The Impact of Social Responsibility Disclosure on Financial Performance Via Accounting Conservatism as A Mediator Variable: Evidence from Jordan

Mohammad Abdullah Fayad Altawalbeh

doi:10.5539/ijbm.v16n12p101

Abstract

This study aimed to investigate the direct effect of corporate social responsibility disclosure (CSRD) on financial performance as well as the indirect impact via accounting conservatism as a mediator variable. The sample of the study consisted of 45 industrial companies listed on Amman stock exchange (ASE) over the period 2015-2019, CSRD was measured using a 43-item index, data to measure the variables was collected through the financial reports of the study sample publicly available on ASE website, Smart PLS3 software was run to examine the study hypotheses, the results of the path analysis revealed that CSRD has a positive significant direct effect on financial performance, furthermore, accounting conservatism has a positive and significant effect on financial performance, this result prove that accounting conservatism has a complimentary partial mediation role between CSRD and financial performance, a partial mediation occurs when the direct impact of the exogenous (CSRD) remains significant along with the indirect impact in the mediation model, furthermore, it is a complementary mediation that occurs when the indirect effect and direct effect remain significant and in the same direction. The study recommends that external auditor evaluate and communicate the CSRD level within the auditor&rsquo;s report.

Highlights

Corporate social responsibility (CSR) is the act of a firm to integrate social and environmental concerns while conducting its operations, firms are profit oriented, and consider social and environmental interests (Marta,2015), These interactions take place through different channels; the most important one is the corporation’s annual report which is used as a mean to influence society’s perception of their operations, and to legitimize their ongoing existence (Deegan & Unerman,2011,p231)
Wuttichindanon (2017) examined the reporting alternatives for CSR disclosure and its determinants for the listed firms in Thailand, the study include governmental ownership, corporate size, age and financial performance as independent variables, the results found that government firms with high government ownership percentage and big firms are expected to adopt sustainability report, content analyses of corporate social responsibility disclosure (CSRD) has a positive association with the government owner ship, which is consistent the view of stakeholder theory which believes that CSR activities are adopted because of the stakeholders power a part from financial performance
Mahrani and Noorlailie (2018) examined the effect of CSR disclosure governance attributes on financial performance via earnings quality as a mediation variable measured by the modified Jones model (1995), the study sample consisted of 102 listed companies in Indonesia using a purposive sampling model, secondary data was collected through financial reports and audited financial statements publicly available, data was analyzed using Partial least square, the results revealed that earnings management has fully mediated the effect of CSR disclosure on financial performance, the indirect effect analysis showed that CSR disclosure positively affect earnings management, earnings management has a negative and significant impact on financial performance

Summary

Introduction

Corporate social responsibility (CSR) is the act of a firm to integrate social and environmental concerns while conducting its operations, firms are profit oriented, and consider social and environmental interests (Marta,2015), These interactions take place through different channels; the most important one is the corporation’s annual report which is used as a mean to influence society’s perception of their operations, and to legitimize their ongoing existence (Deegan & Unerman,2011,p231). Jordan is one of the developing countries, it keeps pace with international practices that seek to enhance the level of disclosure and transparency. In this context, Amman stock exchange market (ASE) has joined the united nations initiative for sustainable markets, ; ASE attaches high priority to social stability and encourages listed companies to consider social and environmental activities and to protect human rights, interests of the society and future generations. Previous studies conducted in the Jordanian context have had interesting contribution in tracking the rapid development in the field of social responsibility practices and disclosure (e.g. Suwaidan et al, 2004, Weshah et al, 2012, Abu farha & Alkhalaileh, 2016) this study intends to contribute to the literature in two ways; firstly, this paper will examine the direct and indirect impact of corporate social responsibility disclosure on ijbm.ccsenet.org

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Conclusion