Effects of GLICs and State Ownership on Corporate Social Responsibility: Evidence from Malaysia
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Dec 1, 2017
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Abstract
This study investigates the effects of Government-Linked Investment Companies (GLICs) and state ownership on the Corporate Social Responsibility (CSR) disclosure using a sample of 190 Malaysian listed companies over the period 2009 to 2014. The results of Weighted Least Squares (WLS) show that GLICs and state ownership are negatively associated with CSR disclosure, thereby indicating that an increase in the level of GLICs and state-owned shares in a company leads to a reduction in the level of CSR disclosure. This study provides evidence to policymakers that the role of government is supported in promoting GLICs to integrate and implement CSR policies. Furthermore, it provides evidence to shareholders, managers and investors that GLICs and state ownership disclose less voluntary information – both voluntary non-financial and CSR information. This study contributes to the literature concerning the impact of finance and corporate governance through the examination of the impact of GLICs and state ownership on CSR disclosure in Malaysia.
Keywords: Corporate Social Responsibility Disclosure, Government-Linked Investment Companies, State Ownership, Malaysia
JEL Classification: G30, G38
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References
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Adegbite, E., & Nakajima, C. (2012). Institutions and institutional maintenance: Implications for understanding and theorizing corporate governance in developing economies. International Studies of Management and Organization, 42(3), 69-88.
Aguilera, R. V., & Jackson, G. (2003). The cross-national diversity of corporate governance: Dimensions and determinants. Academy of Management Review, 28(3), 447-465.
Aguilera, R., Williams, C., Conley, J., and Rupp, D. (2007). Corporate governance and social responsibility: A comparative analysis of the UK and the US. Corporate Governance: An International Review, 14(3), 147-158.
Aharony, J., Lee, C., & Wong, T. J. (2000). Financial packaging of IPO firms in China. Journal of Accounting Research, 38, 103-126.
Amran, N. A., & Ahmad, A. C. (2010). Corporate governance mechanisms and performance: analysis of Malaysian family and non-family controlled companies. Journal of Modern Accounting and Auditing, 6(2), 1-15.
Amran, A., & Devi, S. S. (2008). The impact of government and foreign affiliate influence on corporate social reporting: The case of Malaysia. Managerial Auditing Journal, 23(4), 386-404.
Bai, C., Lu, J., & Tao, Z. (2006). The multitask theory of state enterprise reform: Empirical evidence from China. American Economic Review, 96(2), 353-357.
Bansal, P. (2003). From issues to actions: The importance of individual concerns and organizational values in responding to natural environmental issues. Organization Science, 14(5), 510-527.
Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4), 717-736.
Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71-86.
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4, 497-505.
Chapple, W., & Moon, J. (2005). Corporate social responsibility (CSR) in Asia. Business and Society, 44(4), 415-441.
Chena, J, Hongb, H., & Steinc, J. C. (2002). Breadth of ownership and stock returns. Journal of Financial Economics, 66, 171-205.
Chu, E. Y. (2004). The determinants of ownership structure in Malaysia. Paper presented in The Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, 4-6 July 2004, Singapore.
Darus, F., Mad, F., & Yusoff, H. (2014). The importance of ownership monitoring and firm resources on corporate social responsibility (CSR) of financial institutions. Procedia -Social and Behavioral Sciences, 145, 173-180.
Edoho, F. (2008). Oil transnational corporations: Corporate social responsibility and environmental sustainability. Corporate Social Responsibility and Environmental Sustainability, 15, 210-222.
Eng, L. L., & Mak, Y. T. (2003). Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy, 22(4), 325-345.
Estrin, S., & Perotin, V. (1991). Does ownership always matter? International Journal of Industrial Organization, 9(1), 55-72.
Esa, E., & Zahari, A. R. (2016). Corporate social responsibility: Ownership structures, board characteristic and the mediating role of board compensation. Procedia Economics and Finance, 35, 35-43.
Eweje, G. (2007). Multinational oil companies’ CSR initiatives in Nigeria: The scepticism of stakeholders in host communities. Managerial Law, 49(5/6), 218-235.
Flammer, C. (2013). Corporate social responsibility and shareholder reaction: The environmental awareness of investors. Academy of Management Journal, 56(3), 758-781.
Frynas, J. G. (2000). Oil in Nigeria: conflict and litigation between oil companies and village communities. Hamburg: LIT Verlag.
Ghazali, N. A. M. (2010). Ownership structure, corporate governance and corporate performance in Malaysia. International Journal of Commerce and Management, 20(2), 109-119.
Godos-Díez, J. L, Fernández-Gago, R., Cabeza-García, L., & Martínez-Campillo, A. (2014). Determinants of CSR practices: analysis of the influence of ownership and the management profile mediating effect. Spanish Journal of Finance and Accounting, 43(1), 47-68.
Graves, S. B., & Waddock, S. A. (1994). Institutional owners and corporate social performance. Academy of Management Journal, 37, 1034-1046.
Haniffa, R., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391-430.
Hu, Y. Y, Zhu, Y., & Hu, Y. (2016). Does ownership type matter for corporate social responsibility disclosure: Evidence from China. Global Conference on Business and Finance Proceedings, 11(1), 183-197.
Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42, 564-576.
Imam, S. (2000). Corporate social performance reporting in Bangladesh. Managerial Auditing Journal, 15(3), 133-141.
Ingley, C. B. (2008). Company growth and board attitudes to corporate social responsibility. International Journal of Business Governance and Ethics, 4(1), 17-39.
Li, W., & Zhang, R. (2010). Corporate social responsibility, ownership structure, and political interference: Evidence from China. Journal of Business Ethics, 96(4), 631-645.
Li, Q., Luo, W., Wang, Y., & Wu, L. (2013). Firms performance, corporate ownership, and corporate social responsibility disclosure in China. Business Ethics: A European Review, 22(2), 159-173.
Lo, B. C. W., & Yap, K. L. (2011). Are Malaysian companies ready for corporate social responsibility? Labuan e-Journal of Muamalat and Society, 5(3),11-15.
Taha, M., & Haziwan, M. (2013, June 9). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Retrieved from https://ssrn.com/
Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268-305.
Mascarenhas, B. (1989). Domains of state-owned, privately-held, and publicly traded firms in international competition. Administrative Science Quarterly, 34, 582-597.
Mohd Ghazali, N. A. (2007). Ownership structure and corporate social responsibility disclosure: Some Malaysian evidence. Corporate Governance, 7(3), 251-266.
Mohd Nasir, N. A., & Abdullah, S. N. (2004). Voluntary disclosure and corporate governance among financially distressed firms in Malaysia. Financial Reporting, Regulation and Governance, 3(1), 1-39
Musallam, S. R. M. (2015). Government-controlled companies and corporate accounting performance. International Journal of Innovation Sciences and Research, 4(7), 309-313.
Najid, N. A., & Abdul Rahman, R (2011). Government ownership and performance of Malaysian government-linked companies. International Research Journal of Finance and Economics, 61(1), 1450-2887.
Nmehielle, V., & Nwauche, E. (2004). External-internal standards in corporate governance in Nigeria. George Washington University Law School, Public Law and Legal Theory Working Paper No. 115.
Roberts, R. W. (1992). Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting Organizations and Society, 17, 595-612.
Saleh, M. (2009). Corporate social responsibility disclosure in an emerging Market: A longitudinal analysis approach. International Business Research, 2(1), 131-141.
Sanchez, J., Sotorrio, L., & Diez, E. (2011). The relationship between corporate governance and corporate social behaviour: A structural equation model analysis. Corporate Social Responsibility and Environmental Management, 18, 91-101.
Soliman, M. M., El Din, M. B., & Sakr, A. (2012). Ownership structure and Corporate Social Responsibility (CSR): An empirical study of the listed companies in Egypt. The International Journal of Social Sciences, 5(1), 2305-4557.
Stanwick, P. A., & Stanwick, S. D. (1998). The relationship between corporate social performance, and organizational size, financial performance, and environmental performance: An empirical examination. Journal of Business Ethics, 17, 195-204.
Sulong, Z., & Nor, F. M. (2010). Corporate governance mechanisms and firm valuation in Malaysian listed firms: A panel data analysis. Journal of Modern Accounting and Auditing, 1(56), 1548-6583.
Tabachnick, B. G., & Fidell, L. S. (2007). Using multivariate statistics. Boston: Pearson/Allyn& Bacon.
Taufil-Mohd, K. N., Md-Rus, R., & Musallam, S. R. M. (2013). The effect of ownership structure on firm performance in Malaysia. International Journal of Finance and Accounting, 2(2), 75-81
The Tenth Malaysia Plan 2011-2015. Retrieved from http://www.epu.gov.my/
Tian, L., & Estrin, S. (2008). Retained state shareholding in Chinese PLCs: Does government ownership always reduce corporate value. Journal of Comparative Economics, 36(1),74-89.
Van Beurden, P., & Gossling, T. (2008). The worth of values: A literature review on the relation between corporate social and financial performance. Journal of Business Ethics, 82(2), 407-424.
Webb, L, Cohen, J., Nath, L., & Wood, D. (2009). The supply of corporate social responsibility disclosure among US Firms. Journal of Business and Ethics, 84, 497-527.
Xu, B., & Zeng, T. (2016). Profitability, state ownership, tax reporting and corporate social responsibility: evidence from Chinese listed firms. Social Responsibility Journal, 12(1), 23-31.
Yoon, Y., Giirhan-Canli, Z., & Schwarz, N. (2006). The effect of Corporate Social Responsibility (CSR) activities on companies with bad reputations, Journal of Consumer Psychology, 16(4), 377-390.
Adegbite, E., & Nakajima, C. (2012). Institutions and institutional maintenance: Implications for understanding and theorizing corporate governance in developing economies. International Studies of Management and Organization, 42(3), 69-88.
Aguilera, R. V., & Jackson, G. (2003). The cross-national diversity of corporate governance: Dimensions and determinants. Academy of Management Review, 28(3), 447-465.
Aguilera, R., Williams, C., Conley, J., and Rupp, D. (2007). Corporate governance and social responsibility: A comparative analysis of the UK and the US. Corporate Governance: An International Review, 14(3), 147-158.
Aharony, J., Lee, C., & Wong, T. J. (2000). Financial packaging of IPO firms in China. Journal of Accounting Research, 38, 103-126.
Amran, N. A., & Ahmad, A. C. (2010). Corporate governance mechanisms and performance: analysis of Malaysian family and non-family controlled companies. Journal of Modern Accounting and Auditing, 6(2), 1-15.
Amran, A., & Devi, S. S. (2008). The impact of government and foreign affiliate influence on corporate social reporting: The case of Malaysia. Managerial Auditing Journal, 23(4), 386-404.
Bai, C., Lu, J., & Tao, Z. (2006). The multitask theory of state enterprise reform: Empirical evidence from China. American Economic Review, 96(2), 353-357.
Bansal, P. (2003). From issues to actions: The importance of individual concerns and organizational values in responding to natural environmental issues. Organization Science, 14(5), 510-527.
Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4), 717-736.
Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71-86.
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4, 497-505.
Chapple, W., & Moon, J. (2005). Corporate social responsibility (CSR) in Asia. Business and Society, 44(4), 415-441.
Chena, J, Hongb, H., & Steinc, J. C. (2002). Breadth of ownership and stock returns. Journal of Financial Economics, 66, 171-205.
Chu, E. Y. (2004). The determinants of ownership structure in Malaysia. Paper presented in The Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, 4-6 July 2004, Singapore.
Darus, F., Mad, F., & Yusoff, H. (2014). The importance of ownership monitoring and firm resources on corporate social responsibility (CSR) of financial institutions. Procedia -Social and Behavioral Sciences, 145, 173-180.
Edoho, F. (2008). Oil transnational corporations: Corporate social responsibility and environmental sustainability. Corporate Social Responsibility and Environmental Sustainability, 15, 210-222.
Eng, L. L., & Mak, Y. T. (2003). Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy, 22(4), 325-345.
Estrin, S., & Perotin, V. (1991). Does ownership always matter? International Journal of Industrial Organization, 9(1), 55-72.
Esa, E., & Zahari, A. R. (2016). Corporate social responsibility: Ownership structures, board characteristic and the mediating role of board compensation. Procedia Economics and Finance, 35, 35-43.
Eweje, G. (2007). Multinational oil companies’ CSR initiatives in Nigeria: The scepticism of stakeholders in host communities. Managerial Law, 49(5/6), 218-235.
Flammer, C. (2013). Corporate social responsibility and shareholder reaction: The environmental awareness of investors. Academy of Management Journal, 56(3), 758-781.
Frynas, J. G. (2000). Oil in Nigeria: conflict and litigation between oil companies and village communities. Hamburg: LIT Verlag.
Ghazali, N. A. M. (2010). Ownership structure, corporate governance and corporate performance in Malaysia. International Journal of Commerce and Management, 20(2), 109-119.
Godos-Díez, J. L, Fernández-Gago, R., Cabeza-García, L., & Martínez-Campillo, A. (2014). Determinants of CSR practices: analysis of the influence of ownership and the management profile mediating effect. Spanish Journal of Finance and Accounting, 43(1), 47-68.
Graves, S. B., & Waddock, S. A. (1994). Institutional owners and corporate social performance. Academy of Management Journal, 37, 1034-1046.
Haniffa, R., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391-430.
Hu, Y. Y, Zhu, Y., & Hu, Y. (2016). Does ownership type matter for corporate social responsibility disclosure: Evidence from China. Global Conference on Business and Finance Proceedings, 11(1), 183-197.
Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42, 564-576.
Imam, S. (2000). Corporate social performance reporting in Bangladesh. Managerial Auditing Journal, 15(3), 133-141.
Ingley, C. B. (2008). Company growth and board attitudes to corporate social responsibility. International Journal of Business Governance and Ethics, 4(1), 17-39.
Li, W., & Zhang, R. (2010). Corporate social responsibility, ownership structure, and political interference: Evidence from China. Journal of Business Ethics, 96(4), 631-645.
Li, Q., Luo, W., Wang, Y., & Wu, L. (2013). Firms performance, corporate ownership, and corporate social responsibility disclosure in China. Business Ethics: A European Review, 22(2), 159-173.
Lo, B. C. W., & Yap, K. L. (2011). Are Malaysian companies ready for corporate social responsibility? Labuan e-Journal of Muamalat and Society, 5(3),11-15.
Taha, M., & Haziwan, M. (2013, June 9). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Retrieved from https://ssrn.com/
Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268-305.
Mascarenhas, B. (1989). Domains of state-owned, privately-held, and publicly traded firms in international competition. Administrative Science Quarterly, 34, 582-597.
Mohd Ghazali, N. A. (2007). Ownership structure and corporate social responsibility disclosure: Some Malaysian evidence. Corporate Governance, 7(3), 251-266.
Mohd Nasir, N. A., & Abdullah, S. N. (2004). Voluntary disclosure and corporate governance among financially distressed firms in Malaysia. Financial Reporting, Regulation and Governance, 3(1), 1-39
Musallam, S. R. M. (2015). Government-controlled companies and corporate accounting performance. International Journal of Innovation Sciences and Research, 4(7), 309-313.
Najid, N. A., & Abdul Rahman, R (2011). Government ownership and performance of Malaysian government-linked companies. International Research Journal of Finance and Economics, 61(1), 1450-2887.
Nmehielle, V., & Nwauche, E. (2004). External-internal standards in corporate governance in Nigeria. George Washington University Law School, Public Law and Legal Theory Working Paper No. 115.
Roberts, R. W. (1992). Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting Organizations and Society, 17, 595-612.
Saleh, M. (2009). Corporate social responsibility disclosure in an emerging Market: A longitudinal analysis approach. International Business Research, 2(1), 131-141.
Sanchez, J., Sotorrio, L., & Diez, E. (2011). The relationship between corporate governance and corporate social behaviour: A structural equation model analysis. Corporate Social Responsibility and Environmental Management, 18, 91-101.
Soliman, M. M., El Din, M. B., & Sakr, A. (2012). Ownership structure and Corporate Social Responsibility (CSR): An empirical study of the listed companies in Egypt. The International Journal of Social Sciences, 5(1), 2305-4557.
Stanwick, P. A., & Stanwick, S. D. (1998). The relationship between corporate social performance, and organizational size, financial performance, and environmental performance: An empirical examination. Journal of Business Ethics, 17, 195-204.
Sulong, Z., & Nor, F. M. (2010). Corporate governance mechanisms and firm valuation in Malaysian listed firms: A panel data analysis. Journal of Modern Accounting and Auditing, 1(56), 1548-6583.
Tabachnick, B. G., & Fidell, L. S. (2007). Using multivariate statistics. Boston: Pearson/Allyn& Bacon.
Taufil-Mohd, K. N., Md-Rus, R., & Musallam, S. R. M. (2013). The effect of ownership structure on firm performance in Malaysia. International Journal of Finance and Accounting, 2(2), 75-81
The Tenth Malaysia Plan 2011-2015. Retrieved from http://www.epu.gov.my/
Tian, L., & Estrin, S. (2008). Retained state shareholding in Chinese PLCs: Does government ownership always reduce corporate value. Journal of Comparative Economics, 36(1),74-89.
Van Beurden, P., & Gossling, T. (2008). The worth of values: A literature review on the relation between corporate social and financial performance. Journal of Business Ethics, 82(2), 407-424.
Webb, L, Cohen, J., Nath, L., & Wood, D. (2009). The supply of corporate social responsibility disclosure among US Firms. Journal of Business and Ethics, 84, 497-527.
Xu, B., & Zeng, T. (2016). Profitability, state ownership, tax reporting and corporate social responsibility: evidence from Chinese listed firms. Social Responsibility Journal, 12(1), 23-31.
Yoon, Y., Giirhan-Canli, Z., & Schwarz, N. (2006). The effect of Corporate Social Responsibility (CSR) activities on companies with bad reputations, Journal of Consumer Psychology, 16(4), 377-390.