Corporate Political Connection and Corporate Social Responsibility Disclosures: A Neo-Pluralist Hypothesis and Empirical Evidence Mohammad Badrul Muttakin Dessalegn Getie Mihret Arifur Khan Department of Accounting, Deakin University, Melbourne, Australia Forthcoming in Accounting, Auditing and and Accountability Journal Corresponding Author: Dr Dessalegn Getie Mihret Department of Accounting Deakin University 221 Burwood Highway Burwood, Victoria 3125 Australia Email: dmihret@deakin.edu.au Phone: +61 92445202 Corporate Political Connection and Corporate Social Responsibility Disclosures: A Neo-Pluralist Hypothesis and Empirical Evidence Abstract Purpose – This study examines the association of corporate political connection with the level of voluntary corporate social responsibility (CSR) disclosures to determine how the relationships between the state and the corporate sector influence CSR engagement Design/methodology/approach – Based on a neo-pluralist view of legitimacy theory, which conceptualises the state as a concentration of power amenable to exploitation by the corporate sector, the study develops and empirically tests a hypothesis that CSR disclosures are inversely associated with political connection A sample of 936 firm-year observations is used with data collected from annual reports of companies listed on the Dhaka Stock Exchange in Bangladesh from 2005 to 2013 Findings – Results indicate that corporate political connection is associated with reduced CSR disclosures This finding suggests that the perceived need for CSR disclosures as a legitimation strategy diminishes for politically connected firms The finding supports a neopluralist argument that political connection could enable firms to eschew stakeholder pressure associated with potential legitimacy threats originating from poor CSR performance This conclusion challenges the pluralist view of legitimacy theory that considers the state as a neutral arbiter resolving conflict among stakeholder groups in society Originality/value – The study makes a significant contribution to the literature by developing a neo-pluralist theorisation of voluntary CSR disclosures within legitimacy theory and empirically testing it Because prior empirical CSR disclosure research is largely underpinned by the pluralistic conception of society, examining this phenomenon from a neopluralist perspective enables a more complete understanding of CSR disclosure behaviours of firms Keywords – Corporate Social Responsibility, Legitimacy theory, Neo-pluralist view, Stakeholder theory, Bangladesh Paper type – Research paper Introduction Voluntary corporate social responsibility (CSR) disclosures have attracted significant research attention in recent decades due to heightened societal interest in CSR One of the focus areas in this respect has been understanding the rationales for firms’ CSR engagement (Parker, 2014) and interpreting ensuing corporate behaviour Prior research indicates that one possible motivation behind voluntary CSR disclosures is to portray business practices as congruent with societal expectations (see, for example, Cho et al., 2012; Deegan and Rankin, 1996; Milne and Patten, 2002; O’Donovan, 2002; Suchman, 1995) This view maintains that CSR disclosures are driven by the interest in legitimising the firm’s existence by placating key stakeholders but not necessarily discharging corporate accountability obligations (Killian and O'Regan, 2016) pertaining to the environmental and social impact of business on society (Cho et al., 2015; Deegan and Rankin, 1996, p 60; Milne and Gray, 2013) The need for legitimacy is underpinned by the concept of an underlying social contract between corporations and society To maintain the social contract, firms attempt to influence legitimacy by attending to stakeholders’ expectations—including those of the government, consumers (Deegan and Rankin, 1996), shareholders and special interest groups (Roberts, 1992), for example, through voluntary CSR disclosures Legitimacy theory has been widely adopted to explain voluntary CSR disclosure behaviours of firms as a strategy to communicate firms’ actual CSR performance or to manipulate stakeholder perceptions about such performance This mainstream articulation of legitimacy theory is problematic because it is premised on the pluralist notion of society, which conceptualises the state as a neutral arbiter for freely competing interests in society From the pluralist perspective, power—the capacity to influence others (see Max Weber’s definition of power in Gerth and Mills, 1948, p 180)—is conceived as widely distributed among stakeholders in society, albeit not necessarily evenly This notion of power suggests that multiple stakeholders can influence state policymaking and that no particular stakeholder can systematically dominate others (Gray et al., 1996, p 16) Nevertheless, power asymmetries abound, especially in non-pluralistic societies, and the state may serve as an institution with a concentration of power amenable to exploitation by dominant interest groups in society, including corporations (Archel et al., 2011) as the state may align itself with interests This perspective challenges the concept of neutrality of the state that underpins the pluralist view of society By recognising the limitations of the pluralist assumptions, a critical strand of the legitimacy theory literature interprets the theory from a neo-pluralist perspective (Soobaroyen and Mahadeo, 2016; Guthrie and Parker, 1989; Gray et al., 1996), which recognises the unequal distribution of power in society and questions neutrality of the state (Archel et al., 2009) This alternative theoretical perspective warrants empirical investigation because CSR disclosure issues are gaining in importance in the era of globalisation, when stakeholders may be interested in firms operating in environments atypical of a pluralist society Despite repeated calls to refine CSR research within legitimacy theory (Guthrie and Parker, 1989; Gray et al., 1996), empirical research has largely continued to adopt the pluralist view of the theory In particular, empirical studies based on the neo-pluralist view of society are yet to emerge This study responds to these calls by developing and empirically testing a neo-pluralist hypothesis on a possible inverse association between corporate political connection and the level of voluntary CSR disclosures The study is based on data collected from annual reports of non-financial companies listed on the Dhaka Stock Exchange (DSE) in Bangladesh Our findings support the neo-pluralist hypothesis that politically connected firms perceive a reduced need for CSR disclosures as a legitimation strategy We argue that firms may use political connection to fend off potential risk of losing the social contract associated with perceived poor CSR performance The empirical context of Bangladesh provides an ideal setting to empirically test such a neo-pluralist hypothesis on CSR disclosures, because the country is characterised by a tenuous institutional environment, which implies limitations on mechanisms of enforcing desirable corporate behaviour in the event of poor CSR performance In such contexts, firms could employ political connection rather than legitimating through voluntary CSR disclosures to avoid possible legitimacy challenge regardless of whether the firms meet CSR performance expectations This study contributes to research and policy as follows First, it extends the literature on voluntary CSR disclosures within legitimacy theory by developing and empirically testing a neo-pluralist hypothesis The study provides a timely response to Richardson’s (2015) call to challenge mainstream views in accounting research through quantitative critical research and Patten’s (2015) call for methodological diversity to achieve greater understanding of research phenomena within the critical stream of research In this respect, the study enriches the existing critical theorisation regarding drivers of voluntary CSR disclosure by generating an additional factor, namely, corporate political connection that influences voluntary CSR disclosures Because legitimacy theory research has largely adopted a pluralistic view of society, our study in a setting where key assumptions of a pluralistic society are absent enables testing of the theory’s explanatory power Second, by exposing corporate political connection as a key restraining factor that could limit CSR performance, results could inform stakeholders such as non-governmental organisations (NGOs) (Belal et al., 2015) and other civil society groups (see Apostol, 2015) in any effort to advocate for policy changes directed at ensuring corporate accountability to society Furthermore, given the increasing integration of developing economies into the global supply chain and the tendency of CSR reporting practices to vary by country (Chen and Bouvain, 2009; Kolk and Pinkse, 2010; Young and Marais, 2012), the findings of this study may inform international stakeholders interested in exploring CSR issues pertinent to emerging economies as an input for making business decisions The remainder of this paper is organised as follows In section 2, we further develop the motivation for the study by highlighting the empirical context of Bangladesh This is followed by the theoretical framework and hypothesis formulation in section Section outlines the research design, and section presents our data analysis, which is followed by a conclusion in section CSR in Bangladesh 2.1 The significance of CSR matters and corporate political connection in Bangladesh Upon Bangladesh’s independence in 1971, the focus of its economy began to transition from its agrarian base to industry According to the World Bank statistics, the contribution of the industrial sector to the national GDP doubled from the period 1991 – 2000 (15%) to 20012010 (30%) The growth in foreign direct investment (FDI) has also been remarkable during the last two decades, as a number of more-developed Asian countries have outsourced their factory production, mainly textiles, to Bangladesh However, rapid industrialisation and investments by overseas investors has generated concerns about corporate accountability regarding employee, environmental and ethical issues, which has led to increasing demands for enhanced transparency in business practices (Belal and Owen, 2007) Furthermore, in recent years, some high-profile environmental and safety-related corporate disasters that claimed hundreds of lives in the garment industrial sector have resulted in significant pressure from foreign buyers on firms to demonstrate socially responsible business practices Well-publicised incidents include the collapse of ‘Rana Plaza’ (Siddiqui and Uddin, 2016; Sinkovics et al., 2016.), a factory building, that killed over 1200 garment workers on April 24, 2013 (Washington Post, 2013) Similarly, 112 people were burned alive or jumped to their deaths when the Tazreen Fashions Ltd building caught fire on November 24, 2012 (The Daily Star, 2012) As a result, U.S President Barack Obama announced the suspension of U.S trade privileges for Bangladesh in June 2013 over concerns regarding labour rights and workers’ safety (Washington Post, 2013) These incidents attracted international attention to Bangladeshi politics, labour rights, and workers’ safety and resulted in international buyers facing significant pressure to demand socially responsible business practices from Bangladeshi suppliers The incidents also reveal the politics-business nexus in Bangladesh and its implications for socially responsible corporate behaviours For example, no legal actions were taken against Delwar Hossein, the owner of Tazreen Fashions, because the local industry body, the Bangladesh Garments Manufacturers and Exporters Association (BGMEA), a powerful lobby group whose members account for approximately 10 percent of parliament, provided legal assistance to him The group defended him on the grounds that he was not on the premises at the time the fire broke out (Allchin, 2013) Similarly, Sohel Rana, owner of ‘Rana Plaza’, was a local political leader of the ruling party Bangladeshi Awami League (BAL) (The Wall Street Journal, 2013) Following the Rana Plaza incident, ‘the Bangladeshi Prime Minister Sheikh Hasina publicly denied Rana’s affiliation with her party although the media exposed—shortly afterwards—his continued political activities as a member of the ruling party (Gomes, 2013) Politically connected businesses are commonplace around the world (Faccio et al., 2006), although they are less common in countries that apply stringent regulations against political conflicts of interest (Faccio, 2006) Particularly, corporate political connection is pervasive in countries with weak regulatory environments and high levels of corruption Bangladesh is characterised by a poor regulatory environment (Farooque et al., 2007) and according to Transparency International’s index, the country has a high level of corruption [1] Furthermore, Muttakin et al (2015) highlight that political connection is extensive in Bangladesh Business owners can easily obtain party nominations for parliamentary elections by making large donations, thereby placing them in a position to use the government system to maintain, defend and advance business interests Bangladeshi business owners such as those in the garment industry are some of the most powerful politicians in the country Workers and their unions shun expressing opposition to the businessmen because the financial and political power of the businessmen portends excessive costs of legal and political action against any pressure group For example, Yardley (2012) notes that Bangladesh factory owners are major political donors, and some of them own newspapers and television stations, which feature relatively positive news about businesses while ignoring issues such as labour rights He also notes that in Bangladesh’s parliament, roughly two-thirds of the members belong to the country’s three largest business associations [2] Political connection in the Bangladeshi corporate governance context takes two forms First, government officials could serve as members of the boards of directors at numerous listed companies, or retired politicians may be assigned as directors arguably in exchange for favours (see, for example, Sobhan and Werner, 2003) Second, many industrial elites in Bangladesh either become part of the political process or develop strong personal and/or business relationships with political leaders and their families and make financial contributions to the major political parties (Chowdhury, 2009) The success of such businesses tends to depend upon the connections they maintain with political parties In recent years, a large number of businessmen in Bangladesh have mainly been tied with two major political parties, i.e., Bangladeshi Awami League (BAL) and the Bangladesh National Party (BNP) In the ninth parliament, 59% of the elected Members of Parliament were businessmen, with 44% having assets worth at least one crore taka (US$10 million) (Chowdhury, 2009) As argued later in this paper, these forms of political connection can serve as a strategy to manage potential legitimacy gaps and associated regulatory or political action 2.2 Bangladesh’s institutional background and CSR disclosure The regulations that govern the business practices of Bangladeshi firms include the Companies Act, 1994, the Income Tax Ordinance, 1969, and the Securities and Exchange rules, 1987 Nevertheless, neither any legislative pronouncement nor the Securities and Exchange rules, 1987, mandate CSR disclosures for public limited companies CSR disclosure levels of Bangladeshi companies tend to be low and of a descriptive nature, reporting mostly positive news (Belal, 1999; Imam, 2000) The disclosures also tend to focus on employee8 related matters, as compared to CSR information on a more comprehensive set of issues (Belal, 2001) Disclosure of information on important social issues such as child labour, equal opportunities and poverty alleviation is limited due to a focus on profits and the absence of legal requirements (Belal and Cooper, 2011) While a mandatory requirement for CSR disclosures is regarded as an option to enhance corporate accountability on CSR matters, a lack of political will and prohibitive costs involved may hinder such a move (Belal et al., 2015) By contrast, the desire to satisfy key stakeholder groups such as international buyers, tends to generate motivation for CSR reporting in Bangladesh (Belal and Owen, 2015; Belal and Owen 2007) Theoretical framework and hypothesis development 3.1 A neo-pluralist view of legitimacy theory and CSR disclosures Legitimacy theory is widely adopted to explain voluntary CSR disclosures (e.g., Deegan, 2002; Deegan, Rankin and Tobin, 2002; O’Donovan, 2002) Guthrie and Parker (1989) questioned the explanatory power of the theory and argued that political economic considerations determine corporate decisions to disclose CSR information Similarly, recent critical literature (Archel et al., 2009; Gray et al., 1995) problematises the pluralist version of legitimacy theory by interrogating the key assumptions underpinning this version of the theory This dominant articulation of legitimacy theory is grounded in the concept of a ‘social contract’, which is envisaged to provide the basis for identifying the rights society grants to firms and the societal expectations that ensue in return From this perspective, firms will have the legitimacy to operate if the values and actions of the firms are consistent with societal values and expectations Such congruence enables the firm to garner community acceptance and good corporate image necessary for the firm’s continued existence (Deegan and Rankin, 1996) On the other hand, disparity between the two phenomena produces a legitimacy gap that might prompt economic, legal, social, or political sanctions on organisations (Deegan and Rankin, 1996; Dowling and Pfeffer, 1975) That is, the pluralist view envisages that the implicit and explicit terms of the social contract would be discontinued if companies fail to operate within the bounds of societal expectations, i.e., when corporate legitimacy is lost This view maintains that to avoid these consequences, firms employ strategies to justify their existence by inter alia providing voluntary CSR reports aimed at portraying the firm as a socially responsible business (Deegan and Rankin, 1996) Organisations influence the perceived legitimacy society confers on them (Dowling and Pfeffer, 1975) through managing legitimacy threats using a range of strategies, including CSR disclosures (O’Donovan, 2002) This conception draws on the liberal idea of individual freedom to act and exercise choice through the market for economic matters or through political action for non-economic issues Because the state provides mechanisms for political action, the liberal notion of CSR is premised on the neutrality of the state in relation to arbitrating competing interests Neutrality of the state enables stakeholders to exert pressure to “enforce” the social contract in the event that corporations fail to meet CSR obligations For example, legal requirements place accountability obligations on firms (Gray et al, 1996, p 3940; 43), and CSR reporting could serve as a communication channel in this respect (Gray et al., 1996, p 44) Such reports may serve to communicate substantive CSR engagements of firms, represent a symbolic act without an actual commitment to CSR, or a combination of these two possibilities (Ashforth and Gibbs, 1990) That is, voluntary CSR disclosure could be provided to legitimate the existence of the corporation (Deegan, 2010, p 334) by disclosing information on actual CSR activities or by merely altering the perceptions of stakeholders about CSR activities of the firm The pluralist view maintains that pressure on companies to engage in socially responsible activities originates from stakeholders, such as the state, consumers (Deegan and Rankin, 1996), special interest groups, shareholders (Roberts, 1992), and NGOs (Belal et al., 2015) To address potential or actual pressure in this regard, firms may employ legitimation strategies by attending to the stakeholders’ expectations (Gray et al., 1995; 10 consistent with model The results suggest that despite having political connections, exportoriented companies in Bangladesh disclose more CSR information to mitigate the pressure exerted by international buyers and ensure their long-term survival This result is consistent with Islam and Deegan’s (2008) observation that pressure from powerful stakeholders serves as a principal driver of CSR disclosure in Bangladesh We conducted additional tests to consider the model’s robustness We run the regression by using the natural logarithm value of the CSR disclosure scores as the dependent variable Overall, the results not differ significantly from our main findings We also run the regression by dropping all control variables from the model Our results remain consistent with the findings reported in Table Finally, we used fixed-effects regression, and confirmed that our results not differ qualitatively from the findings we reported in Table Conclusion and discussion Based on a neo-pluralist view of legitimacy theory, this study argues that voluntary corporate social responsibility (CSR) disclosures are inversely associated with corporate political connection The empirical evidence from a sample of listed non-financial companies on the Dhaka Stock Exchange in Bangladesh supports our hypothesis that in a neo-pluralist setting, corporate political connection could be associated with reduced voluntary CSR disclosures Consistent with the neo-pluralist conceptualisation of the state, the evidence shows that political and business elites could align their interests The results challenge the conventional claim that firms need CSR disclosures as a legitimacy tool to manage stakeholder pressure for socially responsible corporate behaviour Instead, we establish an alternative argument that in neo-pluralist societies, firms could use political connections to eschew potential stakeholder pressure for CSR engagement Other factors such as board independence that are positively associated with CSR disclosures not alter the inverse association between political connection and CSR disclosure levels This finding suggests that political connection 20 may adversely influence proper functioning of governance mechanisms such as the appointment of independent directors It is also consistent with Sobhan and Werner’s (2003) observation that directors classified as “independent” in Bangladesh tend to be former bureaucrats with vested interests in the relevant companies This study also shows that CSR reporting is positively associated with export-orientation of companies regardless of political connections of the companies This evidence supports Islam and Deegan’s (2008) argument that Bangladeshi export-oriented companies provide CSR disclosure to mitigate pressure from powerful foreign buyers The present study extends findings of previous research (Islam and Deegan, 2008 and Islam and Deegan, 2010) by providing empirical evidence that legitimacy threats originating from powerful stakeholders such as foreign buyers outweigh the role of political connections in influencing CSR disclosure behaviours Further, the archival research in the present study provides empirical support for prior qualitative studies (see, for example, Deegan and Gordon, 1996) on CSR practices of companies in developing countries and for critical CSR disclosure research more generally The findings of this study bear implications beyond Bangladesh because political connection in various forms is prevalent world-wide—for example, corporate lobbying applies to pluralistic societies as well (e.g., Deegan and Gordon, 1996) Furthermore, corporate pre-occupation with economic performance and the need to advocate corporate accountability for environmental and social performance is a pertinent agenda even in countries with a pluralist orientation (see, for example, Haque et al., 2016) The study enhances our understanding of CSR disclosure by illuminating a more complete set of factors that shape firms’ voluntary CSR disclosures It emphasises the need to evaluate CSR reports in light of the firm’s political connection status and involvement in exports The present study has responded to the call for studies to understand the legitimating strategies of firms with due regard to the political environment in which firms operate (Archel et al., 2009) In doing so, it extends the emerging research that examines political connection 21 and CSR disclosures First, the study develops a hypothesis on CSR disclosures based on a more critical view of legitimacy theory (Guthrie and Parker 1989; Gray et al., 1995) that recognises the unequal distribution of power in society and questions the neutrality of the state (Archel et al., 2009) Second, the study presents a counterpoint to the recent study on China (Li et al., 2015) that argues that politically connected Chinese firms tend to engage in greater CSR activities and that corporations invest in CSR (in return for continued government support) in areas where the state is resource-constrained to provide services to communities Implicit in the argument of Li et al (2015) is the premise that the state is ideologically aligned with the corporate sector That is, the state could support corporate interests because the corporate sector helps the state achieve governmental goals (see Gray et al., 1995; Miller, 1991) That is, the Chinese case illustrates an institutional arrangement where the state and the corporate sector advance shared goals that are also aligned with the interests of the community In contrast, political connection in Bangladesh manifests itself in business and political elites’ tendency to help firms eschew legitimacy threats regardless of CSR engagement The difference between our finding and that of Li et al (2015) underscores the significance of institutional context in shaping corporate behaviour pertaining to CSR By developing and testing a new hypothesis on the association between CSR disclosures and political connection in an institutional context that differs from the Chinese political environment, our study poses an argument that differs from that of Li et al (2015) By empirically establishing that political connection could be employed to eschew a legitimacy challenge regarding CSR performance, our findings enrich findings of prior studies (e.g., Deegan, 2010; Woodward et al., 1996) that have conceived political connection as a legitimating strategy That is, political connection can reduce management’s perceived need to use CSR disclosure as a legitimation strategy because associating the firm with key political figures could reduce potential stakeholder pressure emanating from poor CSR performance From a methodological perspective, our study responds to a call for methodological diversity in 22 the critical domain of CSR research (see Patten, 2015), which has tended to emphasise qualitative methods (Everett et al., 2015), and Richardson’s (2015) call to challenge mainstream theorising through quantitative critical research This is an important contribution because the critical accounting community has largely neglected quantitative research methods (Richardson, 2015), although this method has the potential to enrich our understanding of phenomena Supplementing critical research with a quantitative methodology can generate new factors influencing CSR disclosures and advance generalizability of conclusions through largesample studies (Patten, 2015; Richardson, 2015) The study has important implications for policy and research Although the literature provides empirical evidence on a range of factors associated with the level of voluntary CSR disclosures, if and how corporate political connection is associated with such disclosures has not been empirically explored from a neo-pluralist perspective The findings of this study suggest that the politics-business link merits attention in any regulatory effort directed at fostering corporate accountability pertaining to CSR Because raising the awareness of stakeholders on pertinent CSR issues is a key goal of critical CSR research (Burritt and Schaltegger, 2010), the findings of the study are expected to be of interest to stakeholders interested in advocating corporate accountability in this regard A better understanding of societal issues and the advancement of public discussion (Neu et al., 2001) on CSR would inform NGOs and other stakeholders that advocate the need for corporate CSR engagement For example, findings of this study could be of interest to advocacy groups interested in lobbying for regulatory policy requirements on CSR activities Furthermore, the study could inform international companies that have business links with local companies in assessing potential business partners’ engagement in ethical practices A meaningful evaluation of this firm-level attribute would be possible if macro-level issues are understood Some limitations of this study should be noted First, we acknowledge that our study suffers from an inherent limitation common to most CSR disclosure research That is, the study 23 does not isolate disclosures that reflect actual CSR engagement of firms from those that are mere attempts at impression management Second, the study fully relies on CSR disclosures made through annual reports We recognise that some companies may not fully disclose their social activities in annual reports Third, this study uses directors’ political affiliation to identify politically connected firms Because politically connected firms are likely to make donations to political parties, future research could examine how managers utilise political donations to manage issues of corporate legitimacy Notes [1] According to the corruption perception index for 2015 prepared by Transparency International, Bangladesh is ranked 139 out of 167 countries (http://www.transparency.org/cpi2015#results-table) [2] The three largest business associations in Bangladesh are the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) the Metropolitan Chamber of Commerce and Industry (MCCI) [3] We excluded financial sector companies, since they are controlled by different regulations and are likely to have different disclosure requirements and governance structure Moreover, as per section 15 of the Banking Company Act, the appointment and removal of directors, CEOs, or managing directors require the 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FAGE FSIZE ROA Mean 0.245 0.560 0.099 0.100 0.348 0.639 25.200 8.838 0.067 Median 0.2 0.111 0.125 0.536 25 8.857 0.063 Std Dev 0.185 0.497 0.104 0.087 0.477 0.719 11.033 0.691 0.128 Panel B Distribution of Sample by industry Average CSR Cement 0.314 Ceramics 0.167 Engineering 0.209 Food 0.131 Jute 0.171 Paper & Printing 0.164 Miscellaneous 0.269 Pharmaceuticals 0.377 Tannery 0.242 Textile 0.332 CSRDI = corporate social responsibility disclosure score/ index; PCONDUM is an indicator variable set equal to for politically connected firms and otherwise We consider a firm to be politically connected when at least one of its major shareholders or a member of its board or the CEO is or was a member of the parliament, a minister or closely associated with a political party or a politician; PCONPRO = proportion of politically connected directors on the board; BIND = proportion of independent directors on the board; EXPORT = dummy variable equals if the firm belongs to the textile or pharmaceutical industry and otherwise; LEV= ratio of book value of total debt to total assets; FAGE = the number of years since the firm’s inception; FSIZE = natural logarithm of total assets; ROA = ratio of earnings before interest and taxes to total assets 31 Table 3: correlation matrix Variables CSRDI CSRDI 1.000 PCONDUM PCONPRO BIND EXPORT LEV FAGE FSIZE ROA -0.024* -0.047* 0.289*** 0.435*** -0.244*** 0.246*** 0.564*** 0.305*** PCONDUM PCONPRO BIND EXPORT LEV FAGE FSIZE ROA 1.000 0.783*** -0.047 0.020 0.049 -0.004 0.127*** -0.070** 1.000 -0.065* 0.071** -0.017 -0.002 0.119*** 0.011 1.000 0.083** -0.221*** 0.069** 0.228*** 0.034** 1.000 -0.073** 0.090*** 0.264*** 0.069** 1.000 0.192*** -0.255*** -0.296*** 1.000 -0.011 -0.047 1.000 0.133*** 1.000 CSRDI = corporate social responsibility disclosure score/ index; PCONDUM is an indicator variable set equal to for politically connected firms and otherwise We consider a firm to be politically connected when at least one of its major shareholders or a member of its board or the CEO is or was a member of the parliament, a minister or closely associated with a political party or a politician; PCONPRO = proportion of politically connected directors on the board; BIND = proportion of independent directors on the board; EXPORT = dummy variable equals if the firm belongs to the textile or pharmaceutical industry and otherwise; LEV= ratio of book value of total debt to total assets; FAGE = natural log of the number of years since the firm’s inception; FSIZE = natural logarithm of total assets; ROA = ratio of earnings before interest and taxes to total assets *, **, *** = statistically significant at less than the 0.10, 0.05 and 0.01 levels 32 Table 4: Multiple regression results using CSRD index as the dependent variable Variables Constant PCONDUM PCONPRO LEV FAGE FSIZE ROA Industry Year Adjusted R2 F stat Observations Model Coefficient -1.294 -0.029 -0.022 0.119 0.129 0.261 Included Included 0.533 52.970 936 Prob 0.000*** 0.001*** 0.001*** 0.000*** 0.000*** 0.000*** Model Coefficient -1.285*** -0.084 -0.024 0.119 0.127 0.267 Included Included 0.530 52.630 936 Prob 0.000*** 0.045** 0.000*** 0.000*** 0.000*** CSRDI = corporate social responsibility disclosure score/ index; PCONDUM is an indicator variable set equal to for politically connected firms and otherwise We consider a firm to be politically connected when at least one of its major shareholders or a member of its board or the CEO is or was a member of the parliament, a minister or closely associated with a political party or a politician; PCONPRO = proportion of politically connected directors on the board; BIND = proportion of independent directors on the board; LEV= ratio of book value of total debt to total assets; FAGE = natural log of the number of years since the firm’s inception; FSIZE = natural logarithm of total assets; ROA = ratio of earnings before interest and taxes to total assets *, **, *** = statistically significant at less than the 0.10, 0.05 and 0.01 levels 33 Table 5: Multiple regression results using CSRD index as the dependent variable Model Model Model Model Variables Coefficient Prob Coefficient Prob Coefficient Prob Coefficient Prob Constant -1.283 0.000*** -1.194 0.000*** -1.171 0.000*** -1.160 0.000*** PCONDUM -0.017 0.216 -0.046 0.000*** -0.107 0.098* -0.227 0.000*** 0.279 0.001*** -0.319 0.034** 0.053 0.000*** 0.472 0.000*** PCONPRO BIND 0.361 0.000*** PCONDUM *BIND -0.169 0.086* PCONPRO* BIND EXPORT 0.064 0.000*** PCONDUM *EXPORT 0.031 0.081* PCONPRO* EXPORT LEV -0.021 0.001*** -0.020 0.009*** -0.023 0.001*** -0.027 0.000*** FAGE 0.110 0.000*** 0.111 0.000*** 0.105 0.000*** 0.113 0.000*** FSIZE 0.129 0.000*** 0.126 0.000*** 0.120 0.000*** 0.122 0.000*** ROA 0.231 0.000*** 0.272 0.000*** 0.250 0.000*** 0.294 0.000*** Industry Included Included Year Included Included Included Included 0.516 0.528 0.545 0.539 F stat 53.100 53.44 53.90 55.36 Observations 936 936 936 936 Adjusted R CSRDI = corporate social responsibility disclosure score/ index; PCONDUM is an indicator variable set equal to for politically connected firms and otherwise We consider a firm to be politically connected when at least one of its major shareholders or a member of its board or the CEO is or was a member of the parliament, a minister or closely associated with a political party or a politician; PCONPRO = proportion of politically connected directors on the board; BIND proportion of independent directors on the board; EXPORT = dummy variable equals if the firm belongs to the textile or pharmaceutical industry and otherwise; LEV= ratio of book value of total debt to total assets; FAGE = natural log of the number of years since the firm’s inception; FSIZE = natural logarithm of total assets; ROA = ratio of earnings before interest and taxes to total assets *, **, *** = statistically significant at less than the 0.10, 0.05 and 0.01 levels 34 ... governance in corporate social responsibility disclosures" , Corporate Social Responsibility and Environmental Management, Vol 17 No 1, pp 15-26 Li, S., Song, X and Wu, H (2015), "Political Connection, ... test the hypothesised relationship between corporate social responsibility disclosure (CSRDI) and corporate political connections The corporate political connection (PCON) variable is measured in.. .Corporate Political Connection and Corporate Social Responsibility Disclosures: A Neo-Pluralist Hypothesis and Empirical Evidence Abstract Purpose – This study examines the association of corporate