Determinants of Corporate Social Responsibility Disclosure: The Case of Banking Sector in Pakistan

The Case of Banking Sector in Pakistan

Abstract

This research aims to examine Corporate Social Responsibility Disclosure (CSRD) in Islamic and conventional banks in Pakistan. As legitimacy theory suggests existence of "social contract" among society and banks, therefore, banks must consider CSRD for long-term and profitable performance. Based on the theory, this study examines the effect of bank size, profitability, financial leverage, bank age, audit firm size, and visibility on the CSRD of Islamic and conventional banks in Pakistan. A sample of 24 banks is considered including 5 full-fledged Islamic and 19 conventional banks for six years from 2010 to 2015. Capitalizing content analysis, a Corporate Social Responsibility Index (CSRDI) is developed using annual reports of the sample banks. Empirical results show that ethics and human resource are the highest disclosed categories. Furthermore, Mann-Whitney test reveals that there is no significant difference in the disclosure of Islamic and conventional banks in the annual reports in terms of CSR. Finally, the results of multiple regression analysis reveal that size, financial leverage, and listed status are highly significant and positively affect the CSRD of banks in the context of Pakistan.