Corporate social responsibility (CSR) exploring disclosure quality in Australia and Pakistan : the context of a developed and developing country

In recent times, corporate social responsibility (CSR) practices have received extensive attention from policymakers and academics worldwide. Corresponding with this attention is a rise in accountability expectations from stakeholders, largely to reduce the risks of corporate failure experienced in the past. As a result, firms have adopted CSR disclosure to signal accountability and legitimacy, as stakeholder expectations in this area have increased. CSR has been increasingly important since the 1990s alongside financial considerations as concerns relating to environmental, social, governance, and economic/financial concerns have grown in importance. Disclosure within CSR reports remains largely voluntary, unlike financial disclosure practice, which is highly regulated. CSR disclosure practice has advanced in the absence of a formal conceptual framework. This has meant a high degree of variation in content, assessment of content and terminology adopted. As a result, there is a lack of clarity surrounding the 'norms' that might be expected for CSR disclosure and 'best practice' assessment of content requirements, particularly the narrative compared to metrics. This study aims to challenge the notion under which CSR disclosure 'quality' has been primarily assessed through disclosure quantity (volume) (except limited studies that addressed both quality and quantity). Accepting the proposition that disclosure quantity and disclosure richness are two independent dimensions, this study has considered the need for a valid and generally acceptable 'assessment' criteria of CSR disclosure quality. Using the qualitative characteristics of the International Financial Reporting Standards (IFRS) Conceptual Framework for Financial Reporting (that is, relevance, faithful representation, understandability, comparability and timeliness), this study has developed a 'CSR Disclosure Quality Index' to assess the quality of CSR disclosure. This assessed level of CSR disclosure quality is related to a number of board characteristics to explore if these appear to impact CSR disclosure quality. As a result of the existing research gap on cross-country context perspectives, this study assesses CSR disclosure quality in Australia and Pakistan in the context of developed and developing countries, respectively. The CSR disclosure of the top 100 listed companies in the Australian Securities Exchange (ASX) and Pakistan Stock Exchange (PSX) in the period 2017‚Äö- 2018 are adopted to assess the index developed. The results indicate both differences and similarities in CSR disclosure quality between both countries. For instance, overall results indicate that CSR disclosure of ASX industries is more focused on the relevance, faithful representation, comparability and timeliness disclosure characteristics and less focused on understandability. Comparatively, the CSR disclosure of PSX industries addressed faithful representation and comparability less frequently and concurred with less focus on understandability. Interestingly both groups focus on relevance as an important 'quality' criterion. Overall, the CSR disclosure quality of the ASX sample was found to be better and ranked above-average in quality compared to the PSX sample that indicated average disclosure quality levels. The present study adopts regression analysis to assess whether a number of board characteristics appear to impact the CSR Disclosure Quality Index. Board independence and gender diversity were found to influence ASX companies. This study has significant theoretical and practical contributions. This study has provided a way to assess CSR disclosure quality focused on qualitative characteristics identified to be important within the conceptual framework. This index was tested against a sample of companies from a developed and developing country; it found that information relating to the quality of CSR disclosures is evidenced from this index. This index provides a way to further develop 'quality' disclosure and meet the research gap that has criticised quantity measures over quality measures. Additionally, this study also explored the implications of various board characteristics in influencing CSR 'Quality' disclosure in meeting accountability obligations.