The impact of international brands and awards on Indian textile and apparel firms’ social disclosure practices

Abstract

This study empirically investigates the extent of corporate social disclosure (CSD) practices by Indian textile and apparel (TA) listed firms for the 2010-2012 time period. In spite of an upward trend in CSD practices by Indian TA listed firms, the results indicate a consistent low level of such important disclosure practices over the three year period with an overall mean disclosure of 10.44%. The overall low extent of CSD by Indian TA firms and the potential large adverse impact of this sector to the country’s social environment have major implications for future development of social reporting standards. Further analysis reveals that Indian TA listed firms commonly communicate social information relating to ‘labor practices and decent work’ while disclosure of ‘human rights’ is virtually non-existent. The finding may indicate that Indian TA firms place increasing importance in communicating labor practices related information as a possible strategy to alleviate tension amongst stakeholders in order to secure their societal legitimacy. Potential concern arises from noncommunication of social activities and related risks. Poor or non-existent disclosure may lead to questions whether Indian firms and their international brand-name affiliations have been transparent and accountable regarding their production and supply activities. The dearth of social disclosure by Indian TA firms has implications for foreign purchasers of branded products as international companies have been implicated in numerous sub-optimal social practices or incidents, at times leading to fierce criticism. The findings on the significant and positive influence of international brands and the interaction of this variable and international awards obtained on disclosure practices imply that such international exposures may put a higher level of pressure on Indian TA firms to communicate more social information as part of an overall package to better address global concerns on such crucial issues. The affiliation with international brand-name firms perhaps is the ultimate driver for the firms to provide more social information as a response to the growing awareness on such issues of their foreign renowned buyers. Firm characteristics control variables firm size, profitability and year of reporting are positively associated with the extent of CSD whereas CEO duality is negatively associated with the extent of CSD.