Exploring the Mirror versus Substitute Dichotomy in Social and Environmental Disclosure

Abstract

Much of the debate over how the institutional context can shape corporate social responsibility (CSR) is focused on the dichotomy between liberal and coordinated markets drawn from Varieties of Capitalism. CSR in liberal market economies (LMEs) is seen as a substitute for institutional voids and relies on market incentives, while in coordinated market economies (CMEs), such practices are seen as a mirror of their institutional strengths and rely on stakeholders' networks. Recently, this view has been criticized for its neglect of developing countries since their CSR practices may not fit properly into this LME-CME dichotomy. We add to this debate by comparing the social and environmental disclosure practices of 86 companies from eight different countries: Australia, Brazil, Canada, Germany, India, South Africa, South Korea, and the United Kingdom. We show how institutional characteristics have different effects on social and environmental disclosure, depending on the context in which companies are operating. We show that social and environmental disclosure in LME countries is driven by market forces and is shareholder-oriented, while in CME countries, it is driven by regulatory provisions. Regarding developing countries, the inclusion of different institutional features may be required to better explain companies' social and environmental disclosure practices