The Impact of Corporate Governance on Corporate Social Responsibility Disclosures: Evidence from Botswana Stock Exchange

Abstract

The nexus between corporate governance (CG) and corporate social responsibility (CSR) is well researched and established in literature. However, the debate regarding the influence corporate governance exerts on corporate social responsibility engagements and reporting is still inconclusive.  This study investigates the impact of CG mechanisms on CSR disclosure among the listed companies in Botswana. The study employs content analysis to extract relevant data from annual reports for period 2014 to 2017. Comprehensiveness of descriptions of entity engagements in community involvement, human resources, environment and product and consumers is used as dependent variable while board size, board meeting frequency, ratio of independent directors to board size, the size of audit committee and its meeting frequency are used as independent variables. Company size and Return on assets are controlling variables. Least square regression method is used to analyse the effect of CG attributes on CSR disclosures. Comprehensiveness of disclosure is measured by sentences of reporting, availability of comparative figures, presence of photos and quantified CSR descriptions. The results suggest that the board size, board independence and audit committee meetings frequency have a statistically significant positive influence on corporate social responsibility reports. Company size also reflected a significant positive association with CSR disclosure. These results have implications on composition and structure of the board of directors which should be accorded due attention as the firms work to improve responsiveness to their stakeholders’ demands through CSR investments and disclosures.

Keywords: Corporate governance, Corporate social responsibility, Disclosure, Agency theory, Legitimacy theory, Botswana

DOI: 10.7176/RJFA/10-20-05

Publication date:October 31^st 2019