies in Pakistan. So policymakers in Pakistan should design policies to assure that
companies should perform their operations in environment friendly manner. The textile
sector in Pakistan contributes significantly toward GDP and exports; however, its
performance regarding CSED is quite poor. This thing should also be accounted for by
policymakers. In addition based on results of ownership structure, authors have found
that government and financial institutions in Pakistan do not consider CSR an important
element while making investment decisions. Government should frame policy for these
government institutions so that these can play their positive role in promoting CSED
practices in Pakistan. Linking these results with the CSR guidelines by SECP, authors
have found that majority of companies in Pakistan have not been following these

guidelines as only five of the companies in the sample have formed a separate CSR
committee. Further none of the company has appointed an external expert for providing
assurance on CSR activities. So based on these results, it can be implied that the
company’s performance for implementing these CSR guidelines has been very
disappointing following the three-year period.
However this study also has some limitations. This study has used only the three-year
period which is quite short to determine long-term CSR strategy of companies. Second, we
have used annual report only as a medium to measure CSED practices. There can be some
other sources which can be used to measure CSED practices. Finally results of this study
cannot be generalized because of the small sample size of 120 top companies based on
market capitalization. The future research can be conducted to find economic
consequences of CSED information in annual reports on market. In addition, cross-national
study can also be a potential avenue to explore CSED practices in a particular region in
order to determine how geographical, institutional elements can affect CSED practices in
annual report.
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Corresponding author
Khurram Ashfaq can be contacted at: khurram.jxufe@outlook.com
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Abstract Khurram Ashfaq and

j SOCIAL RESPONSIBILITY JOURNAL j

j SOCIAL RESPONSIBILITY JOURNAL j

into account the interest of wide category of stakeholders. As mentioned in introduction

j SOCIAL RESPONSIBILITY JOURNAL j

j SOCIAL RESPONSIBILITY JOURNAL j

3.2 CEO duality

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3.3 Board diversity

3.4 Foreign ownership

Shareholders’ demand regarding disclosure in annual reports may be affected by their

3.5 Institutional ownership

3.6 Government ownership

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3.8 CSR committee

3.9 Foreign listing

3.10 Industry type

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3.12 Firm size

Table I Sample companies classiﬁcation

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4.3 Independent variables

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Table III Descriptive statistics of CSED of sample companies

not presented CSED information in a disaggregated manner on the basis of theme,

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5.2 Descriptive statistics of human resource disclosure

Table IV Category-wise human resource disclosure

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1 Automobile 11 24.36 25.27 26.18 71 71 71 24.08 23.52 24.1

5.3 Descriptive statistics of consumer and product disclosure

Table VI Category-wise consumer and product disclosure

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1 Automobile 11 17.81 17.81 20 71 71 71 26.13 26.13 25.95

5.4 Descriptive statistics of community disclosure

Table VIII Category-wise community disclosure

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1 Automobile 11 18.18 18.9 21 71 71 71 24.49 23.74 23.86

5.5 Descriptive statistics of environment disclosure

5.6 Descriptive statistics of general disclosure

Table X Category-wise environmental disclosure

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5.7 Descriptive statistics of CSED by industry type

Table XII Category-wise general disclosure

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1 Automobile 11 15.63 15.45 16.36 51 52 52 15.18 14.6 15.73

Table XIV Descriptive statistics of CSED by industry type

Mean disclosed sentences Range SD

Table XV Descriptive statistics of mean CSED index by industry type

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5.8 Descriptive statistics of CSED based on news type

5.9 Descriptive statistics of CSED based on nature of information

Table XVI Descriptive statistics based on type of news (good news)

1 Automobile 11 77.81 79 86 283 286 286 93 91 92.86

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1 Automobile 11 0.27 0.27 0.36 2 2 3 0.65 0.65 0.92

Table XVIII Descriptive statistics based on type of news (neutral news)

1 Automobile 11 22 23 23 100 100 100 30.84 30.6 30.46

Table XIX Descriptive statistics based on nature of information (monetary news)

1 Automobile 11 4 4 4 8 8 8 2.32 2.34 2.34