Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
Accountability and Transparency of Corporate Social Responsibility
Reporting and Corporate Reputation: Evidence from an Emerging
Economy
Faizah Darus* Suaini Othman** and Roshayani Arshad***
Stakeholders are increasingly demanding for greater disclosure of corporate social responsibility (CSR) practices as
such disclosure will reveal the actions of management towards CSR which in turn will enhance public perception and
corporate reputation. The aim of this study is to examine the influence of CSR reporting on corporate reputation in
the context of legitimacy theory. Using a sample of 248 companies listed on Bursa Malaysia, an investigation into the
relationship between CSR disclosures and corporate reputation was undertaken. The results of the study revealed
that the quality of CSR disclosure relating to community and marketplace appeared to have a significant relationship
with corporate reputation. The results infer that social involvement with community activities and the offering of
quality products and services can significantly enhance corporate reputation.
JEL Codes: M41 “Accounting”
1. Introduction
The mounting discontent among the public regarding business violation on moral commitments
to society and the impact on physical environment has driven the public and multiple
stakeholders to demand for more corporate social responsibility (CSR) information (Crowther &
Martinez, 2007; Ferns, Emelianova, & Sethi, 2008; Godfrey & Hatch, 2007; Gray, 2006; Kolk,
2005). In particular, the stakeholders require information that demonstrates a company‟s
responses for accountability and corrective action as well as its strategies on preventive action
and minimizing harm. In Malaysia, the increase in companies‟ engagement in CSR practices and
disclosure is expected to be more visible after the introduction of the mandatory disclosure
requirements by the government and Bursa Malaysia in 2007. This regulation is in line with
international demands for CSR reporting and to encourage public-listed companies to embrace
greater accountability and transparency of CSR information. With such regulatory requirements,
Malaysian companies are required to make public their CSR activities or the lack of such
activities in their annual reports to stakeholders. The mandatory disclosure requirement
essentially is to promote companies to undertake CSR activities and to be accountable and
transparent in reporting them to their stakeholders. The engagement in CSR activities and the
reporting of such activities as a matter of enhanced accountability and transparency is becoming
more urgent with the growing evidence that it also enhances corporate reputation (Bebbington et
al., 2008; Bertels & Peloza, 2008; Guidery & Pattern, 2010; Toms, 2002; Unerman, 2008).
Following the increase in CSR reporting due to the mandatory requirements, this study aims to
investigate whether CSR reporting has an effect in enhancing corporate reputation.
The remainder of this paper is organised as follows. Section 2 discusses the literature review
and hypotheses generation. Section 3 discusses the research methodology. The research
findings are reviewed in Section 4. The final section highlights the conclusion and implications of
the results
*Associate Professor Dr. Faizah Darus, Accounting Research Institute & Faculty of Accountancy, Universiti Teknologi
MARA, Malaysia. Email : faiza634@salam.uitm.edu.my
**Dr. Suaini Othman, Faculty of Accountancy, Universiti Teknologi MARA, Malaysia. Email : suaini@salam.uitm.edu.my
***Associate Professor Roshayani Arshad, Accounting Research Institute & Faculty of Accountancy, Universiti Teknologi
MARA, Malaysia. Email : roshayani@salam.uitm.edu.my
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
2. Literature Review
a) Legitimacy Theory
In the area of corporate reporting, particularly in relation to social and environmental initiatives, a
body of prior literature suggests that the main incentive for management to disclose CSR
information is to gain legitimacy (Deegan, 2002; Guthrie, Petty, & Yongvanich, 2004; Pattern,
1991). Legitimacy is an acceptance of a company by the external actors such as the regulators,
major stakeholders, fund providers or public at large (Deephouse, 1996). The CSR literature
demonstrates that the main incentive for management to disclose CSR information is mainly due
to the desire to gain legitimacy (Pattern, 1991). This is based on the concept that a social
contract exists between an organisation and society. Organisations are part of a broader social
system; hence an organisation has no inherent right to exist and acquire resources unless the
society confers an organisation the “state” of legitimacy (Deegan, 2002) . This infers that failure
to conform in a manner that is consistent with the expectations of society can revoke the
organisation‟s „contract‟, which in turn may potentially lead to the organisation own demise
(Cormier, et al., 2005; Deegan & Rankin, 1996). Therefore, it is crucial that an organisation
seeks congruency between the values and its action and that of the society. Consistent with
Deegan (1996), in this study it is argued that managers have tendencies to embrace greater
accountability and transparency of their CSR reporting in annual reports to influence the societal
perceptions resulting in an enhanced corporate reputation.
b) CSR Reporting
CSR requires organisation to act responsibly, specifically their actions should cause less harm to
the society (accountability) and the environment (sustainability) (Anne & Crowther, 2005). Gray
et al. (1995) refers to CSR disclosure as information disclosed by companies regarding their
CSR activities, aspirations or public image specifically with regard to environmental, community,
employee and consumer issues. Thus, transparency, accountability and sustainability are
important aspects of CSR (Anne & Crowther, 2005). Aras & Crowther (2007) pointed out that
CSR disclosure should include three important aspects; namely transparency, accountability and
sustainability. Transparency refers to information provided by the organization through its
reporting mechanism on all the effects of the actions taken by the organisation. Accountability
involves responsibility for the effects of actions taken by the organisation. Hence, this concept
requires an organisation to report the quantification of the effects of its action to all stakeholders
affected by those actions. In other words, the report should contain understandability, relevance,
reliability and comparability characteristics. Sustainability refers to actions taken by an
organisation that impacts its external environment, which demands corporations to be socially
responsible not only to the present but also towards the future members of society (Aras &
Crowther, 2007, pp. 122-129).
c) Quantity and Quality of CSR Reporting
The quantity of CSR disclosures are normally measured by the number of words, sentences,
paragraph or pages (Milne & Adler, 1999; Unerman, 2000) disclosed by companies either in their
annual or sustainability reports. However, numerous findings from prior literature indicate that
CSR reports were made by companies merely as public relation exercises or as a legitimation
tool rather than based on altruistic reasons (Clarke & Gibson-Sweet, 1999; Deegan & Gordon,
1996; Hooghiemstra, 2000; Nue, et al., 1998; Wilmhurst & Frost, 2000). As a result, current
studies on CSR disclosure are putting greater emphasis on the quality of CSR disclosure
(Freeman, 2006; Hasseldine, Salama, & Toms, 2005; Milne, Tregidga, & Walton, 2003; Turker,
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
2009), as the quality of CSR disclosure is still preferred by stakeholders as it is argued to be
more credible and reliable than a volume of information. In addition, quality disclosure is said to
engender greater public trust, as well as being more meaningful in assisting stakeholders for
making quality decisions (Freeman, 2006; Murray, Sinclair, Power, & Gray, 2006) and could help
to influence the perceptions of reputation (Ferns, et al. 2008).
d) Corporate Reputation
The relationship between CSR reporting and corporate reputation has become a prominent
debate.
The most accepted definition of corporate reputation quoted in many of the prior
literature was provided by Fombrun (1996), a renowned researcher as
…a perception representation of a company‟s past actions and future prospects that describe
the firm‟s overall appeal to its constituents when compared to other leading rivals…
(Brammer & Pavelin, 2004, p. 704)
This definition integrates the impression that corporate reputation is a source of competitive
advantage that reflects the perceptions of multiple stakeholders. A strong corporate reputation
protects a company from its rivals as it is more difficult to replicate and mimic the characteristics
of a superior corporation (Barney, 2001; Deephouse & Carter, 2005; Rose & Thomsen, 2004).
Such reputation gives a company its competitive advantage in its various markets and this could
be translated into an improved bottom line (Dowling, 2006; O'Callaghan, 2007). Past literature
indicates that failure to wisely manage CSR can damage a company‟s reputation (Freeman,
2006). Turban and Greening (1996) found companies with a higher CSR practices are deemed
more reputable and therefore are perceived to be more “attractive” as employers. Prior studies
have also found that CSR initiatives have led many companies to enjoy positive corporate
reputation (Hooghiemstra, 2000; Ferns, et al., 2008; Laufer & Coombs, 2006; Rose & Thomsen,
2004). The above arguments form the premise for the development of the hypotheses for this
study.
H1: The quantity of CSR disclosure is positively significantly related to corporate reputation
In this study, the quality of CSR disclosure embodied four dimensions, thus the following
hypotheses were formulated:
H2a: The quality of Community disclosure is positively significantly related to
corporate reputation
H2b: The quality of Environmental disclosure is positively significantly related to corporate
reputation
H2c: The quality of Workplace disclosure is positively significantly related to
corporate
reputation
H2d: The quality of Marketplace disclosure is positively significantly related to corporate
reputation
3. The Methodology and Model
The sample for the study comprised of 248 companies listed on Bursa Malaysia. The year 2007
was chosen due to the introduction of the mandatory CSR disclosure requirements imposed by
Bursa Malaysia on public-listed companies. To examine the influence of CSR disclosure on
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
corporate reputation, a one year time-lagged effect was taken into consideration (Smith,
Vasudevan, & Tanniru, 1996), therefore, the effects of CSR disclosure in 2007 on corporate
reputation was examined in 2008. The companies were randomly selected from nine industries
namely Trading/Service, Technology, Hotel, Property, Construction, Infrastructure, Consumer
Product, Industrial Product and Plantation. The Finance companies were excluded due to the
different regulatory requirements and also material difference in their type of operations (Cheng
& Courtenay, 2006; Gray et al., 1995; Raffournier, 1995). In view that Technology and Hotel
industries consist of small population; they were grouped together with the Trading/Service
industry, which they share almost similar nature of business. Likewise, Property, Construction
and Infrastructure were grouped into the same category while Consumer and Industrial Products
were also grouped into the same category. The annual and sustainability reports of the
companies were downloaded from Bursa Malaysia website. Table 1 presents the details of the
sample companies chosen for the study.
Table 1: Sample Companies
Industries
Total
Number of
Companie
s in
Sample
Trading/Service/Technology/Hotel
65
Property/Construction/Infrastructur
61
e
Plantation
30
Consumer/Industrial Products
92
Total
248
Total
Number of
Listed
Companie
s
172
104
Percentag
e
39
240
555
77
38
45
38
59
In this study the CSR disclosure was measured through a content analysis of the companies‟
annual and sustainability reports. The quantity CSR disclosure was measured based on the
number of words disclosed (Deegan & Rankin, 1996; Douglas, et al., 2004; Wilmhurst & Frost,
2000; Zeghal & Ahmed, 1990). The quality of CSR disclosure on the other hand, was measured
using an equal-weighted index comprising of 100 items segregated into four main themes
namely; Communities, Environment, Workplace and Marketplace rated on a score of 0 to 5.
Non-disclosure or merely compliance to requirement (NON) was given a score of 0; General
rhetoric, minimum coverage, (GEN) a score of 1; Specific activities that were briefly discussed,
promotional, rhetorical, qualitative (QUA) a score of 2; Specific, detailed, informational,
qualitative and quantitative or monetary (MON) a score of 3; Implementation, commitment to and
progress towards sustainable development in core business (COM) a score of 4; and
Implementation and monitoring, use of targets, results published, benchmarking against
competition and/or best practice in other sectors (IMP) a score of 5. Therefore, the minimum
possible score is zero while the maximum possible score for a company is 125 for each of the
four main themes comprising of 25 items each. This scoring approach is also consistent with
prior studies on corporate voluntary reporting including on CSR disclosure (Branco & Rodrigues,
2008; Chau & Gray, 2002; Haniffa & Cooke, 2002).
The corporate reputation in this study was measured using a corporate reputation index which
was developed as a result of interviews with CSR managers and based on an index adapted
from RepTrak TM model of Reputation Institute. The corporate reputation in this study was
measured based on seven dimensions comprising of 58 items; Financial performance (14
items), Product or service quality (12 items), Governance (1 item), Leadership (13 items),
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
Citizenship (10 items), Workplace climate (5 items) and Innovation (3 items), rated on a
dichotomous score. The total score for each dimension was based on 100% as each dimension
was considered as equally important. Accordingly, the total score is 700%. Therefore, the overall
score of corporate reputation for a company will be the average score of these seven
dimensions. Table 2 presents the variables and their measurements.
Table 2: The variables and their measurements
Variable
Measurements
Acrony
m
Independent Variables
Quantity of CSR Disclosure
CSRDQ
Content analysis of annual and
T
sustainability reports, using word
count as a unit of analysis
Quality of Community Disclosure
CCSRD
Quality of Environmental
QL
Disclosure
ECSRD
Quality of Workplace Disclosure
QL
Quality of Marketplace disclosure
WCSRD
The index indicates the score of
QL
quality disclosure for a company
MCSRD
j, where N is the maximum
QL
number of relevant items a
company may disclose and dj is
equal to 0 to 5, where the
minimum score is zero and the
maximum score is 5. The total
maximum scores for a company
mj is 125 maximum scores for
each main theme - Community,
Environment, Workplace and
Marketplace.
Variables
Variables
Dependent Variable
Corporate Reputation
Variable
Acrony
m
Measurements
REP
The index indicates the level of
corporate reputation for a
company for each dimension,
where N is the maximum number
of relevant items a company
performs and dj is equal to 1 if
the item is disclosed and 0 if
otherwise. The score of seven
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
dimensions
(Financial
performance,
Product/service
quality, Corporate governance,
Citizenship, Workplace Climate,
Leadership
quality
and
Innovation) were totaled and then
averaged, yielding a corporate
reputation score for a company.
Control Variables
Size of the company
SIZE
Total assets
Profitability
ROA
Proportion of profit before
interests and taxes over the sum
of share capital and reserves
Industry Affiliation
 Trading/Service/Technology/
Hotel industry
TSTH
 Property/Construction/Infrastructure
industry
PCNI
 Plantation industry
PLT
 Consumer/Industrial
industry
Product
 Score of 1 if a company is in the
category of TSTH; 0 if otherwise
 Score of 1 if a company is in the
category of PCNI; 0 if otherwise
 Score of 1 if a company is in the
category of PLT; 0 if otherwise
 Score of 1 if a company is in the
category of CIP; 0 if otherwise
CIP
Therefore, the following multiple linear regression model was developed to test H1, H2a, H2b,
H2c and H2d
REP = β0 + β1CSRDQT + β2 CCSRDQL + β3 ECSRDQL + β4 WCSRDQL
+ β5MCSRDQL + β 6SIZE + β 7ROA + β8TSTH + β9 PCNI + β10PLT
+ β11CIP+ εt
Where:
REP represents corporate reputation index
CSRDQT is the quantity of CSR disclosure
CCSRDQL is the quality of Community disclosure
ECSRDQL is the quality of Environmental disclosure
WCSRDQL is quality of Workplace disclosure
MCSRDQL is quality of Marketplace disclosure
SIZE is size of company
ROA is profitability
TSTH if a company is in the category of Trading/Service/Technology/Hotel industry
PCNI if a company is in the category of Property/Construction/Infrastructure industry
PLT if a company is in the category of Plantation industry;
CIP if a company is in the category of Consumer/Industrial Product industry
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
εt is an error term.
4. The Findings
a) Descriptive Statistics
Table 3 and Table 4 present the descriptive statistics for the quantity (CSRDQT) and quality of
CSR disclosure for 2007. The mean score 930.25 indicates that on average, the companies
have about 930 words in their annual or sustainability reports with a minimum of 0 disclosure
and a maximum of 11,915 words.
Table 3: Descriptive Statistic for Quantity of CSR Disclosure
N
M
M
M
Std.
i
ax
e
Dev
n
a
n
Quantity of CSR
2
1
11
9
129
(CSRDQT)
4
3
91
3
7.0
disclosure (words)
8
.
5
0
8
0
.
0
2
5
Table 4: Descriptive Statistic for Quality of CSR Disclosure
N
M
M
Mean
i
ax
(%)
n
(
%
(
)
%
)
Community QCSRD
2
.
40
8.3387
4
0
.8
8
0
0
Environment
2
.
57
5.6065
QCSRD
4
0
.6
8
0
0
Workplace QCSR
2
.
54
8.1129
4
0
.4
8
0
0
Marketplace QCSR
2
.
40
4.3419
4
0
.8
8
0
0
The results from Table 4 revealed that the quality of CSR disclosure recorded a minimum of zero
for all dimensions (community, environment, workplace and marketplace) and a maximum
ranging from 40.80 percent for the community and marketplace dimension to 57.60 percent for
environment. The minimum scores of zero for the post-regulation period highlights that although
a mandatory disclosure requirement had been imposed, it does not necessarily reflect the quality
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
of CSR disclosure. This may indicate that some companies produce CSR disclosures to comply
with the regulatory requirements for social legitimacy purposes.
Overall, the quality scores of CSR disclosure were generally low, with the highest mean score of
8.3387 percent for the community dimension. The results reflect that the quality of CSR
disclosures among public listed companies in Malaysia were concentrated on the Community
and Workplace dimensions. Conversely, the disclosures on the environment and marketplace
dimensions generated low quality scores. The low quality scores do infer that CSR activities are
still at the early stage in Malaysia. Given more time and the progressive initiatives undertaken
by the regulatory bodies such as Tax incentives, Green Policy, Green Building Index and Green
Malaysia, the quality of CSR disclosures is expected to keep in step with the improving
environment.
Table 5 presents the descriptive statistics of corporate reputation and its seven dimensions. The
results from Table 5 revealed that the mean score for corporate reputation was 19.58 %. Of the
seven dimensions of corporate reputation, financial performance registered the highest mean
score (40.77 percent), followed by leadership (24.86 percent) and products/service quality (21.70
percent). These findings reflect that public-listed companies in Malaysia were very concerned
about their financial performance and maintaining strong leaders to enhance their reputation.
Product and service quality were also emphasised. The lowest mean score was for innovation
(5.64 percent) suggesting that Malaysian companies were putting less effort in innovative work to
improve corporate reputation.
Table 5: Descriptive Statistics of Corporate Reputation Index
Variable
Minimu
Maxi
Std.
m
mum
Mean
Deviation
Corporate Reputation
2.38
68.45
19.58
14.01
Citizenship
.00
90.00
12.74
16.94
Workplace
.00
80.00
10.40
18.43
Corporate Governance
100.0
.00
20.96
40.79
0
Product/Service Quality
.00
95.48
21.70
17.30
Innovation
.00
60.00
5.64
11.25
Leadership
.00
91.67
24.86
19.95
Financial Performance
.00
94.03
40.77
23.064
Table 6 presents the Pearson Correlation Coefficient between the quantity of CSR disclosure
and the four dimensions of quality CSR disclosures with corporate reputation. The results of the
correlation analysis revealed that the independent variables are highly correlated with corporate
reputation and its seven dimensions. All the correlations are significant at the one percent level.
The results support prior literature that CSR disclosure is associated with a company‟s
reputation (Adams & Zutshi, 2006; Bertels & Peloza, 2008; Ferns, et al., 2008; Adams & Zutshi,
2006; Fombrun, 2005; Friedman & Miles, 2001; Kolk, 2005; Lewis, 2003). The results indicate
preliminary evidence on the relationship between CSR disclosure and corporate reputation
enhancement. The results from the correlation analysis indicate that all the correlation
coefficients are less than 0.9; hence no multicollinearity exists among the variables tested in this
study.
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
Table 6: Correlations between CSR disclosures and corporate reputation
R
C
E
T
W
C
P
I
L
P
Z
P
G
Q
N
D
FIN
CSRDQT
.
.
.6
.6
.6
3
4
.4
.3
4
7
5
0
8
0
8
.28
*
*
*
*
*
4
5
0
2
7
8
8
7**
*
CCSRDQ
L
.6
5
*
9
*
ECSRDQ
L
.4
9
7*
*
WCSRD
QL
.5
6
8*
*
MCSRDQ
L
.5
8
9*
*
*
.6
4
*
1
*
.5
6
8*
*
.5
6
3*
*
.5
5
3*
*
*
.5
9
*
3
*
.4
6
7*
*
.5
8
0*
*
.5
8
6*
*
*
*
*
*
.
3
3
4
.
5
0
3
*
*
.
2
2
4
.
3
6
7
*
*
.
2
8
1
.
4
4
6
*
*
.
3
2
3
.
3
9
8
*
*
*
*
*
*
*
*
*
*
*
*
.4
9
*
7
.3
6
*
5
.33
**
3
.3
2
2*
.3
2
2*
.21
5**
.3
0
2*
.3
3
8*
.26
7**
.3
6
0*
.3
4
0*
.29
0**
*
*
*
*
*
*
*
*
**. Correlation is significant at the 0.01 level (2-tailed).
Where:
REP is corporate reputation (overall)
CTZ is citizenship
WP is workplace climate
CG is corporate governance
PQ is product quality
IN is innovation
LD is leadership
FIN is financial performance
CSRDQT is quantity of CSR disclosure
CCSRDQL is quality of community disclosure
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Proceedings of World Business And Economics Research Conference
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ECSRDQL is quality of environmental disclosure
WCSEDQL is quality of workplace disclosure
MCSRDQL is quality of marketplace disclosure
Table 7 presents the results of the multiple regression analysis for this study. The results
exhibited in Table 7 showed that the F statistic = 40.71 and is significant, while the adjusted R2 =
0.639. The Durbin-Watson stood at 2.006, inferring that the data meets the assumption of
normality. Finally, the model is free from any multicollinearity problem as all the VIF values
registered below 10.
Table 7: Multiple Regression Results on the Relationships between CSR Disclosures
and Corporate Reputation Index
Dependent Variable: Corporate Reputation
R Square = 0.655, Adjusted R2 = 0.639, Std. Error = 8.27 , F =40.71,
0.000
Durbin-Watson = 2.006
Std
Be
B
Erro
ta
t
.Sig
r
Constant
7.
12.42
1.60
.00
76
8
1
0
4
TSTH
1.59
.03
.7
.44
1.208
1
9
59
8
PCNI
1.60
.00
.1
.90
.203
8
6
26
0
PLT
2.
2.17
.12
.01
5.236
40
3
4
7**
9
CIP
1.81
2.
.01
.14
4.377
3
41
6**
1
5
ROA
3.
.13
.00
1.897
.572
31
5
1***
7
SIZE
3.
.17
.00
2.403
.692
47
2
1***
1
CSRDQT
1.
1.13
.13
.10
1.871
64
8
2
2
4
CCSRDQL
6.
.42
.00
.709
.108
53
5
0***
2
ECSRDQL
.04
.8
.41
.080
.099
9
11
8
Sig. =
VIF
1.773
1.736
1.819
2.347
1.140
1.671
4.401
2.895
2.537
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Proceedings of World Business And Economics Research Conference
24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
WCSRDQL
-.108
.101
.07
0
.378
.149
.16
1
MCSRDQL
1.
06
2
2.
53
8
.28
9
2.933
.01
2**
2.755
*** Significant at the 0.01 level
** Significant at the 0.05 level
* Significant at the 0.1 level
The results from Table 7 showed that the quantity of CSR disclosure was not significant whereas
the quality of disclosure for community and marketplace appeared to have a significant
relationship with corporate reputation therefore H1 was rejected while H2a and H2d were
accepted.
The results infer that involvement with community activities can significantly enhance a
company‟s reputation. The results are consistent with prior findings which assert that in
developing countries, engagement in community activities received a higher degree of priority
than any other CSR initiatives; as lifting the community‟s standard of living was perceived to be
crucial to the economic growth of a nation (Belal & Owen, 2007; Loftus & Purcell, 2008).
Similarly, in Malaysia, engagement in community activities seems to generate more impact on
corporate reputational value than that of other activities. The significant results for marketplace
quality disclosure are consistent with prior studies which contend that “firms that produce
superior quality products, use truthful advertising and act in a socially and environmentally
responsible manner are creating reputational advantage” (Miles & Covin, 2000, p. 300).
Environment and workplace quality disclosure produced insignificant results; therefore H2b and
H2c were rejected. A possible explanation could be due to the level of information disclosed in
relation to environment was far below the level of quality disclosure in accordance with
international best practice. Of the control variables, size and profitability were positively
significant in terms of their relationship with corporate reputation while for industry affiliations, the
plantation and consumer/industrial product industries were significant. The plantation industry in
Malaysia has been generally dominated by big companies (Amran & Devi, 2008). In addition, the
plantation and consumer/industrial product industries in Malaysia are inextricably linked with the
export of the country‟s major commodities. Additionally, they are also seen to be more visible to
the international capital market. This could lead to being perceived as enhancing the positive
reputational value of the industries in the eyes of their stakeholders; thereby reinforcing their
positions as the more reputable industry among other industry sectors.
5. Summary and Conclusions
The aim of the study is to examine whether CSR reporting has any effect in enhancing corporate
reputation among Malaysian public-listed companies, following the introduction of the mandatory
CSR reporting in 2007. Overall, two conclusions can be drawn from the results of this study.
Firstly, the quality of CSR reporting has an influence on corporate reputation. However, in an
emerging economy such as Malaysia, the quality of CSR reporting that enhance corporate
reputation was very much focused on the community and marketplace dimensions. Secondly,
the quantity of CSR disclosures could not generate reputational value. These results are
consistent with prior studies undertaken in the developed countries where corporate reputation
will be enhanced only when quality information is communicated (Guidry & Pattern, 2010;
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24 - 25 February, 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-45-0
Hasseldine, et al., 2005). This also supports the views that companies that use CSR disclosure
as public relation vehicles will consequently erode their reputational values (Centaur
Communications, 2005). Therefore, consistent with legitimacy theory, it is crucial that an
organisation seeks congruency between its CSR disclosure and societal expectation in order to
remain legitimate. Therefore, companies that embrace greater accountability and transparency
and enhance the quality of their CSR reporting will be able to influence societal perceptions
resulting in an enhanced corporate reputation.
Acknowledgements
The authors would like to express their gratitude to the Accounting Research Institute, Ministry of
Education, Malaysia and Universiti Teknologi MARA for funding and facilitating this research
project.
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