Abstract
This study investigates whether Corporate Social Disclosure (CSD) is affected by IFRS convergence and social value in a country that has strict societal norms (Saudi Arabia). Using a sample of 292 Saudi manufacturing and utilities firms listed on the Saudi Capital Market during the period of 2015-2019, the study finds that IFRS convergence is not related to the CSD of the Saudi manufacturing and utilities firms. On the other hand, social values (as modeled by adopting CSD as a strategic objective) are significantly related to CSD. These results provide evidence supporting the view that CSD is influenced by social values rather than the change in the corporate disclosure environment in countries that exhibit strong conformity to societal values, such as Saudi Arabia. Overall, the current study adds to an understanding of the factors that determine CSD outside the shareholder-stakeholder orientation model.
Highlights
This study investigates whether Corporate Social Disclosure (CSD) is affected by information for the existing mandatory disclosure system (IFRS) convergence and social value in a country that has strict societal norms (Saudi Arabia)
Using a sample of 292 Saudi manufacturing and utilities firms listed in the Saudi Capital Market (TADAWL) over the period 2015-2019, this study finds that the change in the financial disclosure environment through IFRS convergence is not related to the CSD of the Saudi manufacturing and utilities firms in the sample
Based on the above line of reasoning, the current study proposes that social value, as modeled by adopting CSD as a strategic objective, is an important factor affecting the incentives of managers toward adopting CSD in Saudi Arabia
Summary
Legitimacy theory contends that a firm’s success is dependent on the acceptance that it receives from its stakeholders (Frynas & Yamahaki, 2016). The change in disclosure environment brought about by the adoption of IFRS will encourage managers to increase CSD to provide incremental disclosure meant for the existing mandatory disclosure system (IFRS) In such a situation, the disclosure mechanism is shown as a shift from a shareholderoriented to a stakeholder-oriented model in common law countries during the IFRS convergence (Smith et al, 2014). The CSD-IFRS disclosure mechanism might work differently in environments that exhibit strong adherence to social values This identifies a gap existing in prior studies concerning this issue, as most studies have been carried out in countries having either a shareholder-stakeholder orientation model. This result provides evidence supporting the view that CSD is affected by social values rather than the change in the financial
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