Factors Influencing Social Responsibility Disclosure by Portuguese Companies Author(s): Manuel Castelo Branco and Lcia Lima Rodrigues

Reviewed work(s): Source: Journal of Business Ethics, Vol. 83, No. 4 (Dec., 2008), pp. 685-701 Published by: Springer Stable URL: http://www.jstor.org/stable/25482407 . Accessed: 02/03/2013 09:21
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(2008) 83:685-701 Journal of Business Ethics DOI 10.1007/sl0551-007-9658-z

Springer 2008

Factors Influencing
Disclosure

Social Responsibility
Companies

by Portuguese

Manuel Castelo Branco Lucia Lima Rodrigues

ABSTRACT.
rate web pages)

This
and

study compares
annual reports

the Internet (corpo

as media of social

The both

responsibiHty disclosure
ences disclosure. It

(SRD) and analyses what

SRD on the Internet

influ
by

SRD, purpose of this study is to understand on the Internet and in annual reports, by

examines

Portuguese
Internet results retical and are

Hsted companies
2003 annual interpreted through

in 2004
the to lens

and compares
media. a multi-theo adopted, of

the
The

reports

as disclosure

framework. disclose a sociaUy

According social responsible

the framework

companies present

responsibiHty image so

information that they

to can

and testing a series of hypotheses. The SRD in annual reports and on the Internet by a sample of companies with shares listed on the Portuguese Stock Exchange {Euronext content analysis, SRD is Lisbon) is analysed. Using classified in terms of theme human (environment, developing nature of resources, products and customers and community involvement). are considered to engage in corporate Companies social responsibility activities and disclosure (CSR) because of two different kinds of motivations. Some expect companies their stakeholders assets wiU that having good relations with lead to increased financial

legitimise their behaviours

influence suggest macy the that theory a and external theoretical

to their stakeholder groups and

of reputation. combining provides Results legiti an framework

perception

a resource-based

perspective

explanatory
companies.

basis

for

SRD

by

Portuguese

listed

KEY WORDS:
theory, disclosure,

annual

reports,
perspectives,

internet,
social

legitimacy
responsibility

resource-based Portugal

returns by assisting in developing valuable intangible and assets can These (resources capabilities). be sources of competitive advantage because they can differentiate Other disclosure a company from in CSR engage companies to conform to about how thus
used to a

its competitors. activities and norms a and should be con legitimacy

its Al

stakeholder

Introduction Most of the empirical studies on social responsibility disclosure (SRD) have focused on the annual report, to be the most which is considered tool important used

expectations ducted,
instrument adherence

operations mainly
to and company

constituting
by such norms

demonstrate

expectations.

to communicate with their by companies stakeholders et for al., 1995b; (see, example, Gray Neu et al., 1998). However, the Internet has become an important medium can through which companies natures, and thus some recent studies have been made analysing com as a web SRD medium pages panies' (see, for example, Frost et al., 2005; Patten, 2002a; Patten and and Pei, 1999). Explora 2004; WiUiams Crampton, tion of companies' web pages as a SRD medium is now as essential as the to exploration of annual reports understand SRD disclosure practices. disclose information of different

in CSR activities engage though some companies and disclosure because their managers' personal values are aligned with CSR values, this aspect wiU not be explored in this study. Whereas the first kind of motivations may be ana explored through perspective lytical lens (see, for example, Branco and Rodrigues, et al., 2005; Toms, the 2006; Hasseldine 2002), second kind is consistent with social and political in particular legitimacy explanations, theory for and 2002; Deephouse (see, example, Deegan, et Neu Patten and Carter, 2005; al., 1998; theory Crampton, 2004; Zimmerman and Zeitz, 2002). a resource-based

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686 Manuel The two

Castelo Branco and Lucia Lima Rodrigues of the strong impact of on stock markets in globalised fostering convergence eit., corporate practices" p. 58). (op. In the foUowing the theoretical frame section, ronment, work used is presented. Thereafter foUow sections on hypotheses and discussion. results development, methodology, some are conclusions drawn. FinaUy, is "an iUustration

multi-theoretical

results are interpreted through the lens of a framework which these combines to which information companies to mainly so that they can groups and of

perspectives, according disclose social responsibiHty present a sociaUy responsible legitimise influence their behaviours the external

image to stakeholder

perception reputation. a higher visibility seem to exhibit with Companies greater concern to improve corporate image through SRD. Results suggest that the framework proposed of SRD by Portuguese listed may be an explanation
companies.

Theoretical Two

framework influences in this are SRD companies' study: those related to the within which companies to economic incentives. on

major

evidence from paper empirical to add to Portugal for two reasons. First, we want the scarce research on SRD by Portuguese compa nies by providing present literature and evidence cultural empirical is based in Anglo-Saxon should be added about and institutional new data. Most other of the countries geo

This

examines

acknowledged

context socio-political and those related operate, The both theoretical influences, by

perspectives,

adopted incorporates institutional adopting theory specificaUy legitimacy theory (see, for

framework

In con graphic, trast to the understanding of SRD from common countries law EngHsh-speaking (Australia, Canada, of SRD in Continental the determinants UK, USA), contexts. are stiU relatively in Portugal, Europe, particularly we want to unknown. Second, analyse if there are reasons to expect in less that listed companies developed a different oped such as Portugal, wiU behave in countries, manner in more devel than companies (2007, p. 30), in countries
It presents

and Carter, 2002; Deephouse example, Deegan, et 2005; Neu al., 1998; Patten and Crampton, 2004; Zimmerman and Zeitz, and resource-based 2002), for Branco and (see, example, et Hasseldine 2006; al., 2005; Toms, Rodrigues, Some authors provide studies in 2002). important perspectives which similar combinations are attempted (see, for to engage driven by companies wiU
them that

countries.

to Lopes and Rodrigues According one is of the least developed Portugal

the euro-area and a smaU OECD country.

example, Bansal, 2005). are considered In this study, companies in some form of stakeholder management, two different kinds of motivations. Some believe
bring to achieve

that being
them a better

seen
economic

as sociaUy
advantage, results.

responsible
aUowing They expect

competitive

specific
panies'

features
financing

regarding
structure

its capital market,

and corporate

com

governance

for a different institutional systems, providing setting from most and capital market-oriented developed most of the SRD studies have countries, where In particular, the degree of family been made. are is and financing policies significant ownership bank oriented. of the particular characteristics Notwithstanding that factors of this the results study suggest Portugal, listed influence SRD practices of Portuguese which are not significantly different companies SRD of companies influence which is consistent This countries. developed results of Cormier them which
spective

having good relations with lead to increased financial developing capabilities) advantage valuable which because

their returns

stakeholders by assisting

wiU in and

intangible can be sources such assets

assets

(resources of competitive can differentiate a motivations perspective

These from its competitors. company a resource-based are consistent with analytical Other lens.

than those in more with the

in CSR activities and engage companies because of external pressures. They either to what other companies conform do, because they so not harm them in terms would believe that doing to and survival, or respond of their profitability disclosure to be detri events, which they believe discrediting to their profitability and survival and must be mental their effects. CSR activities and addressed to mitigate
disclosure appear as mechanisms these companies use

and Magnan that the strategies

country's

to suggest disclosure
of a given

lead (2003), which in the way in similitude are determined,

socio-cultural

irre
envi

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Factors Influencing SRD the bounds of what to act and be seen acting within to the expecta is considered according acceptable should tions of stakeholders on how their operations be conducted. Social disclosure
such

by Portuguese Companies is on

687

constitute

activities and responsibility a instrument mainly legitimacy to demonstrate its adherence

are consistent

refers to the accep social legitimacy, which and tance of a company by its social environment, the consider constituents. external Companies in their constituents various social of expectations behaviour to achieve social legitimacy. Legitimacy "is a social judgment of appropriateness, acceptance, and Zeitz, and desirability" 2002, (Zimmerman comes The of social p. 418). importance legitimacy from the theoretical embedded that companies assumption in which in the social environment are they and expectations The company's by this

used by a company
expectations.

to in of

These

motivations

with

social

and

poHtical

theory

explanations, the benefits

theory. particular legitimacy From a resource-based perspective CSR are, to a great extent, related corporate

to their effect on

2006). (Branco and Rodrigues, reputation a with repu Companies good social responsibility external tation are able to improve relations with
actors such as customers, investors, bankers, suppliers

operate, and that their performance are affected by the environment. success,
interface.

even

survival,

is

determined

and competitors.
or increase

They

also attract better

employees' motivation

employees
and

current

as one of SRD is seen, from such a perspective, to seek acceptance the strategies used by companies and approval of their activities from society. It is seen as an important tool in corporate strat legitimation or to It is used maintain the establish egies. legiti it may of the company because influence macy public and public poUcy. Legitimacy opinion theory an important way of SRD that suggests provides to convince with stakeholders, them communicating that the company is fulfilling their expectations
(even when actual corporate behaviour remains at

morale

as weU

as their commitment which in turn may

of information

the company,
outcomes.

and loyalty to improve financial

on a company's

Disclosure

behaviours bility helps holders.

and outcomes to build

regarding social responsi a positive stake image with

is particularly in enhancing the SRD important Itmight be effects of CSR on corporate reputation. a signal of improved social and envi considered ronmental fields conduct of and hence because disclosure reputation the influences It wiU be in those external

variance with One

some of these expectations).

perception

for reputation. in social activities, companies investing responsibility to realise the likely to create positive reputation, value of such reputation without making associated difficult disclosures
Probably

to combine attempts problem regarding to different bodies of theory explain organisational or is that they are often incommensurable behaviour in some important aspects. The theo incompatible ries often focus on different core concepts. A multi theoretical framework should focus on common
core concepts. theory and resource-based perspec

(Hasseldine
the most

et al., 2005; Toms,

important

2002).
of

weakness

Legitimacy

resource-based understanding
relationships ment have on

perspectives they provide

between the a company's

is related to the lack of on the influence that the

and success its environ and

tives are believed ceived

call "the stakeholder

to be useful CampbeU

as using what can be

as they can be con et al. (2003, p. 559)

Thus, these

company

metanarrative".

(Branco

perspectives theory

This is why in this study a 2006). Rodrigues, is resource-based with social combined perspective and political in particular and theories, legitimacy stakeholder theories. However, these theories are complementary opposite (Gray et al., 1995a, p. 52). The institutional perspective of legitimacy theory is one of the dominant theories in SRD research (see, for considered rather than alternative or

explored by using the other hand, organisational insights. On and legitimacy organisational reputation are consid ered to have similar antecedents, social construction

stakeholder

and Carter, processes and consequences (Deephouse two to This refers these interrelated 2005). study that of legitimacy, which is explored from concepts: an institutional and that of reputation, perspective; is explored from a resource-based which perspective. For aspect
must be

Patten and 2002; example, Deegan, et Neu 2004; al., 1998). The analytical Crampton, focus of legitimacy theory's institutional perspective

the purposes of this study, the fundamental is that legitimacy that requires a reputation
retained. It requires a company to convince

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688 Manuel its relevant

Castelo Branco and Lucia Lima Rodrigues HI: There wiU be a positive relationship between of international activity and SRD.

pubHcs that its activities are congruent with their values. Thus, and legitimacy reputation are inextricably in this and the Hnked, study two not wiU distinction between be explored the
further.

the degree

Company SRD

size

Development In what section

of hypotheses

for SFJ} based on the foUows, explanations in the previous theoretical framework presented are developed

to corporate size, with larger com than smaUer ones (see, for panies disclosing more et Neu Adams 2003; al., 1998; Archel, example, et et al., 1998; Patten, Purushothaman 1991; al., is related 2000). public Size is also used commonly visibility. Larger companies to scrutiny from stakeholder groups since ceptible are to visible external groups and more they highly to adverse reactions vulnerable them; and among
larger companies, on average, are more diversified

by selecting the most relevant SRD. To analyse the usefulness factors influencing of the theoretical framework above, this proposed a sample of study adopts the strategy of examining companies a variety for a of proxies and using to its characteris related social visibility company's are chosen to tics and media exposure. Variables

as a proxy for sus are more

and in represent particular aspects of social visibility, its each case, an expectation relationship to regarding SRD is stated based on prior literature.

across geographical and product more diverse ing larger and

2004a, (Brammer and Pavelin, more more visible companies wiU that larger, likely activities and disclosure consider social responsibility
as a way of enhancing corporate reputation.

thus hav markets, stakeholder groups It is also p. 704).

International International

experience

H2:

There

will

be a positive

relationship

between

size and SRD. is developed by operating experience markets in, and depending upon, (Bansal, foreign of international experience 2005). The importance as a determinant perspective 1999) and can be explained from the theories of social and political (Choi, a perspective is resource based which of SRD in which the role of a company, in a country, is defined SRD in the practices.
companies

Industry affiliation Another industry SRD by commonly affiliation. legitimacy used proxy for social visibility This was found to be related is to

(Bansal, 2005). The manner its

and wiU in
na

stakeholders, affect undoubtedly

foreign markets

Operating
to consider

requires

tional

differences by

customer culture

influenced

needs, which of and customs

are that

theory studies. Industries with or a potentiaUy more impor high pubUc visibility, tant environmental impact, or having less favourable to disclose more social found images were public their than information counterparts responsibility 2003; (see, for example, Adams et al., 1998; Archel, Clarke tion There and Gibson-Sweet, 1999; Patten, 1991). are reasons to suspect that industry affilia is related to certain categories of SRD. Com industries with larger potential

are exposed also to a greater country. Companies extent to the laws, rules and regulations governing different countries. trade within In less developed a company which abroad holder nity countries does one would a larger amount to a broader spectrum is exposed and to the international influences expect that of business of stake commu

in panies environmental

of pro-social the Given trend such exposure international initiatives, responsibUity initia is likely to lead to more proactive corporate issues. tives with respect to the social responsibility scrutiny.

likely to provide impact are more in and environmental information, companies industries with high visibility among final consumers issues of are more important likely to consider information and disclose involvement community Gibson and related to such involvement (Clarke

Sweet,

1999).

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Factors Influencing SRD Thus, this study suggests industries should be refined that the classifications of

by Portuguese Companies

689

to provide more reHable tests. Two types of proxies for social exposure related to in previous industry affiHation which were proposed studies are used: "consumer (see, for proximity"

is likely to be associated to higher levels of visibility, and PaveUn, 2004b, SRD (Bansal, 2005; Brammer et al., and Li, 2000; Cormier 2007, in press; Bewley 2004, 2005). The total amount of media coverage of raises companies' visibiUty, making attention and further public p. 203). There SRD wiU be a positive relationship between and the media exposure measure. them scrutiny the object (Bansal,

et al., 2006; Clarke and Gibson example, CampbeU Sweet, 1999) and "environmental sensitivity" (see, for Patten, 2002b). The different example, Archel, 2003; proxies for social exposure are beHeved to be related to is disclosure different SRD community categories: a measure to of with related be positively expected to the final consumer, whereas environ proximity to be related positively mental disclosure is expected with ameasure of environmental sensitivity. Consumer proximity The nearer a company the more

2005, H4:

Control Control other

variables are designed variables, which on SRD influences potential been to account for and

is to the individual

probable is its name of the general public, the and hence, members it is its wiU social be Thus, greater hy visibility. disclosure is involvement that community pothesised associated imity H3a: with the measure consumer. relationship disclosure between and the of a company's prox to the final

consumer, to most to be known

have

introduced.

responsibility on the availability

practices are in the SRD literature, analysed Prior that social researchers argue activities and disclosure are dependent of financial resources within a

and Pavelin, 2007, company (for example, Brammer in press; Roberts, Brammer and 1992). FoUowing Pavelin (2007, in press), profitability and leverage are used financial this study to capture of the availability resources within a company. These vari ables are included as control variables. in

There wiU be a positive involvement community

consumer proximity

measure.

Profitability
Environmental Companies impact on sensitivity in industries that have a larger potential are considered to be to envi industries that profit empirical studies have concluded a not to does be determinant appear ability significant of SRD and 2003; Brammer (for example, Archel, Pavelin, 2007, in press; Patten, 1991; Purushothaman et al., 2000). From a legitimacy theory perspective, can be considered to be related positively profitability or negatively to SRD (Neu et al., 1998). On the other hand, from a stakeholder perspective (Roberts, 1992), to be associated is expected performance with social activities and dis positively responsibility closure. In view ofthe existence of these results and economic different variable the association between this interpretations, a and SRD is tested without making any pri ori assumption about the sign of such association (see, for example, Archel, and Li, 2000; 2003; Bewley et al., 2000). Several

the environment

respect subject to greater pressures with concerns in ronmental than companies with less risk in terms of environmental Therefore, industries information sensitive H3b:

impact. in environmentaUy sensitive companies are more likely to disclose environmental in less environmentaUy

than companies industries.

There wiU be a positive relationship environmental disclosure and the mental sensitivity measure.

between environ

Purushothaman Media Several media exposure

Leverage

studies exposure,

suggest which

individual companies' is used as a proxy for social

that

The

power upon

of

creditors

as a to which

depends

the degree

stakeholder group a company relies

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690 Manuel

Castelo Branco and Lucia Lima Rodrigues exposure; CP,: consumer mental sensitivity; Profit,:
age; u,: error term.

on debt financing a lack of (Roberts, 1992). Noting in the studies which conclusiveness this explore Purushothaman (2000, p. 112) relationship, out that with point companies high leverage may have closer relationships with their creditors and use other means mation. infor responsibiHty in this study the association between Thus, this variable and SPJD is tested without making any a priori assumption about the sign of such association. to disclose social et al.

proximity; profitabdity;

ES,:

environ lever

Lev,:

Operationalisation International FoUowing measured financial

of variables

experience is Bansal (2005), international experience of sales outside Portugal by the percentage

Methods Empirical models The analysis the use of multiple to analyse the relationship includes statistical conducted study Hnear regression models total SRD and between in this

to total sales as reported in the segment data of the statements (see also Choi, 1999). size there are no theoretical reasons which a particular measure

Company Because

each one of its categories, both in annual reports and on the Internet, and the influencing factors referred are exam to in the previous section. Ten models ined. The models discussed above. aU use the same influencing factors there are ten different However,

of might clearly justify choosing measure size (Hackston and Milne, 1996, p. 87), the used in this study is total assets, as reported on the balance sheet (Brammer and Pavelin, 2004b; Haniffa and Cooke, 2005). Industry affiliation it is suggested in this study that the classi Because fications of industries should be refined to provide more reliable tests ofthe theoretical framework used, two types of proxies for social exposure related to proximity" industry affiliation are used: "consumer The different "environmental and sensitivity". are to be related for social believed exposure proxies to different
expected consumer to

variables: total SRD in annual reports and dependent on the Internet and SPJD I), environ (SRDAR in annual reports and on the disclosure mental Internet closure (HFJ3AR disclosure (PCDAR disclosure resources dis and ED I), human (EDAR on in annual the Internet and reports and customers and HRDI), products in annual reports and on the Internet PCDI), community in annual reports and on and involvement the Internet

SRD
be

categories:
related whereas

community
to

disclosure
a measure dis

is
of

positively

proximity,

environmental

(CIDAR and CIDI).

The approach adopted in the empirical analysis is summarised general form of the by the foUowing models: SPJD disclosure
ence, size, media

closure
measure

is expected
of environmental

to be

related
sensitivity.

positively

to a

Consumer

index =/
exposure,

(international
consumer

experi

proximity,

In this study, a binary measure proximity. is used. High-profile and low profile) (high profile are to the are better known those that companies and whose names of to most members

environmental general stated as: = The

control sensitivity, form of the models

variables) examined

is thus

are expected to be the general public. are Based on prior literature, high-profile companies sectors: house as those in the foUowing identified final consumer known hold
retailers,

DISC,

60l + Bi/IE, + B2lS, + B3lME, + fi4,CP, + B5lES, + Be/Profit, + fi7lLev, + u,

goods

and

textiles,

beverages,
services,

food

and drug
gas

telecommunication

electricity,

where,

for

company

i: DISC,:

SRD

index

(SRDAR,;

SRDI,;

EDAR,;
S,:

EDI,; HRDAR,;
CIDI,); size; ME,: IE,: media

PCDI,; PCDAR,; HRDI,; international experience;

CIDAR,;

water and banks. AU others are con distribution, variable is used to sidered "low profile". A one/zero one if the industries: from these designate companies zero if it a and is from sector, company high-profile sector. is from a low-profile

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Factors Influencing SRD Environmental sensitivity. In this study, "more sensi to be those with more tive" industries are considered matters in environmental criticised risk of being because of their activities environmental impact or poUution). depletion
ature, the foUowing

by Portuguese Companies ROA assets ismeasured (Belkaoui

691 income/total

by the ratio of Net and Karpik, 1989). ismeasured for

higher risk of involving resource has natural (such based

sensitive"

Leverage. Leverage assets debt/total Karpik,

press).

Thus,
"more

on prior
sectors

liter
are

1989;

(see, Brammer

by the ratio of Total Belkaoui and example, Pavelin, 2007, in

and

con gas, chemicals, mining, struction and budding materials, and paper, forestry steel and other metals, gas distribution electricity, as "less sensi and water. All others are considered identified: oil and tive". A one/zero variable is used one companies from these industries: is from amore sensitive industry and zero if it is from a less sensitive industry. Media To exposure a measure develop the number
was counted.

Sample The in this study comprises used listed as are more to disclose social companies, likely they a information and have web page that responsibility SRD. in the To be included provides sample for this a to: had company study, sample its shares listed on the Portuguese Stock end of the (Euronext Lisbon) by Exchange 2003, have its 2003 annual report available for re have
view, and

to designate if the company

of

the

exposure,
newspapers

of articles
Company

media companies' in two Portuguese

exposure was

measured

and perusing "Jornal de Noticias" for 1 the between 2001 "Expresso", period January and 31 December 2003. The search facilities present on the web pages of these newspapers were used. A by search was carried out for each company,
the name of the company.

have

an accessible

the Internet The initial -

corporate 2004. by August

web

page

on

using
The

as a Euronext sample included aU companies Lisbon at 31 December 2003. listed on From the

keyword,

search

results were relate Control

examined

to exclude

articles

that did not issues.

specifically variables

to social responsibility

initial 57 listed companies (50 of them listed on the a main market and seven on the second market), as final sample of 49 companies was identified, de scribed The in Table companies I. included to sectors in the sample are clas using the FTSE Global This classification system are considered in

and leverage are used in this study to Profitability capture the availability of financial resources within the company. These two variables are used as control
variables.

sified according Classification System. sectors which the several comprises Table II. Construction sector which

Profitability. When
one can use with In contrast

measuring
accounting-based

corporate
measures,

performance
measures. market

accounting

or market-based

are less subject to bias by managerial and manipulation they do not rely on past perfor mance et al., 1988, p. 859). However, (McGuire are on on company based investors' viewpoints they performance, (ibid.). This thus ignoring is the main variable other reason stakeholder for adopting groups an

based measures

presents and around 16% of the total). (8 companies and Forestry and paper are the sectors which foUow in terms degree of importance (each of them with 6 and about 24% taken together). panies Banks

and building materials is the the largest number of com

Data

collection the level of by social responsibility infor this sample companies, study
This technique consists of

in this study. accounting-based on assets (ROA) is used as ameasure Thus, return (Belkaoui performance and Li, 2000; Brammer 1989; Bewley et al., 2004; Patten, 2007, in press; Cormier for economic and Karpik, and Pavelin, 1991).

To measure mation
uses

disclosed
"content

analysis".

classifying

the

information

disclosed

into

several

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692 Manuel

Castelo Branco and Lucia Lima Rodrigues TABLE

Identification of

I
the sample

Description Companies
Less

Main market Hsted on Euronext Lisbon at 31 December 2004

Second market 50 7 57 2 2 0 1 1 0 12 1

OveraU

Companies Companies Companies

not subject to Portuguese law without annual report for 2003 without web page page under construction or maintenance 3

Companies with web Final sample

3 0 43 6 49

TABLE Nature Environmental

disclosure

II

of SRD by sectors Human resources Products

consumers disclosure

Companies

and

Community
involvement disclosure

disclosure

Annual
reports

Web
pages

Annual
reports

Web
pages

Annual
reports

Web
pages

Annual
reports

Web
pages

Sector Automobiles and parts

n 0

% 00

n 0

n 0

% 00

% 00

% 0

01100

01100

Banks
Beverages

3
1 and buUding materials 6 1 1 2 0 2 0 1 0 0 2 1

50
50 75 100 100 67 00 33 0 33 00 0 100 33

2
2 3 0 1 2 3 0 1 0 2 1

33
100 38

6
2

100
100

2
2 4 1 1 2 1 3 1 0 0 2 2 1

33
100 50

6
2

100
100

5
1 6 1 1 1 0 1 1 0 0 3 2 1

83
50 75 100 100 33 00 17 100 0 00 75 100 33

5
0

83
0

5
1 2 0 1 2 1 1 0 0 2 1

83
50 25 0 100 67 0 17 100 0 33 0 100 33

Chemicals
Construction

2 100 1 100

2 100 1 100

2
7

100
88 100 100 100 50 100 100 67 100 100 100

2 100 1 100

1
6

50
75 100 0 67 50 33 0 33 25 50 67

2 100 1 100

1
3 0 1 1 1 0 0 0 1 0

50
38 0 100 33 00 17 0 0 01 0 50 0

2 100 1 100

Electricity
and electrical equipment Engineering and machinery Food and drug retailers Food producers and processors Forestry and paper Household goods and textiles Leisure, entertainment and hotels Media and photography Electronic Software and computer services services Telecommunication Transport

1 100

1 100

1 100

1 0 1 100 67 3 02100 3 50 1 0 33 3 02 0 100 33 4 2 3

1 100 0 100 2 67 1 50 2 50 0 100 1 0 0133 50 100 33 1 1 2

Total
%: Percentage
percentage of

23
of disclosing
total sample

47 20

41 44

90 25

51 29

59 26

53 14
disclosing

29 20
companies

41
as a

companies
is reported).

in the sector (except for the final line in the table where

capture the aspects of so categories of items which to analyse. one wants cial responsibiUty simplest form of content analysis consists of or absence of information the presence detecting The

2005; Patten, (see, for example, Haniffa and Cooke, et of the Purushothaman 2002b; al., 2000). One of this form of content analysis is main shortcomings that it does not aUow the measurement ofthe extent

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Factors Influencing SRD of information data do not disclosure reflect the and, therefore, that emphasis the coded

by Portuguese Companies their web

on their

693 similar information disclosed

pages with
annual reports.

attach to each information

1990, p. 42). However, topics discussed is considered as a reasonable measure to provide social of management's wiUingness in general (Bewley and Li, information responsibility On the other 2000, p. 206). hand, we consider it to be a more method than counting of appropriate of pages when one is sentences, words or proportion as such different media of disclosure comparing annual reports and web pages. the analysis of the SRD is made using an that is, a scoring index, system equal-weighted a which each SRD theme for assigns point pertain considered. Disclosure ing to any of the categories scores for each company are added and not weigh Thus, ted, because it is assumed is equally important. Listed that each item of disclosure

companies item (Zeghal and Ahmed, of different the number

empirical studies in the area were of great in the SRD index used (see, for utility developing et al., 1998; Gray 2003; Adams example, Archel, et al., 1995b, Hackston and Milne, 1996; Patten, Several et al., 2000; WiUiams and Pei, 1991; Purushothaman to SRD in this refers in the disclosures 1999). study following four categories:

environmental; human resources;

products
community

and consumers;
involvement.

Environmental relating
management

disclosure
and

comprises policies,
environmental

disclosures environmental
awards

to environmental
system

2003 annual reports were ana companies' lysed. Only the sections ofthe annual report where the disclosure of social responsibility is vol information
untary were analysed, namely the chairman's report or

ISO 14001 and Eco Management and (including Audit Scheme the environmental EMAS), impacts of products and processes, environment-related expenditures, conservation activities, efficiency.
issues as

the environmental of and natural disclosures resources

numbers

benefits

of products, recycling

resources

and

letter to the shareholders

and the management

Each of the companies' web pages was and analysed during the month of August 2004. The were entire web All examined. links were pages but for the following exclusions: followed, neither (Patten copies and Crampton, of social and/or on-line of the annual

report. accessed

Human
employee

energy concerning covers such disclosure

and remuneration,

share ownership, consultation, employee employee or and of minorities education, training employment
women, and trade union information. Products and

report

copies in the included available, were ports, where web page analysis; links to external release disclosures press were the followed were companies (Patten and Crampton,
or product

nor on-line 2004) re environmental

encompasses to product quality (for example, third-party recog nition for the quality of the company's products) and
consumer relations (for example, customer com

consumers

disclosure

disclosures

related

also not

(but press releases of examined for SRD) 2004); such as news

were not fol

. involvement plaints) Community to disclosures relating sponsorship its), as weU as charitable donations

disclosure

includes

(e.g. of art exhib and activities.

links to company
letters lowed.

publications
catalogues

score is of 30. The maximum The total maximum score for each of the categories considered is of 11 for environmental disclosure, 9 for human resources dis closure, 5 for products and consumers disclosure and 5 for community involvement disclosure (see Table III). To avoid penaHsing companies for not disclosing items considered irrelevant to them, these items were excluded. This is the case with Banks and Software and computer services sectors, particularly regarding some of the environmental disclosure items (poUution arising from use of product, discussion of specific environ
mental laws and regulations, prevention or repair of

The

reason

for

the

exclusions

referred

to in the

is the purpose of coUecting preceding paragraph on two data the media segregated (Frost analysed et al., 2005, p. 91). This is done because the focus is on the comparison of the social responsibility information that companies choose to highlight on

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694 Manuel

Castelo Branco and Lucia Lima Rodrigues TABLE III

SPJD areas and items of disclosure Annual Web n

Environmental disclosure

Categories

reports % n

pages %

policies or company concern for the environment Environmental management, 14 systems and audit PoUution from business operations 11 22.45 9 18.37 PoUution arising from use of product 4 8.16 9 18.37 Environmental
Discussion Prevention Conservation of or specific repair environmental of damage resources to the and laws and regulations 3 6.12 activities 4 5 10.20 environment recycling

16 28.57 10 20.41

17 32.65 34.69

8.16

1 2.04

of natural

11 22.45

8 16.33

SustainabUity
Environmental aesthetics 4 8.16 3 6.12

11 of energy in the conduct of business operations of products 1 2.04 2 4.08

disclosure

22.45 1020.41 7 14.29

12

24.49

Conservation Energy
Human

efficiency
resources

Employee Employee Employee Employee Employee

Employee

Health

Employment

and Safety 16 32.65 9 18.37 2 4.08 0 0.00 of minorities or women

29 59.18 5 10.20 training 6 12.24 4 8.16 assistance/benefits 26 53.06 5 10.20 remuneration 32 65.31 19 38.78 profiles
share purchase schemes 14 28.57 3 6.12

Employee morale Industrial relations

Products and consumers

10 20.41 6 12.24 7 14.29 0 0.00

disclosure

Product

safety Product quality

Disclosing of consumer safety practices 1 2.04 4 8.16

6 25 12 24.49 10 20.41
difficult-to-reach consumers

12.24 51.02

7 14.29 23 46.94

Consumer
Provision Community

complaints/satisfaction
for disabled, involvement aged, disclosure and

6.123

10.20 5

10 20.41 14 28.57 Charitable donations and activities 13 26.53 14 28.57 for education Support arts 12 24.49 14 28.57 and culture for the Support 5 10.20 3 6.12 for health Support pubUc 10 20.41 13 26.53 Sponsoring sporting or recreational projects
%: Disclosing companies as a percentage of total sample.

aesthetics environmental damage to the environment, and energy efficiency of products) and some of the items (safety and products and consumers disclosure customer case with and hotels disclosure safety practices). The same is thought to be the companies from the Leisure, entertainment sectors, but only items. regarding environmental

score indexes are constructed Thus, the disclosure to take into account these considerations:

for a expresses the level of disclosure of number is the maximum company j, where N relevant items a company may disclose and d{ is equal to 1 if the indicator i is disclosed, and 0 otherwise. This index

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Factors Influencing SRD When indicates the disclosure score is equal to 0, it / does not disclose any item. index

by Portuguese Companies

695

that a level 1,..., m, mean is provided, and m, is the maximum number of indicators d{ disclosed by a company j. In the case of Banks and Software and computer Index values of disclosure
services sectors, environmental information total

that company = equal to i

report 44% of companies disclose 3 or 4 categories of social responsibility and 45% only dis information, close information related to one or two of the cat egories companies responsibility information
considered.

considered. disclose

On

the or

Internet,

38%

of

the

4 categories 3 of social and 39% only disclose information, related to one or two of the categories II indicate that the kind of social dis companies resources is human

score is 6; and for products and consumers, the total score is 3 (SRD total of 23). In the case of entertainment and from the Leisure, companies hotels sector, environmental total score information score is 6 (SRD By services total score of 25). other comparison with sector has sectors, lower the financial

Results

in Table

responsibility close in their information

information annual

that more

ronmental

argument even in studies which ponents Kohers of SRD p.

direct envi significantly some as an is This used authors impact. by to exclude banks and finance companies analyse all the various com 2003). (Archel, 101) characterise a limited direct and Simpson the banking of the pro

reports and con (90%), foUowed by products sumers information and environmental (59%) information On the the kind of Internet, (47%). that more

is prod companies provide ucts and consumers information (53%), foUowed by human resources information (51%). Comparison Internet with annual of the information similar information disclosed disclosed on the in the

information

(2002,

industry as having environment and duction

safety are minimal

poUution

a relatively where process product

concerns.

homogeneous safety and employee

II indicates that community reports in Table as fre involvement is not disclosed information both on the Internet involvement and the annual disclosure the Internet is reports. the only is the pre

quently

Community

In the case of banks, which represent an important of in the used this part sample study, we have con sidered disclosures
ronmental

category regarding which ferred media of disclosure companies whereas only

do so).

that

environmental

disclosure
and

relating
management

to environmental
systems

policies,

comprises envi

disclose

(40% of the by companies this information on the Internet, 29% of them use the annual report to reported by (1999) and can be inter For example, Banks and services are sectors with a high and community rela consumers, is an important part of the SRD are similar to those

environmental

awards and Audit policies

operations),

(including ? Scheme EMAS), as poUution (considered

conservation of

ISO

14001

and Eco Management lending and investment from

resources

These Clarke

results

business
and

natural

preted Telecommunication among visibility tions disclosure made

and Gibson-Sweet in a similar way.

and disclosures sustainability PoUution energy efficiency. concerning arising from use of product and energy efficiency of products are recycling activities,
not there concerns are no that relevant banks have and, as far as we know, laws and specific environmental

regulations

pertaining

to the banking

sector.

in these sectors. As expected, by companies while few banks disclose environmental information, the percentage of retailers and telecommunication services disclosing such information is higher com pared On to banks. the other hand, suggest, some as Clarke industries have and Gibson-Sweet a larger po

Results

and

discussion

Descriptive Results

analysis

but are not as impact on the environment to the final consumer, is less and the public aware of them. A company to the less weU known close public, tential in activities with larger po on the would have less environment, impact reason to justify its existence to society by means of a better known one. disclosures than community involved seems to be the case of companies in the and

(1999) tential

suggest that companies prefer the annual as an SRD 11 medium. do not report companies social on information the present responsibility in the annual report the same Internet, whereas with only 5 companies. For the annual

happens

This

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696 Manuel

Castelo Branco and Lucia Lima Rodrigues

human resources are an resource, it is

Chemicals,

Construction and building materials and a sectors: and of paper Forestry larger percentage than them disclose more environmental information information. involvement community seems more difficult to explain What expected) sures by companies tive sectors, such in some (and was not are the results for environmental disclo environmentaUy as Construction and building and processors. These producers SPJD than compa as might be expected. sensi

important

natural other

for

investors

to be

interested

in it. On

the

hand, because company web pages are aimed at a broader public, including consumers, it is natural to community to give prominence for companies involvement Table

and products/consumers information. IV presents the results of the test on the SRD in the annual reports and between difference on rank the Wilcoxon-signed the Internet. Both test and the paired sample t-test indicate significant in total SRD and human resources dis differences in annual reports). Al (more disclosure in involvement the difference community though disclosure is not statisticaUy significant, there is an the Internet and an between important difference closure nual reports as disclosure the Internet). media (more disclosure on

materials companies nies from

and Food

do not disclose more

other sectors, in included the fact that the companies However, and are the sample are listed on the second market, thus less visible, may explain the lack of disclosure, at
least in part.

Comparison Internet with annual reports environmental information

of the information similar information II and and in Tables information evident

disclosed disclosed

on

the that

in the resources

III indicates human

are more

in annual

on the Internet, whereas involvement community

the reverse information.

reports than is the case with The differ

Analysis An

ofthe main

results

ence only seems to be relevant in the case of human resources information (the annual report is the pre and community of ferred medium disclosure) information involvement (the Internet is the pre ferred medium products say whether
reports or

of the Kolmogorov-Smirnov (K-S analysis test sta the and normality LiUiefors) Shapiro-Wilk variables and contin tistics suggests that dependent are not uous distributed variables independent to normaUty normaUy. To bring the variables closer of the purpose and independent dependent transformed by computing for the der Waerden's 2005). transformed Multiple developed The regression variables. regression continuous normal analysis, variables the are

With of disclosure). respect it is difficult information and consumers it has

on the

to to

a stronger

presence

in annual the choice of on

Internet.

transformation analysis

As Zeghal and Ahmed amedium for information

(1990) argue, disclosure is dependent

scores using Van (Haniffa and Cooke, is performed with the

the message is intended. the target public for whom Because annual reports are directed at investors and

is used to test the hypotheses regression the before conducting above. However,

TABLE
Paired sample f-tests and Wilcoxon-signed rank test

IV
for SRD in annual reports and on the Internet

Paired

sample

t-test

Wilcoxon

test

Mean

difference

t 3.452 0.901 6.949

-0.186 -1.183

Sig. (2-taUed) 0.001 0.372 0.000

0.853 0.243 on on the the

Asymp.

Sig. (2-taUed)

Environmental disclosure Human resources disclosure

Products Community aBased Based on on and consumers involvement ranks ranks disclosure disclosure

SRD Total0.063 0.020 0.206

-0.008 -0.041 in annual in annual

-2.997a 0.003 0.752 -0.316a 0.000 -5.132a

0.844 -1.333b -1.183b0.183

positive negative

(disclosure (disclosure

reports reports

> disclosure < disclosure

Internet). Internet).

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Factors Influencing SRD analysis

tests,

by Portuguese Companies

697

several
autocorrelation

diagnostic
tests,

tests,

such

as normality
tests

heteroscedasticity

to ensure and multicoUinearity tests, are performed are drawn based on the multiple vaHd conclusions If the tests are not satisfied then results. regression are performed. The Jarque corrective procedures on the residuals of Bera normaHty test is performed aU the models. is tes of multicoUinearity possible ted based on the correlation matrix aU incorporating The existence the independent variables (transformed data) as weU as computing the variance inflation factor (VIF). to Results indicate that multicoUinearity is unlikely a In addition, be results suggest that in problem. none of the regressions the highest VIF is above 3, no need to be concerned is that there confirming about
variables.

regression analysis is used for multivari Multiple ate testing ofthe hypotheses. Each ofthe dependent variables, SRD in annual reports and on the Internet, is regressed the transformed against independent categorical variables Table V presents the results ofthe pertaining Table V independent total SRD. significant independent together, to total SRD. the results of regressing the reports on the dependent variables variable are The F values for the two models at 0.01 level. variables that the suggests when taken considered, This variables. The are also included. regression models

taken explain total SRD and its categories this does not mean that each individuaUy. However, to the of the independent variables contributes of the dependent variables. explanation The adjusted R2,s suggest that approximately 34% (in the case of annual reports) and 37% (in the case of the Internet) of the variation scores in the SRD can be explained between the companies by the in the regression variables included independent models. two of the independent variables are each model: size in both, media significant case in the of annual exposure reports and leverage in the case of the Internet. The coefficients of total Only in

the

correlation

between

the

independent

test for unequal variances, White's general on each set of test is performed heteroscedasticity test statistics are not signif results. All chi-squared To icant at a five percent level. Thus, the tests suggest that a widespread does heteroscedasticity problem not exist in the data and no corrective procedure is undertaken to combat its presence in the data.

TABLEV
Results of the regression models for total SRD

Independent

variables

Disclosure

media: Coefficient

Annual estimate

reports

Disclosure Coefficient

media:

Web estimate

pages

(Constant)
International experience Leverage Profitability

0.109 -0.201
0.027 0.146 -0.256 -0.091-0.227 -0.332**

Size
Media exposure sensitivity proximity Environmental Consumer

0.490**
0.376* 0.224 ?0.21 0.181 ?0.151 0.435

0.404**

R2 = 0.432; Adj. R2 = 0.335;

Durbin-Watson = 1.762

R2 = 0.465; Adj. R2 = 0.374;

Durbin-Watson = 1.937

F = 4.460; p = 0.001
White heterosced. test:

F
White

= 0.000 5.100; p
heterosced. test:

Obs

* R2 = = 0.292 36.933; p = test: 2.631; Jarque-Bera JB = 0.268 p p

Obs =

= 0.713 * R2 = 28.025; p = 0.601; Jarque-Bera test: JB 0.740

*Significant at the 0.10 level (2-tailed). **Significant at the 0.05 level (2-tailed).

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698 Manuel assets and media cates, variables

Castelo Branco and Lucia Lima Rodrigues indi these models and media human which consumers resources have as dependent variables products in annual disclosure reports and disclosure variable on the Internet. with The is significant

are positive. This exposure as hypothesised, that as the value of increases so does

is significant Leverage the Internet, presenting suggests that the higher the lower Thus, research reports exposure Internet its SRD. at an

a company's SRD score. in the case of total SRD on a negative coefficient which the leverage in a company, supported in annual and media on the related

exposure positive coefficients and consumers only when products in is the independent variable disclosure (both on Consumer annual and the Internet). reports coefficient disclosure that

the level, aggregated case in the of SRD hypotheses are those related to size

a positive is significant with proximity case in the of community involvement on H3a the Internet, which

(H2) in the case of SRD (H4), whereas is the one the supported hypothesis

leads to a conclusion

to size (H2). the results of regressing the indepen on each category of SRD, from the have hu only those which eight regression models man resources disclosure as a dependent variable are Regarding dent variables non-significant resources disclosure at the 1% level. in annual In the case of human the regression in the case of is reports is significant at the 2% level, whereas on the Internet the regression similar disclosure The from power explanatory 7.5% for the human

on the in the case of disclosure is accepted a In is with Internet. addition, leverage significant in the case of human resources coefficient negative disclosure nificant products
reports.

on with

is sig the Internet, and profitability a positive in the case of coefficient consumers in annual and disclosure summarises with the results on

Table
testing.

VI

hypothesis

Consistent exposure,

which

studies size and media previous are considered as proxies for social

non-significant.

of the regression ranges on resources disclosure

visibUity, have in general a positive relationship with the total SRD. These results are consistent with frame resulting from the theoretical expectations work proposed and with previous SRD studies. SRD and The non-significant relation between international considered consistent environmental in both media of disclosure experience is an unexpected result. These results are those of Choi disclosure (1999), who analysed listed practices of Korean

involvement the Internet to 49.5% for community disclosure on the Internet. As for the importance of in explaining variation variables the independent between the size variable is disclosure, companies' in almost aU coefficients with positive significant are the The the regression models. exceptions

with

TABLE VI
Summary of the results from the hypotheses testing

Variables Hypotheses
International experience Positive Positive Company size relation relation

Annual
Non-significant Positive

pages reportsWeb
Non-significant Positive products resources products and total Positive and relation: products relation Non-significant: human

relation

Non-significant: and consumers Media exposure Positive relation Positive and relation:

consumers

consumers

SRD
Non-significant Environmental Consumer visibility proximity Positive Positive relation relation Non-significant Non-significant Non-significant Positive community Non-significant Non-significant

relation: involvement

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Factors Influencing SLID by Portuguese Companies and did not find a significant association companies between international (which he calls experience customers' and disclosure. influence") "foreign consumer Regarding is only relation positive Internet Although reports' proximity, discernible significant in the case of a Concluding This SRD study by a

699

remarks some factors which influence

analyses

involvement disclosure. community a positive case in of annual relation the is also involvement disclosure community these results are considered to be the theoretical framework are aimed proposed. at a broader

listed on the sample of companies Stock Lisbon), (Euronext Portuguese Exchange a theoretical framework which combines using legitimacy theory and a resource-based perspective. to this framework, managers According increasingly need to consider SRD as a signal of improved social and environmental disclosure influences conduct the in those fields external because of perception in that operate By demonstrating they with social and ethical criteria, compa can build reputation, whereas failing to do so impor than to to the infor and

hypothesised, consistent with Because

company web pages than annual reports, it is natural for companies public to give prominence to the Internet as a media of their involvement activities. disclosing community Environmental explains visibility in environmental the differences This is not a factor which disclosure

reputation. accordance nies

is an unexpected among companies. finding. The theoretical framework leads to the proposed expectation associated findings with such of is that higher environmental visibility to higher levels of disclosure, and the SRD studies are consistent

can be a source of reputational risk. attribute greater Portuguese companies tance to annual reports as disclosure media the Internet. Noticeable much mation the differences are related resources of human higher presence in annual reports than on of

the Internet

previous are a sign These expectation. findings a more that companies with limited environmental are also environmental informa impact disclosing

These

tion. For example, banks are increasingly disclosing this kind of information. This is probably explained by the fact that in the last two decades the focus has been
sure.

on

environmental seem

responsibility

and

disclo

reports. are probably related to the fact that at investors and it is annual reports are directed to be interested natural for investors in human resources. On the other hand, because company web pages are aimed at a broader public, it is natural for to give to community companies prominence results
involvement information.

higher information

presence community on the Internet than in annual

involvement

to be quite sensitive to firms Portuguese as their visi media public perceptions, proxied by their SRD bility and their size, when determining strategies. These
literature, both

findings
in

are well

documented
countries

in the
(see, for

Anglo-Saxon

that companies with to improve greater concern higher visibiUty on SRD both the Internet corporate image through and in annual reports. In addition, in sectors with a high visibiUty among consumers there is greater con exhibit cern for community activities and dis involvement is thus some support for the use of a closure. There of legitimacy theory with resource-based combination to explain SRD by Portuguese Usted perspectives
companies.

Evidence

seems

to suggest

et al., 1998; and Li, 2000; Neu example, Bewley Patten, 1991) and in continental (Cormier Europe et al., 2005). These and Magnan, 2003; Cormier results are also consistent with literature from other countries Cormier et al., 2000). (Choi, 1999; Purushothaman and Magnan (2003, p. 58), who have French firms' environmental reporting

analysed practices, suggest that "corporate disclosure strategies seem to be determined in a similar way, irrespective
of a given country's socio-cultural environment".

of

interesting result is related to the seeming lack between the factors influ significant difference SRD listed compa encing practices of Portuguese when to companies from more compared countries. We consider that there is no in the less devel in a significantly in more developed

An

nies

These of on the

authors

consider

that this "is an iUustration

stock markets strong impact of globalised in corporate convergence fostering practices"

developed reason to expect that companies oped capital markets wiU behave different manner capital markets. than companies

(ibid.).

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700 Manuel We

Castelo Branco and Lucia Lima Rodrigues Revista Espafiola

571-601.

interpret the findings as a result of the con in corporate practices which is promoted vergence (Cormier by the impact of globaHsed stock markets a 2003, p. 58) and has as consequence lack of of contextual seeming importance general factors in determining disclosure practices of Hsted and Magnan, further analyses are required to companies. Although avenue for future validate this claim, it is a promising research (ibid). we believe in that such similitude Furthermore, the way inwhich disclosure practices are determined in the case of unlisted is not as Hkely to happen companies. less subject of unhsted extension companies
medium-sized

de Financiacion y Contabilidad

117,

Bansal, P.: 2005,

Study

'Evolving SustainabiUty: A Longitudinal

Sustainable Development', Strategic

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Management Journal 26(3),

Belkaoui, the tion', A. Corporate Accounting, and P. G. Decision

197-218.
'Determinants Social Informa Journal of

1989, Karpik: to Disclose and

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Accountability

2(1), 36-51.
Bewley, K. and Y. Li: 2000, 'Disclosure of Environ

mental
Companies: Advances

Information
A in Environmental

by

Canadian
Disclosure

Manufacturing
Perspective', and Management 1,

Voluntary

Accounting

are SPJD practices of listed companies to general contextual factors than those companies. interesting possible of this study would be to use a sample of are not listed, including smaU and which
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201-226.
Branco, M. C. and L. L. Rodrigues: 2006, 'Corporate

An

and Resource Social Responsibility Business Ethics 69(2), tives', Journal of

Brammer, Reputation', 713. Brammer, Disclosures S. and by S. Large Pavelin: UK 2004b, Companies', S. and S. Pavelin: 2004a, European Management

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'Budding

Perspec
a Good 704

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22(6),

are of this study, which Other possible extensions to not mutuaUy add be exclusive, may envisaged new insights to the analysis of SRD by companies. One more is related to the use of such possible extension Another refined content analysis procedures. extension is an in-depth analysis of catego involve which very likely would theoretical of framework proposed. be an sample would to the analysis insights

'Voluntary Business

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Campbell, Sectional D., G. Moore Effects and P. Shrives: 2006, 'Cross Account in Community Disclosure',

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Choi,

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J.-S.:

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