A longitudinal study of corporate social responsibility expenditure and ownership structure of financial firms

Md. Abu Jahid,Md. Harun Ur Rashid,Rizal Yaya,Md. Abdul Kaium Masud

doi:10.21511/bbs.17(1).2022.03

Abstract

There is a dearth of longitudinal studies of corporate social responsibility expenditure (CSRE) and corporate governance in Bangladesh, which has been the impetus for this study. The study aims to identify the relationship between ownership structure and CSR expenditure. The empirical study considered a longitudinal period of 2007–2019 of listed financial firms (banks and non-banking financial institutions) of Bangladesh. The final sample consisted of 461 firm-year observations for 53 firms. The study incorporated a set of theories, including agency cost theory and stakeholder theory. The study applied the ordinary least square (OLS) regression technique to test hypotheses. The results of multiple regression analysis showed that foreign ownership and managerial ownership contribute positively and significantly to CSRE. However, the study did not document any relationship between institutional ownership and CSRE. The study used rigorous and alternative measurement techniques to further verify the findings. It was concluded that value creation from CSRE is highly dependent on the ownership structure of financial firms. The empirical study has significant theoretical and managerial implications. AcknowledgmentComments and suggestions from the discussants and paper presenters and audiences of International Conference on Sustainable Innovation (ICoSI 2020) at Universitas Muhammadiyah Yogyakarta, Indonesia, have been gratefully acknowledged, which helps us to improve the quality of this paper.

Highlights

The nature of CSR and environmental investment and expenditure largely depends on the top management priority; it is more evident when the sample consists of developing countries
There is a dearth of longitudinal studies of corporate social responsibility expenditure (CSRE) and corporate governance in Bangladesh, which has been the impetus for this study
The results provide an endogeneity in ownership pattern is not a concern insight that institutional owners do not influence for Asian firms; Bangladeshi firms are relatively CSR expenditure

Summary

Introduction

The nature of CSR and environmental investment and expenditure largely depends on the top management priority; it is more evident when the sample consists of developing countries. Routine business management decisions depend on the corporate policy pursued by different shareholders and investors. Stakeholder engagement and regulatory compliance influenced CSR expenditure decisions. Firms in developing countries face limited stakeholder pressure, and there is a lack of regulatory compliance (Bae et al, 2018, 2021; Rashid, 2021; Bose et al, 2020a; Masud et al, 2019, 2018a, 2018b, 2017). In the presence of weak corporate governance, the financial system of emerging countries like Bangladesh has a conflict between shareholders and agents due to the benefits and short-term investment decisions. It is essential to examine whether the stakeholders and agency theory are the best approach to explain the relationship between ownership structures and CSR expenditure

Objectives

Methods

Findings

Conclusion