Institutional Environment, Corporate Governance and Corporate Social Responsibility Disclosure: A Comparative Study of Southeast Asian Countries

Southeast Asia is the rising star of the global market, however, contrary to its impressive economic achievements, many countries in the region have suffered diverse social problems because of economic growth. Given that a key mechanism to hold businesses accountable is their disclosure practices, this study is looking to expand the understanding of the influences of institutional environment and corporate governance on Corporate Social Responsibility Disclosure (CSRD) in six Southeast Asian countries: Thailand, Singapore, Malaysia, Indonesia, Philippines and Vietnam. A multi-theoretical framework, including institutional theory, agency theory, stakeholder theory and legitimacy theory, was applied. For the purpose of this study, 2013 annual reports of 30 largest companies in the stock exchanges of the six countries were collected. The final sample consists of 171 companies.

Firstly, empirical findings of CSRD levels across the countries showed that Thailand has the highest level of disclosure, followed by Indonesia, Malaysia, Singapore, Philippines and finally Vietnam. There were significant differences between the extent of CSRD of the two countries with highest disclosure (Thailand and Indonesia) and the lowest disclosure group (Philippines and Vietnam). The findings are interesting in a sense that the levels of CSRD do not reflect the stages of economic development, and therefore, the differences in CSRD levels could be attributable to the impact of other institutional factors.

Secondly, in relation to internal determinants and based on the existing literature and the context of Southeast Asia, six corporate governance practices were identified to examine the impact of corporate governance on CSRD. The results of OLS regression supported the negative impact of block ownership and the positive impact of board size as well as the presence of CSR committee on CSRD. Contrary to the theoretical and empirical expectations, board gender diversity was found to have significantly negative relationship with CSRD, and board independence had no impact on CSRD. These differences could be explained by the context of the study where the presentation of women on board is very low and independent directors might not be wholly independent.

Thirdly, in order to examine the impact of the institutional environment on CSRD in a comprehensive way, institutional theory, the Scott’s institutional framework (1995) and existing literature are used to identify relevant institutional factors that potentially influence CSRD. The effect of six institutional factors representing the three pillars, regulative (legal origin and mandatory disclosure), cultural-cognitive (uncertainty avoidance and masculinity cultural dimensions), and normative (the adoption of GRI standard and membership of CSR-related associations), were evaluated in this study. The empirical results indicate that mandatory disclosure, uncertainty avoidance dimension and the adoption of GRI standard have positive impact on CSRD, while the masculinity dimension has negative relationship with CSRD. The findings imply that institutional environment influences CSRD through all the three pillars with some institutional factors have greater impact than others.

The study, therefore, has contributed empirically to the existing literature by providing deeper insights into CSRD levels in Southeast Asia, identifying the effectiveness of corporate governance practices in emerging economies and the Asian context, particularly in relation to CSRD, including further examination of the role of diverse external determinants on CSRD. Theoretically, the study is one of a few that have attempted to quantify institutional environment into measurable institutional factors. These factors, hence, could be re-used in future research to advance understanding on the role of institutional environment in shaping a country’s CSRD practice.