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Grameen Bank’s
Grameen Bank’s social social
performance disclosure performance
Responding to a negative assessment
by Wall Street Journal in late 2001 149
Muhammad Azizul Islam
School of Accounting, Economics and Finance,
Deakin University, Burwood, Australia, and
Martin Reginald Mathews
School of Accounting and Finance, Victoria University, Melbourne, Australia

Abstract
Purpose – The aim of this paper is to establish a linkage between negative global media news towards
Grameen Bank (GB), the largest microfinance organisation in the developing world, and the extent and
type of annual report social performance disclosures by GB, over the nine-year period 1997-2005.
Design/methodology/approach – Content analysis instruments are utilised to analyse GB annual
report social disclosure.
Findings – The study finds that GB’s community poverty alleviation disclosures account for the
highest proportion of total social disclosures in the period 1997-2005. The results of this study are
particularly significant in relation to poverty alleviation – the issue attracting severe criticism from the
Wall Street Journal (WSJ ) late in 2001. The community poverty alleviation disclosures by GB are
significantly greater over the four years following the negative news in the WSJ than in the four years
before. The results suggest that GB responds to a negative media story or legitimacy threatening news
via annual report social disclosures in an attempt to re-establish its legitimacy.
Originality/value – This paper contributes to the literature because in the past there has been no
research published linking global media attention to the social disclosure practices of major organisations
in developing countries.
Keywords Banks, Disclosure, Annual reports, Bangladesh
Paper type Research paper

1. Introduction
There is a growing body of research investigating social disclosure practices of
organisations operating in developing countries (Belal, 2001; Hegde et al., 1997; Jaggi and
Zhao, 1996; Teoh and Thong, 1984; de Villiers and van Staden, 2006; Islam and Deegan,
2008a). What has been lacking in this field of research is to establish a link between the
social disclosure practices (if any) and external pressures on an organisation (the
exceptions being de Villiers and van Staden, 2006; Islam and Deegan, 2008a). In a
previous study by Islam and Deegan (2008a) it is argued that without understanding the
international expectations and pressures, management motivation for social disclosures
in major organisations in a developing country may remain unknown. In this study, we
examine whether pressures via a legitimacy-threatening report by a global media – this Asian Review of Accounting
Vol. 17 No. 2, 2009
being the Wall Street Journal (WSJ ) – influence the social disclosure practices of pp. 149-162
Grameen Bank (GB) – the largest Microfinance Institute (MFI) within developing q Emerald Group Publishing Limited
1321-7348
countries. DOI 10.1108/13217340910975288
ARA Nine years of annual reports (from 1997-2005) by GB are examined to establish a link
17,2 between global pressures and expectations and the social reporting behaviour of GB.
Our argument is based on prior research that adopted media attention as a proxy for
community expectations/concerns to explain organisational annual report disclosures
in developed countries (Brown and Deegan, 1998; Deegan et al., 2002; O’Donovan, 1999).
Bangladesh is a country of MFIs. These institutions come with a poverty reduction
150 agenda and depend on a large number of Western donors and international
organisations such as intergovernmental organisations, the World Bank and IMF.
Furthermore, MFIs around the world (GB is the most prominent and visible figure) have
huge social and economic impacts on the international community in which they
operate. Specifically, the GB-network impacts on over six million poor women in
Bangladesh and 2.5 million poor people across the world (Hulme and Moore, 2005).
The paper is organised as follows. After this introductory section the paper provides
a description of GB as an institution, and a legitimacy threatening report from WSJ;
the theoretical perspectives of the paper are next considered, followed by the research
methods employed and the findings. The final section provides concluding comments.

2. A brief overview of GB
According to the GB website, GB has reversed conventional banking practices,
providing credit to the poor in rural Bangladesh without the need for collateral, and
creating a banking system based on mutual trust, accountability, participation and
creativity. At GB it is believed that credit is a cost effective weapon with which to fight
poverty and it serves as a catalyst in the overall development of the socio-economic
conditions of the poor who have hitherto been kept outside the banking system on the
grounds that they are poor and hence not bankable. The Noble Laureate Professor,
Muhammad Yunus, the founder of GB and its Managing Director, reasoned that if
financial resources can be made available to the poor people without any collateral,
“these millions of small people with their millions of small pursuits can add up to create
the biggest development wonder” (http://www.grameen-info.org/bank).
As of May 2006, GB had 6.83 million borrowers, 97 per cent of whom were women
spread across 2,283 branches; it provided services in 73,609 villages, covering more than
88 per cent of the total villages in Bangladesh (http://www.grameen-info.org/bank).
GB has established a global network of 46 partners in 20 countries and has impacted on
an estimated 2.5 million poor people in the USA, Asia, Africa, the Americas and the
Middle East (http://www.grameenfoundation.org; Hulme and Moore, 2005). It is a
dynamic global organisation that applies a powerful tool, microfinance, to empower the
world’s poorest people to escape poverty (http://www.grameen-info.org/bank).
According to GB’s official website, the bank has more money in deposits than it lends
out to borrowers, and it lends out half a billion dollars a year in loans averaging
under $200 without collateral, and maintains a 99 per cent repayment record (http://
www.grameen-info.org/bank).
At present, GB is regulated by the country’s central bank, Bangladesh Bank, and in
this regard financial statements appear to be audited in accordance with the guidelines
provided by Bangladesh Bank and International Accounting Standards (IASs).
However, there is no specific mandatory requirement for GB to make annual reports
publicly available. Therefore, the reporting practices of GB including social reporting
are self regulated.
3. A legitimacy threatening assessment by WSJ Grameen Bank’s
Late in 2001 GB faced a crisis on disclosure issues as the WSJ (2001) reported a lack of social
transparency in social and financial disclosures within GB’s annual reports and online
information. To make this assessment, a Wall Street journalist interviewed the founder performance
of GB and reviewed all relevant documents including GB annual reports and online
information late in 2001 (WSJ, 2001).
The WSJ (2001) reported that the GB annual reports and online disclosures were not 151
transparent enough to show the real picture. As WSJ (2001) stated:
Some of Grameen’s troubles stem from a 1998 flood and others from the bank’s own success.
Imitators have brought more competition, making it harder for Grameen to control its
borrowers. The bank’s loan portfolio grew rapidly in the early 1990s, but it has now shrunk to
1996 levels, at $190 million. Profits have declined about 85% to the equivalent of $189,950 last
year from $1.3 million in 1999. The bank with 1,170 branches, all in Bangladesh, has high
operating costs. Grameen would be showing steep losses if the bank followed the accounting
practices recommended by institutions that help finance micro lenders through
low-interest loans and private investments[1]. And the situation may be worse than it
appears; the bank is converting many overdue loans into new “flexible” loans that Grameen
report as up-to-date.
In relation to the transparency of GB’s loan recovery rate, WSJ specifically stated: “but
Grameen may simply be delaying inevitable defaults and hiding problem loans” (WSJ,
2001). As indicated previously, GB has always measured success through its loan recovery
rate. The disclosure of a high recovery rate has become the central point of debate as it
appears to give GB the legitimacy to survive in the community in which it operates.
In relation to the level and adequacy of disclosure, WSJ highlighted a supporting
argument where it was shown that GB failed to mobilize international funding due to its
perceived insufficient and inadequate performance statement. It stated:
In early 1998, Grameen approached the international finance Corp., the business-finance arm of
the World Bank, about turning some of Grameen’s portfolio into securities. The IFC declined to
proceed, in part because Grameen “didn’t provide all the account information the IFC
requested” an IFC official said. The official requested anonymity because the IFC is reticent
discussing its negotiations with clients (WSJ, 2001).

4. Theoretical perspective
A widely used theory that attempts to explain social reporting practices is the legitimacy
theory (Adams et al., 1998; Brown and Deegan, 1998; Deegan, 2006, 2002; Deegan et al.,
2002; Deegan and Blomquist, 2006; Deegan and Rankin, 1996; Guthrie and Parker, 1989,
1990; Gray et al., 1995; Neu et al., 1998; O’Donovan, 2002; O’Dywer, 2002; Patten, 1992;
Mathews, 1993; Islam and Deegan, 2008b). Legitimacy theory focuses on the fact that an
organisation’s value system should be congruent with the value system of the society in
which the organisation operates (Linblom, 1994). The need for congruency between
organisational actions and the value system of the society is to ensure organisational
survival (Dowling and Pfeffer, 1975; Neu et al., 1998). The concept of the social contract is
grounded within the legitimacy theory. The notion of a social contract indicates that the
motivation for managers to report social information is to comply with community
expectations, and perhaps reflective of a view that compliance with the community license
to operate (Deegan et al., 2002). Based on the social contract, organisational managers
ARA desire and act to operate in such a manner that honours broader community expectations.
17,2 As the founder and managing director of GB stated in the annual report 2005:
A completely new world can be created by making space for the social entrepreneurs and the
social investors in the business world. This is a very important agenda for all of us. Eliminating
poverty will become so much easier if social entrepreneurs can take up the challenge of ending
poverty, and social investors can put their investment money to support the work of social
152 entrepreneurs (Annual Report, 2005).
Microfinance is firmly associated with the millennium development goals (MDGs)
(Morduch and Haley, 2002; CGAP, 2003; Moll, 2005; Hossain and Knight, 2008). All
the Member States of the UN have agreed to reach the MDGs[2] of halving the proportion
of people who live on less than a dollar a day, and the proportion of people who suffer
from hunger by 2015 (UNESCAP, 2003). Members of the global community such as
international governments, the World Bank, Consultative Group to Assist the Poorest
(CGAP)[3] and development agencies, actively assist NGOs and MFIs to meet the UN
millennium goal of poverty alleviation (www.un.org/millenniumgoals; Bendell and
Visser, 2005; UN, 1998; Manalo, 2003; Ming-Yee, 2007). Microfinance is increasingly
being discussed as the way in which organisations in developing countries can support
MDGs (Bendell and Visser, 2005). Many southern donors and social investors hope to
strengthen microfinance as a poverty reduction tool and MFIs in the north are making
conscious efforts to reach the “very poor” individuals highlighted by the MDGs
(Morduch, 2006). The role of donors to achieve MDGs is crucial. The donors not only
bring their own resources but the possibility of attracting other social investors
(Morduch, 2006) and shaping the perceptions of the broader community. Consistent with
the legitimacy theory, the founder of GB appears to set its mission statements in such
a manner that it fulfils the requirements of the broader community. As the founder and
managing director of GB stated:
[. . .] the mission of Grameen Bank is to provide comprehensive financial services; we empower the
poor to realize their potential and break out of the vicious cycle of poverty (Annual Report, 2001).
As discussed previously, organisations’ actions to comply with global community
expectations are essential to organisational survival. Consistent with this perspective,
GB’s actions appear to comply with the expectations of the global community. As the
founder and managing director of GB mentioned in GB’s website:
Grameen always tried to remain as transparent as an organisation can be. It started to
distribute widely its monthly statement containing all basic information about its operation.
Among the many universities, donors, and libraries who receive this monthly statement the US
Library of Congress is one [. . .] We publish our Annual Report every year. This contains,
besides many other interesting economic, financial and social information, balance sheet, profit
and loss accounts and cash flow statement for the year, audited by two top audit firms of the
country, firms which are affiliated with international audit firms (Grameen Bank online
statement http://www.grameen-info.org/bank).
While the legitimacy theory posits that managers react to the expectations of the
community, the media agenda setting theory (a theory popularly used in journalism and
communication literature) posits that the media can influence and shape the expectations
of that community. Accounting researchers have already adopted the media agenda
setting theory to document the influence of the media on corporate disclosure practices.
They found that the corporate social and environmental disclosure strategies tend to be Grameen Bank’s
tied to the extent of media attention devoted to the relevant social and environmental social
issues (Brown and Deegan, 1998; Deegan et al., 2002; O’Donovan, 1999; Islam and
Deegan, 2008b). performance
According to the media agenda setting theory, the media shapes public awareness as
the media agenda typically precedes public concern for particular issues (McCombs and
Shaw, 1972). “Media are conduits of information. True, they can filter, distort and 153
amplify, and that is where the agenda-setting model offers the greatest promise”
(Neuman, 1990, p. 161). The public needs the media to tell them how important an issue
is, as individuals do not learn this from real world cues. Understanding the nature of
global news coverage by the news media is of great importance when considering its
possible implications, as suggested by previous journalism and communication studies
(Wanta et al., 2004). A study by Salwen and Matera (1989) that found correlations
between foreign news coverage and public opinion, and suggested that global
news coverage does indeed have an agenda-setting effect.
Both positive and negative news have agenda setting effects (McCombs, 2004). While
both positive or negative news have an agenda setting effect, media attention of a
negative or unfavourable nature may have greater agenda setting effects (Deegan et al.,
2002). The negative media attention gives organisations greater incentive to provide
more positive disclosures (Deegan et al., 2002; Islam and Deegan, 2008b).
Consistent with the legitimacy theory, if the international media provides a particular
legitimacy threatening negative story about GB’s social performance (for example;
GB fails to alleviate community poverty or fails to provide sufficient information about
its poverty alleviation performance), then GB will need to adopt a higher level of social
disclosures to re-establish legitimacy. Hence, for the purposes of our study, and with the
legitimacy theory and media agenda theory in mind, we can expect that GB’s disclosure
strategies will respond to a negative news story from the global news media such WSJ.

5. Research method
This study examines the extent and type of annual report social disclosures by GB
over a nine-year period from 1997-2005, to ascertain whether or not a negative story
from WSJ had a significant impact on social disclosures. Nine-year annual reports by
GB and the contexts of the negative story by WSJ were utilised to analyse GB’s social
disclosures.
The annual reports under investigation are available on the GB website. This study
utilises MDGs to categorise social disclosures for a microfinance institution. The
MDGs – which range from halving extreme poverty to providing universal primary
education, all by the target date of 2015 – form a blueprint agreed to by UN member
states and leading global development institutions including leading MFIs (www.un.
org/millenniumgoals). From an organisational perspective it makes sense to contribute
to the achievement of the MDGs; they can help create a sustainable atmosphere,
and they can help businesses to connect with new opportunities (Sturchio, 2008;
Nelson and Prescott, 2003; Prahalad, 2004). Given the importance to tackle the
challenges associated with the MDGs, attention is turned to the potential contributions
from both profit and non-profit organisations (Boechat and Paro, 2008; WBCSD, 2005).
The disclosure content classification for this study broadly embraced the major issues
of the MDGs:
ARA (1) community poverty alleviation;
17,2 (2) community health;
(3) community education;
(4) environmental sustainability; and
(5) others.
154
Interestingly, the issues such as community health, poverty alleviation, community
education and environmental sustainability were considered as specific organisational
annual report social and environmental disclosure categories by many accounting
researchers (Hackston and Milne, 1996; Deegan et al., 2002; Islam and Deegan, 2008a,b).
Furthermore, these issues are believed to be key social performance indicators for
organisations operating in developing countries (Islam and Deegan, 2008a).
The extent of disclosure was measured by the number of sentences. The number of
sentences has generally been used in prior social and environmental accountability
research (Deegan et al., 2002). Furthermore, measures such as sentences have been found to
be highly correlated with other measures, such as percentages of pages dedicated to
particular disclosures (Hackston and Milne, 1996). Disclosure is further classified as
positive and negative. A clear definition of positive and negative disclosure is needed before
making a selection of relevant disclosures. Hogner (1982), Brown and Deegan (1998),
Deegan et al. (2002) and Islam and Deegan (2008b) determined that positive disclosures are
those disclosures that contain information about organisational social activities which
have a positive or beneficial impact on society, and negative disclosures are those
disclosures that contain information about corporate social activities which have a negative
or deleterious impact on society. Consistent with Hogner (1982), Brown and Deegan (1998)
and Deegan et al.(2002), we document GB’s annual report disclosure sentences.
A typical GB annual report includes financial statements, auditor’s reports, a
managing director’s statements, loan activities and social performance statements. The
balance date of GB is 31 December, but annual reports typically become publicly available
within approximately seven months after the balance date. Although there is no legal
requirement for GB to make the annual report publicly available, these annual reports are
predominantly addressed to its stakeholders such as international donor agencies, the
World Bank, development agencies, research organisations and policy makers.
In examining the extent of disclosure, it is necessary to firstly establish the level of
disclosure prior to the WSJ’s report and then compare this measure with the extent of
disclosure following the report. Four yearly annual reports before the WSJ’s news and
four yearly annual reports after the news were considered for the analysis. The nature of
data for this study is consistent with the nature of the data within Deegan et al.’s (2000)
work. The data considered for this study does not meet the assumption of normality
required for parametric tests and therefore a non-parametric test is suggested (Deegan
et al., 2000). Therefore, consistent with the prior study (Deegan et al. 2000), this paper
used the Mann-Whitney U-test – a non-parametric test for the analysis.

6. Findings
6.1 Annual report social disclosures of GB
This section describes the extent of annual report disclosures for each of the five
categories earlier mentioned:
 (1) community poverty alleviation; Grameen Bank’s
(2) community health; social
(3) community education; performance
(4) environmental sustainability; and
(5) others (general policy of social responsibility).
The disclosures over the nine-year period from 1997-2005 are displayed in Table I for
155
each theme. The trends of disclosure are displayed in Figure 1 for the same period.
Descriptions of each category of disclosure are provided next.
6.1.1 Community poverty alleviation disclosure. The community poverty alleviation
disclosures increased from 1997 to 2005 with a peak level of disclosure in 2001
(113 sentences) (Table I). Poverty alleviation disclosures became the most important part
of GB’s annual report and accounted for the highest proportion of total disclosures
(Figure 1). The information on loan recovery rates is believed to be a central part of the
poverty alleviation performance disclosure in every year. A high level of recovery
indicates that poor people are able to repay loans by making viable investments and
earning profits. GB’s record of a higher recovery rate means that poor women are able to
repay without the security of collateral. From 2001 to 2004, GB produced poverty
alleviation statements (with a peak level in 2001), which particularly highlighted its ability
to empower the poor to realise their potential and break out of the vicious cycle of poverty.
6.1.2 Community health disclosure. As seen in Table I, disclosure in relation to
community health performance increased in 1999 and 2000 (peaked with 13 sentences)
and decreased in 2001 and 2002, before disappearing in recent years (Figure 1). Arsenic
contamination of the ground water in Bangladesh has become one of the gravest health
hazards in the recent history of the country. GB’s annual reports from 1998 to 2001
covered an initiative for the community that included viability tests and building
awareness in the community about the serious consequences of arsenic contamination.
The 2000 annual report highlighted safe drinking water through a community based
water supply point. These disclosures were seen as occasional disclosures appearing in
1999, 2000 and 2001. The disclosures appeared, and overlapped with GB’s
environmental sustainability disclosures.

Community poverty Community Community Environmental Total

Year alleviation health education sustainability Others disclosures

1996
1997 12 0 0 0 0
1998 56a (2) 0 0 0 3 59 (2)
1999 48 (2) 11 4 3 2 68 (2)
2000 50 (2) 13 6 6 5 80 (2)
2001 113 (6) 9 12 3 5 142 (6)
2002 98 (3) 2 12 0 3 115 (3)
2003 83 2 12 0 0 97
2004 89 2 12 0 2 105
2005 84 2 12 0 2 100
Table I.
Total 633 (15) 41 70 12 22 778 (15)
Total social disclosure
Notes: ( ) indicates negative disclosure; anegative disclosure sentences included by GB (in sentences)
ARA 160
17,2
140

120
156
Disclosure (sentences)

100

80
Community poverty alleviation
60 Community health
Community education
40 Environmental sustainability
Others
Total social disclosure sentences
20

Figure 1.
GB annual report social 0
1997 1998 1999 2000 2001 2002 2003 2004 2005
disclosure (1987-2005)
Year

6.1.3 Community education disclosure. GB’s educational performance disclosures

also increased in importance in their annual reports. As shown in Table I, the disclosure
increased in 1999 and 2000 and remained consistent from 2001 until 2005 (12 sentences
in every year since 2001). In the 2001 annual report, GB disclosed that to encourage the
schooling of the children of employees/members, it had now introduced scholarships so
that children from poor families could remain at school and compete academically in all
extracurricular activities. Up until December 2004, Tk.12.30 million (US$ 0.22 million)
was distributed among 14,550 students. Priority was given to girls, because in
Bangladesh, education for girls is generally considered less important than for boys.
6.1.4 Environmental sustainability disclosure. Like community health disclosures,
the environmental sustainability disclosures remained minimal and absent in early
and recent times of this study (Table I and Figure 1). Environmental disclosures
provide information about GB’s arsenic mitigation project and minimal information
about the solar energy used in some branches. In the 1997 annual report, little
information was given about its initiative to install solar power to operate on an
experimental basis. Some disclosure on the arsenic related environmental issues were
introduced in 1999 and 2001 (six sentences). GB’s minimal disclosure in relation to
environmental issues exists perhaps because there are no external expectations on GB
to give importance to this issue, and more broadly perhaps because environmental
issues are less appealing to the general populace of developing countries where people
are overwhelmingly preoccupied with meeting their basic physiological needs.
GB’s other disclosures include general disclosures of social policy, which remain
fairly minimal (ranging from 0 to 5 sentences) over the period of the study. In recent
years other disclosures decreased, such as ranging from 2 to 0 sentences.
 According to Tables I and II, GB’s total disclosures contain all positive information Grameen Bank’s
except for a little negative information (between 1998 and 2002) within the theme of social
poverty alleviation. Therefore, negative disclosure is absent from most of the categories.
Summary aggregated totals over the nine-year period from 1997-2005, for each performance
category, are demonstrated in Table II. It is interesting to note that the issue of poverty
alleviation accounted for the highest proportion of total disclosure from GB (81 per cent
of total social disclosure sentences) across the period of the study. The issue of 157
community health, community education, environmental sustainability and others
recorded a low level of disclosure (altogether 19 per cent of total disclosures).

6.2 WSJ’s report and GB’s social disclosures

As previously discussed, GB experienced a direct attack on its survival by the WSJ
(2001). The incident also probably broke down the argument of prior microfinance
literature (Morduch, 1999) that GB was such a powerful organisation and nobody ever
dare criticise its social policy.
The direct threat to GB’s legitimacy by WSJ appeared to influence them to disclose
the momentum level of positive social disclosures through their annual reports in 2001.
It is interesting that Grameen’s other media of disclosures, such as online disclosures,
also demonstrated a positive response towards the WSJ (2001) report. Through the
following online statement, GB tried to change the perceptions created from what had
been published:
You (Wall Street Journal ) owe this to Grameen, to its owners, to the large network of the
committed social entrepreneurs who follow Grameen in their work, as well as to the millions of
poor women and their families around the world who would have benefited from micro-loans if
you had not put a cloud over Grameen and confused the policy-makers in a year when world
leaders will be frantically looking for solutions to massive global poverty (http://www.gramee
n-info.org/bank).
The above statement implies that any attack from the media would create
misunderstandings among policy makers and world leaders about the operation of
MFIs. This type of online public statement and an increased level of annual report
disclosures in 2001 seemed to be GB’s tactic to re-establish its legitimacy. Grameen
reacted far more intensely than perhaps any other organisation in the world to a specific
negative media report, by delivering the highest level of disclosure in 2001.
In relation to GB’s negative social disclosures, it highlighted minimal levels of poverty
alleviation disclosure between 1998 and 2002 (with a peak level in 2001). GB’s peak level of
negative social disclosures (however minimal – six sentences) in 2001, appeared to also be

Issues/themes Positive social disclosure Negative social disclosure

Community poverty alleviation 618 15

Community health 41 0
Community education 70 0
Ensure environmental sustainability 12 0
Others 22 0
Total 763 15 Table II.
Overall social disclosure
Note: In sentences (1987-2005)
ARA associated with the negative media attention from WSJ. GB’s negative self assessment
17,2 appeared to be an attempt to show its transparency and re-establish legitimacy.
As shown in Table III, a further analysis of disclosure was undertaken using the
Mann-Whitney U-test.
Table III shows that community poverty alleviation ( p , 0.05), community
education ( p , 0.05) and total disclosures ( p , 0.05) were significantly greater over
158 the four years after WSJ’ s negative news report than in the four years before. In
particular, community poverty alleviation attracted the most criticism from WSJ, and
thus GB reacted by providing a significant level of related disclosures.
Consistent with legitimacy theory, an organisation facing a threat to its legitimacy
is likely to increase disclosure of positive information following a major incident
which occurs as a result of its own activities. In this context, those issues that
attracted the most criticism from WSJ, led GB to produce more issue related positive
information in the four years subsequent to the negative news than prior to the news.
As shown in Table IV, the results were also particularly significant in relation to
community poverty alleviation – the issue attracting severe criticism from WSJ
(2001). Therefore, the results are consistent with our expectations. Hence, consistent
with the insights provided within the legitimacy theory, annual report social
disclosures by GB reflected its response to a threat to its legitimacy following the
negative report by WSJ (2001).
While the above analysis appears straightforward, it provides some important
insights into the organisational disclosure practices within the context of a developing
country, which are not available in the existing accounting literature.

Mean sentences Mean sentences

(four-year average) (four-year average) p-value
Issues/themes before WSJ report after WSJ report Z Stat. (one tailed)

Community poverty alleviation 41.5 95.75 2.309 0.029

Table III. Community health 6 3.75 0.000 1.0
Comparison of total Community education 2.5 12 2.477 0.029
annual report social Environmental sustainability 2.25 0.75 0.833 0.486
disclosure before and Others 2.5 2.5 0.00 1.0
after WSJ report Total 54.75 114.75 2.309 0.029

Mean sentences Mean sentences

(four-year average) (four-year average) p-value
Issue before WSJ report after WSJ report Z Stat. (one tailed)

Community poverty alleviation 40 93.50 2.309 0.029

Table IV. Community health 6 3.75 0.000 1.0
Comparison of positive Community education 2.5 12 2.477 0.029
annual report social Environmental sustainability 2.25 0.75 0.833 0.486
disclosure before and Others 2.5 2.5 0.00 1.0
after WSJ report Total 53.25 112.50 2.309 0.029
7. Concluding remarks Grameen Bank’s
This paper provides evidence that GB’s community poverty alleviation disclosures social
account for the highest proportion of total social disclosures and influenced total social
disclosures in 1997. The second highest proportion of total disclosures was community performance
education, followed by community health. Community poverty alleviation disclosures
were significantly greater over the four years after the negative news from WSJ than in
the four years before the news. 159
The findings of the review of GB’s annual report social disclosures suggest that there
was a direct impact from a negative report by a global news media on GB’s annual report
disclosures. Negative media attention, specifically a direct attack by WSJ (2001) on GB’s
poverty alleviation credibility and disclosure policy, influenced GB to disclose increased
levels of social information in its 2001 annual report. GB disclosed an increased level of
disclosures as part of their response to negative media attention – this is consistent with
the notion that negative media attention has more of a media agenda setting effect,
which in turn impacts on the disclosure behaviour of an organisation (Deegan et al., 2002;
Islam and Deegan, 2008a,b). GB’s response to legitimacy threatening media attention
was to re-establish its legitimacy. Any global criticism would definitely be harmful to a
MFI; therefore the criticism influenced GB to provide significantly increased levels of
positive social disclosures. This study suggests that the media is important to many
MFIs as it is capable of influencing policy makers and global leaders and donors. Neither
the limited power of existing GB members nor the local community was able to influence
GB’s practices; instead it was the global media (that shapes global community
expectations) that influenced the reporting behaviour of GB.
Given the findings of this paper, there appears to be substantial value in the social
activities and associated disclosure practices of GB, as one of the strategies to maintain
legitimacy within the global community. There is yet much to be learned about the
perceptions of social reporting in developing countries, and given the paucity of this
type of research, this deserves further research attention.

Notes
1. At present conventional banks in Bangladesh closely follow International Accounting
Standards (IASs) (Haque and Islam, 2005) which were adopted by the Bangladesh professional
accounting body. In relation to Grameen Bank reporting, Grameeen Bank clearly indicated that
its financial statements have been in accordance with Bangladesh Accounting Standards since
inception except in the year 2001. However, Grameen’s 2001 annual report clearly indicated that
the financial statements for 2001 were prepared in accordance with IASs. Grameen’s highlight of
IASs in the 2001 annual report appeared to respond to the pressures being exerted by the WSJ.
2. MDGs include eight goals which are to: (1) eradicate extreme poverty and hunger, (2) achieve
universal primary education, (3) promote gender equality and empower women, (4) reduce
child mortality, (5) improve maternal health, (6) combat HIV/AIDS, malaria and other
diseases, (7) ensure environmental sustainability, and (8) develop a global partnership for
development (www.un.org/millenniumgoals/).
3. CGAP is an independent body of policy and research involved in advancing financial access for
the poorest of the poor in developing countries. CGAP has formed alliances with over
30 development agencies and private organisations which actively support the achievement of
the MDGs. Besides its alliances with the World Bank Group help to provide “market intelligence,
promotes standards, develops innovative solutions and offers advisory services to governments,
microfinance providers, donors, and investors” (www.cgap.org/p/site/c/aboutus/).
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Corresponding author
Muhammad Azizul Islam can be contacted at: azizul.islam@deakin.edu.au

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