正如前一章中所述,本研究采用兩種類型的研究工具,即問卷調查和分析阿聯酋股市中上市公司公布的年報內容。問卷調查,在本次研究中用來作為主要數據的收集方法,正如前面所討論的那樣,來檢驗編制財務報表人員阿聯酋公司股東向社會披露企業信息的各個方面時候的態度。這一章專門討論在2003年至2009年,在迪拜和阿布扎比股市上市的所有阿聯酋公司發布的年度報告中用來收集輔助數據的其他工具。

 

本章的主要目的是對年度報告中公司特點與公司社會報告范圍之間的關聯做出的一系列試驗性的假設。這一章內容安排如下:5.1節討論了年度報告作為公司信息披露的主要通道。在5.2節中,對依賴(企業社會信息公開的程度)和獨立變量都進行討論以及提出假設。然后關注公司自愿公開的社會指數和環境信息指數。這個將在5.3節進行討論。接著在5.4節中討論延伸,來討論內容分析的可靠性和有效性。經驗模型構建和數據分析分別在5.5和5.6節中討論。最后在5.7節中進行總結。

 

年度報告研究方法-Research Methodology Analysis Of Annual Reports

 

5. 0引言-5. 0 INTRODUCTION

 

As mentioned in the previous chapter, this study employed two types of research instruments, namely the questionnaire and the content analysis of the annual reports published by companies listed in Emirati stock markets. Questionnaire, a primary data collection instrument, is used in this study, as previously discussed, to examine the attitudes of preparers of financial reports and stakeholders of Emirati companies toward various aspects of corporate social disclosure. This chapter is devoted to discuss the other research instrument to collect secondary data from the published annual reports of all Emirati corporations listed in Dubai and Abu Dhabi stock market in the years 2003 and 2009.

 

The main purpose of this chapter is to develop a set of testable hypotheses about the association between a company’s characteristics and the extent of its corporate social reporting in its annual reports. The chapter proceeds as follows: Section 5.1 discusses the annual report as the main channel of corporate disclosure. In section 5.2, both dependent (extent of corporate social disclosure) and independent variables are discussed and hypotheses are developed. It then moves to develop a disclosure index of social and environmental items that may be voluntarily disclosed by a company. This is discussed in Section 5.3. The discussion then extends, in section 5.4, to address the reliability and validity of content analysis. Empirical model building and data analysis are discussed in sections 5.5 and 5.6 respectively. The chapter concludes with a summary in Section 5.7

 

5.1年度報告-5.1 The Annual Report

 

Although various channels of distribution, such as advertising and promotional leaf1ets may be used by corporations to make disclosures for the public, the annual report is viewed as the main channel of distribution in a developing country like United Arab Emirate while other means of corporate disclosure are of little use. Thus, the extent of corporate social disclosure practices included in this study will be assessed based on the 2003 and 2009 annual reports of all Emirati companies listed on Abu Dhabi and Dubai Securities Markets. While the 2003 annual reports were the first reports available after the two Emirati stock markets have been established in year 2000, the annual reports for the year 2009 were chosen as they are the latest annual reports available from companies at the time of data collection. This longitudinal study was supposed to analyse the annual reports of all Emirati companies for the years 1999 (one year before the two markets had started their activities) and 2009. Year 1999 was supposed to be chosen in an attempt to investigate the impact of the establishment of Securities Markets at UAE on the quality of corporate social responsibility practices, but difficulties were found in trying to obtain information from companies or from the stock markets' websites before year of 2003. Thus, a longitudinal study was applied although the number of companies would have to be reduced from 120 companies in 2009 to less than 30 companies in 2003.

 

The primary objective of financial reporting is to provide useful information to those who have an interest in the corporations, mainly shareholders (Zairi and Letza, 1994; Neu, Warsame & Pedwell, 1998). Gray et al. (1995b) considered that the annual report is a major official and legal document that a firm produces on a regular basis and acts as a significant forum for the presentation of the firm's communication within political, social and economic systems. Other researchers recognized the annual report is the main document used by companies to communicate their social image (Hines, 1988; Tilt, 1994). Analysis of reporting practices through annual reports; therefore, provide an appropriate source of information toward social and environmental issues from the companies' perspectives.

 

As shown in the literature review for this study in Chapter Two, intensive research studies have been undertaken in both developed and emerging economies since year 1970 that used the annual report as the sole source of social and environmental information. These studies focused solely on the annual report for a number of reasons. Annual report is considered as a credible source of specific information and is widely distributed Unerman (2000) and is the major medium for a company to promote itself (Gray et al, 1995b). Additionally, since the annual report is required to be published by all listed companies on a regular basis, this makes the comparison easier.

 

5.2變量的討論和假設發展-5.2 Variables discussion and hypotheses development

 

The level of voluntary social disclosure, measured by the constructed disclosure index, is a dependent variable that has been calculated for each of the companies included in the study. In the literature, a number of explanatory variables have been advanced to explain variations in the extent of financial disclosure.

 

In this study, eleven variables assembled into three categories captured by previous studies, namely company characteristics, corporate governance and ownership structure, will be employed to explain the relationship between the comprehensiveness of social disclosure and a company's financial characteristics These variables are: firm size, financial performance, leverage, industry type, audit firm status, independent nonexecutive directors, audit committee, foreign ownership, institute ownership, government ownership and family ownership. The remaining five variables, which may also be assembled in the same three broad categories, are proposed as they that might influence the extent of social disclosure in UAE. These variables are: The existence of Shaikh in the board of directors of the corporation, the compensation or bonus paid for the board of directors, the location of company headquarters, the stock market a company listed in (Abu Dhabi Financial Market or Dubai Stock Exchange), and the interest expense. All of these seventeen variables are discussed below within three main categories.

 

Both dependent and independent variables used in this study will be discussed in this section in details.

 

5.2.1依賴變量-5.2.1 The Dependent Variable

 

The extent of disclosed social and environmental information by all Emirati listed companies represents the dependent variable used in this study. To measure this extent of social disclosure, a content analysis approach has been applied in this study on all year 2003 and year 2009 Emirati corporate annual reports.

 

Content analysis has been defined by Weber (1996) as a technique of codifying the text of writing into various groups or categories based on selected criteria. Krippendorff (2004) defined this concept as a research technique for making replicable and valid inference from texts to the context of their use.

 

Content analysis became a widely used method of analysis in accounting research (Beattie, 2005) generally, and in the area of social and environmental reporting (Abdul Hamid, 2004; Abu-Baker and Naser, 2000; Achda, 2006; Ahmad and Gao, 2005; Belal, 2000, 2001 ; Naser et al. , 2006; Newson & Deegan, 2002; Dawkins and Ngunjiri , 2008; de Villiers & van Staden, 2006; Garvin et al. , 2009; Gao, S. S., et al., 2005; Hanafi and Gray, 2005; Haniffa & Cooke, 2005; Imam, 2000; Kuasirikun & Sherer, 2004; Lodhia, 2000; Mikdashi and Leal, 2005; Ponnu and Okoth, 2009; Pratten & Mashat, 2009; Purushothaman et al. , 2000; Rashid & Lodh, 2008 ; Ratanajongkol, 2006; Thompson & Zakaria, 2004; Visser, 2002; Yusoff et al. , 2006) in particular.

 

The instrument of measurement used in this research is drawn from previous studies conducted by some authors (Guthrie and Mathews, 1985; Holsti, 1969; Krippendorff, 1980) to measure the extent of corporate social disclosure in the annual reports. This method comprises of the following four testable dimensions:

 

Theme: Corporate social disclosure is measured in terms of theme because this is a common classification (e.g. Ernst and Ernst, 1972-1978; Trotman, 1979; Hackston and Milne, 1996). Annual reports are analyzed for details related to sex specific themes of corporate social disclosure. These sex themes, namely environment, energy, human resources, products and customers, community, and others are defined as follows:

 

Environment - those disclosures that relate to the company' operations which have an environmental impact and how this company acts with this interaction.

 

Energy – disclosing information on how the company uses natural resources efficiently and effectively and what approaches employed by the company to preserve these sources.

 

Human resources – providing information on the firm's activities that effect the different aspects of its employees such as their health & safety, working conditions, training, payment, etc.

 

Products and customers – Reporting information on the product quality and development and whether it meets safety standards. Disclosure of this theme reflects the company's concern of customer satisfaction

 

Community – this theme covers those activities performed by the company benefit the general public and society as a whole such as donations, community programs, sponsoring students, building homes for the orphans and the elderly people, etc. The primary incentive for the company to involve in like these activities may be to portray a good image.

 

(6) Others:

 

The Value Added Statement: the value added of different sectors or different companies. For instance, a manufacturing company may have a high value added element. This includes tax payments to government, payment to employees, and interest and dividend payments. Thus, a statement of value added contains at least the following information (The Corporate Report, ASSC, 1975): turnover, bought-in materials and services, employees' wages and benefits, dividends and interests payable, tax payable, and amount retained for investment.

 

Regional Flow of Funds Statement: According to Samuels (1990), a regional flow of funds statement "would reflect the regions in which wages are paid, and where the purchase of capital items, materials and services are made." This statement can be seen as "an input/output one, disclosing where the reporting enterprise earned its money and where it spent it." Thus, this statement could report the breakdown of the funds earned by the company (industrial, services or banking and finance) according to the regions and the breakdown of the funds spent by it also according to the regions.

 

Statement of Cash Transactions in Foreign Currency: according to the Corporate Report (ASSC, 1975), reporting enterprises should report net contribution to foreign exchange earnings and this statement should contain at least the following:

 

- Cash receipts for direct exports of goods and services.

 

- Cash payments to overseas concerns for direct imports, distinguishing between imports of a capital nature and those of a revenue nature.

 

- Overseas borrowing remitted to or repaid from the reporting country.

 

- Overseas investments and loans made from or repaid to the reporting country.

 

- Overseas dividends, interests or similar payments remitted.

 

Evidence: The quality of social reporting is measured in the categories of monetary quantitative, non-monetary quantitative and declarative disclosure (Ernst and Ernst, 1978). Although the content analysis has been criticised by some authors as it considers quantity not quality of disclosure (Unerman, 2000), this research believes that using this categorization (monetary quantitative, non-monetary quantitative and declarative) enables the researcher to assess the quality of the disclosures since numerical social and environmental information is generally more useful than narrative information (Gray et. al, 1993)

 

Amount: at least three methods were used in previous research to measure the extent of corporate social disclosure, namely the number of words disclosed, number of sentences disclosed, and proportion of pages of corporate social disclosure. All of these methods have been criticised as there are differences in font sizes, styles of writing, margin sizes, graphics (Milne and Adler, 1999).

 

Using sentences as a measure to level of disclosure was preferred by some authors as sentences are better in providing complete and meaningful information (Gray et al., 1995; Milne and Adler, 1999). Other researchers, however, argued that using proportion of pages to measure the volume of disclosure is better since this method takes into account non-narrative social disclosures such as charts, tables, photographs and pictures (Unerman, 2000). Although Frost and Wilmshurst (2000) recognized that “a picture may be worth a thousand words”, they considered using pictures in measuring disclosure volume is highly subjective.

 

In this study, it was decided to employ the proportion of pages method to measure the extent of corporate social disclosure the annual reports of all Emirati listed companies. The study also followed the following steps suggested by Gray et al. (1995b) to use the page measurement method:

 

The data collected manually by carefully reading each company's annual report.

 

The amount of disclosure was measured to the nearest 1 per cent of an A4 page by employing a grid. Results for each company's annual report were then transferred manually to a "scoring sheet" (see Appendix 1).

 

The data on all scoring sheets were then transferred to database. The scoring sheets were retained for query replication.

 

The data was entered into computer software for analysis.

 

The final stage was to gather background data related to all explanatory variables used in the study. These data were taken from the companies' annual reports, stock markets, or from the companies' websites.

 

Location in the report: The location of the social disclosures in the annual report was also examined by many studies since the disclosure location reflects the relative importance placed by the company on the item disclosed (Unerman, 2000). The locations that were examined by previous studies were the chairman’s report, separate sections in the financial statements and notes to accounts, the directors’ report and separate booklet.

 

5.2.2獨立變量-5.2.2 The Independent Variables

 

As discussed in Chapter Two, the relationship between the extent of corporate social disclosure and firm characteristics (such as firm size, financial performance, leverage, industry type, audit firm status, etc), corporate governance and ownership structure have been extensively investigated in the literature since 1970. However, the findings of these studies were not consistent.

 

In this study, hypotheses are formulated about the association between the extent of social disclosure and sixteen independent variables assembled into three categories (company characteristics, corporate governance and ownership structure) that are expected to influence the extent of social disclosure in UAE. Eleven of these variables were commonly used by previous studies to investigate the determinants of voluntary corporate reporting in other countries. These variables are: firm size, financial performance, leverage, industry type, audit firm status, independent nonexecutive directors, audit committee, foreign ownership, institute ownership, government ownership and family ownership.

 

It should be worth to mention that since there is no single proxy has been used to measure some of the these commonly used attributes in the previous literature (see Chapter Two) and since that there is no overriding theoretical reason to choose one proxy rather than another (Alam, 2007), the researcher decided to use proxies seems to be more widely employed by recent studies especially in the emerging economies. This will facilitate the meaningful comparisons between the finding of this study and the previous studies' results.

 

The remaining five variables are proposed by the researcher as they that might affect the extent of social disclosure in UAE. These variables are: The existence of Shaikh in the board of directors of the corporation, the compensation or bonus paid for the board of directors, the location of company headquarters, the stock market a company listed in (Abu Dhabi Financial Market or Dubai Stock Exchange), and the interest expense. All of these sixteen variables are discussed below within three main categories.

 

Company Characteristics

 

Company Size

 

As mentioned earlier in this study, size was one of the main firm characteristics examined by most of the prior studies to determine the level of corporate disclosure. Much evidence from these studies found that large companies tend to disclose greater information than small ones since large firms receive more attention from the general public, and therefore, face greater pressure to exhibit social responsibility (Cowan et al, 1987). In this study, total assets will be used as a measure of company size. It is, therefore, hypothesized that:

 

H1: The larger the firm, the higher the extent of corporate social responsibility disclosure.

 

Financial Performance:

 

Based on the findings of most previous studies, as discussed in literature review chapter, that showed a positively significant association between the extent of social and environmental disclosure and corporate profitability, it is viewed, for the purposes of this study, that profitable companies have a greater incentive to disclose social and environmental information. It is, therefore hypothesized that:

 

H2: The higher the firm's profitability, the higher the extent of corporate social responsibility disclosure.

 

Financial performance was measured by more than proxy in the literature such as net profits, net profit to sales, return on assets and return on equity. In this study, and to facilitate the comparison financial performance is derived by dividing net profit by net sales.

 

Leverage

 

A widely held view is that companies with high leverage ratios tend more to satisfy its long-term creditors' needs for more information and, hence, provide more information in its annual reports than companies with low leverage levels (Wallace et al., 1994).

 

Many studies found a positive association between leverage (measured by total liabilities to total stockholders' equity or total liabilities to total assets) and disclosure level. The leverage ratio will be measured in this study by total liabilities to total assets. Consistent with those studies showed a positive significant relationship between leverage and disclosure level, it is hypothesized that:

 

H3: The higher the firm's leverage, higher the extent of corporate social responsibility disclosure.

 

Industry type

 

Empirical evidence on the relationship between the level of corporate disclosure and a company’s industry is mixed. While some studies found that the corporate disclosure differs among companies from different sectors, (Gao, S. S., et al., 2005; Hossain, et al., 2006; Murcia and Souza, 2008), no insignificant association between the two variables has been found by other studies (Ghazali, 2007; Haniffa and Cooke, 2005; Ho and Wong, 2001; Othman, et al., 2009). Since it is expected from companies operating in different industries to have different concerns and to adopt different accounting policies and practices, the level of social disclosure is hypothesized in this study to differ among companies in different industries and, thus, it is therefore hypothesized that:

 

H4: The extent of corporate social responsibility disclosure is associated with the industry within which a firm operates.

Audit Firm Status

 

Audit firms in UAE can be classified into international affiliation firms and local firms.

 

The Big Four international accounting firms (PricewaterhouseCoopers, KPMG, Ernst & Young, and Deloitte Touche) and the largest Arab group of accounting and auditing firm (Talal Abu-Ghazaleh Organization) are all have main offices and branches in the UAE.

 

Empirical evidence on the relationship between audit firm type and the disclosure extent is not consistent. While some studies observed a positively significant relationship (Camfferman and Cooke, 2002; Murcia and Souza, 2008), other studies noticed a significantly negative relationship between the two variables (Barako, et al., 2006; Hossain, et al. 2006; Wallace and Nasser, 1995).

 

Since international audit firms are often large in comparison with local ones and usually have more concern for their reputation, they are expected to associate with companies comply with International Financial Reporting Standards and disclose more voluntary information in their annual reports. Moreover, it is expected from these international audit firms to recommend their client companies to practice socially responsible accounting practices (Choi, 1998). It is therefore hypothesized that:

 

H5: The extent of corporate social responsibility disclosure is positively associated with engaging with one of the Big 4 auditing firms.

 

Company Headquarter Location

 

It is hypothesized in this study that the companies located in the more developed emirates, namely Abu Dhabi, Dhabi and Sharjah; tend to disclose more social information than companies located in the other less developed four emirates. This assumption is made based on two reasons:

 

Previous authors in their cross-national studies (Cooke & Wallace, 1990; Doupnik & Salter, 1995; Salter, 1998; Williams, 1999) have found that there is a positive association between the economic level of the country and the accounting development. In this respect Belkaoui (1985) argued that the corporate practices and accounting systems reflect the environment where they are developed. However, this study attempts to test whether the economic development level used in cross-national studies can be used to explain the differences in the extent of corporate social practices in an intra-country basis.

 

As discussed previously in chapter three, there are significant differences in the level economic development among the seven emirates comprises UAE where Abu Dhabi, Dubai and Sharjah are the most developed ones. While Abu Dhabi is the largest oil producer and exporter in the region, Dubai has been converted into a leading international business center, and Sharjah has succeeded to diversify its economy to depend on oil, trade and manufacturing. Moreover, these three emirates feature a well developed infrastructure as any in the major developed nations. In fact, these three developed emirates collectively contribute not less than 95 percent of the country's annual GDP (Ministry of Economy, 2009). However, the other four emirates have little oil and depend heavily on subsidies from the UAE federal government. Accordingly, it seems reasonable to expect that those companies that have headquarters in these three developed emirates will disclose more social and environmental information than companies located in other emirates.

 

Companies located in urban areas would be usually more visible (Loughran and Schultz, 2005) than companies located in rural areas since these areas tend to have many institutional investors, brokers, bankers, financial analyzers, and lobby groups. Thus, it seems reasonable to expect that companies with headquarters located in urban areas are more exposed to pressures from stakeholders, including social and environmental activist groups, to improve the quality of their reporting in different aspects such as disclosing voluntary social information to show socially responsible behaviour. In UAE, the three more developed emirates, namely Abu Dhabi, Dubai, and Sharjah might be considered as urban areas since more than 75percent of the total population of the country are living in with the highest living standards comparing to the other four emirates which may be viewed as rural areas. Accordingly, it is expected in this study that the companies located in Abu Dhabi, Dhabi and Sharjah are more visible by public and, hence, tend to disclose more social information than companies located in the other four emirates. Thus, the following hypothesis is formulated:

 

H6: The extent of corporate social responsibility disclosure is associated with the location of the company's headquarter.

 

Interest

 

Banks and financial institutions in the Arab countries usually prefer to lend money to large and reputable companies more than small ones (Naser, 1998). Therefore, it is expected that large companies in UAE are taking loans more than smaller ones, and thus, paying more interest for the creditors. Companies that pay high interest amounts might have little incentives to disclose more voluntary information since the management believes that the aim of money providers (including banks) is to secure a high return on their funds and, thus, paying interest is sufficient enough to attract these external funds.

 

Thus, it is reasonable to expect a negative association between the interest (measured as the amount of interest divided by the net profit) paid by firm to their creditors and the level of voluntary disclosure. Therefore, the following hypothesis has been formulated:

 

H7: The extent of corporate social responsibility disclosure is negatively associated with the amount of interest to creditors.

 

Performance of Stock Market Company Listed in

 

The stock exchange tends to influence the corporate disclosure of the companies listed in (Archambault and Archambault, 2003). In this regard, Meek et.al., (1995) argued that the companies listed in international stock exchanges tend to disclose more information than companies listed only in local exchanges.

 

The UAE stock market is the only one in the GCC that consists of two independent exchanges. Although both exchanges, namely Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM), are operating under the Emirates Securities and Commodities Authorities (ESCA) supervision, they have experienced different characteristics in terms of market capitalization, number of companies listed in these markets and trading volume. All these measures are usually used to evaluate the relative power of the stock market. From table (5-1), it is obvious that all of these measures, except market capitalization, Dubai Financial Market (DFM) seem to be dominant and most active stock market in UAE. Although ADX is the larger of the two markets in terms of market capitalization, DFM is the most liquid stock market, the larger in trading volume in both dollars and number of shares, the higher in the average daily trading, and the higher percentage change in the General Index. These indicators may attract investors to diversify their investment portfolios in Dubai Financial Market, and thus, those investors expect to receive more voluntary information from listed companies in DFM. Accordingly, it is hypothesized in this study that the performance of stock exchanges, in terms of size (market capitalization), trading volume (in monetary value or number of shares) and in percentage change in general index, may be tested as a determinant of voluntary social disclosure.

 

H8: Companies listed in Dubai Financial Market (DFM) tend to disclose more

 

social information than companies listed in Abu Dhabi Stock Exchange (ADX).

 

Table: (5-1.): UAE Stock Exchanges Performance Indicators in Year 2009

 

ADX

 

DFM

 

Market Capitalisation (in Million $)

 

80,201

 

58,095

 

No. of companies listed at period end

 

67

 

67

 

Turnover ratio (%)

 

23.40

 

81.3

 

The General Index (% change)

 

14.8

 

95.3

 

Trading Volume (In US Dollar (Million)

 

18,766

 

47,239

 

Traded Shares (Million)

 

36570.0

 

110,683.6

 

Average daily trading

 

74.76

 

189.0

 

Source: (Arab Monetary Fund (AMF) Bulletin, 2009)

 

Corporate Governance

 

The relationship between the extent of social disclosure in the annual reports of all listed Emirati companies and each of the two main corporate governance characteristics that have been examined in previous literature, namely independent nonexecutive directors, and audit committee, will be investigated in this study. Additionally, two proposed determinants that are expected to influence the level of social reporting in the UAE will be tested.

 

Independent nonexecutive directors:

 

Consistently with the results of many studies in the recent literature in the emerging economies (Barako and Brown, 2008; Barako et al., 2006; Chau and Gray, 2010; Chen and Jaggi, 2000; Haniffa and Cooke, 2002; Ho and Wong, 2001; Khan, 2010), this study hypothesized a positive association between the proportion of non-executive directors and the volume of corporate disclosure. It is, therefore, hypothesized that:

 

H9: The higher the proportion of non-executive directors, the higher the firm's extent of social disclosure.

 

Audit Committee:

 

Since the existence of an audit committee is expected to improve the quality of corporate reporting, and consistently with the findings of majority results of the previous studies investigated the influence of the existence of an audit committee on a corporate disclosure, the following hypothesis has been formulated:

 

H10: The extent of corporate social responsibility disclosure is higher for firms that have an audit committee.

 

Existence of Shaikh on Corporate Board

 

Shaikh is an Arabic title of respect and honor which is commonly used to designate a tribal leader, an Islamic scholar, or sometimes to person who has a financial or political influence. In the Gulf States including UAE the title is used to describe a man of stature, whether he is a manager in high job, businessman, or local ruler. The term is used in this study in this context.

 

The power of the Shaikh in United Arab Emirates, like all other Gulf and some other Arab countries, as a "servant leader" for his tribe or community lies in his principles, values and beliefs (Farling, Stone, & Winston, 1999) or his humility and spiritual insights (Graham, 1991). These values and principles include power, wisdom, mercy, honesty, and generosity. Larry Spears (2010) argued that the characteristics of the servant leader include, amongst others, Stewardship (commitment to serving the needs of others, Commitment to growth of every individual within his organization, and Building community among those who work within his organization. Graham (1991) argued that servant leader recognizes his social responsibility to serve his followers and to dedicate to their needs and interests.

 

Based on above discussion, and since Shaikh is usually respected and followed, it is reasonable to expect that existence of Shaikh on the Emirati corporate board of directors will emphasize company’s social and charitable role and promote the culture of donation and the concept of corporate social responsibility towards the community.

 

In this study, an attempt is made to test the validity of servant leadership theory to investigate the association between the Shaikh's role – as a board of director's member - and the extent of corporate social disclosure amongst Emirati firms. It is, therefore, the following hypothesis is proposed:

 

H11: The extent of corporate social responsibility disclosure is higher for firms that have Shaikh on their board of directors.

 

Compensation to Board of Directors

 

Overseeing the reliability and ensuring that financial reporting is complete and transparent of the financial reporting is one of the most important tasks of the board of directors (Anderson et al., 2004). The evaluation of board's performance depends, at least partially, on the quality of corporate disclosure which is viewed as a function of director characteristics (Klein, 2002).

 

The board of directors' usually receive compensation for their membership consists of cash, pensions, life and health insurance (Brenner, 1996), stocks or stock options (Brenner, 1996; Sibson Consulting, 2003). In this study, it is expected to observe a positive association between the compensation received by board of directors and the quality of corporate social disclosure based on the following:

 

Members of the board are motivated to maximize the company's value and profitability since their compensation is usually linked to the company's performance. From shareholders perspective, they are willing to pay more compensation to the company's board of directors as they leaded the company successfully to achieve high profits and, thus, they met the interests of shareholders. It was noted previously in this section that most studies considered the financial performance as an important determinant of corporate social disclosure, thus, this may imply that the board compensation which is linked to the company's performance could be tested as a possible determinant of this type of disclosure.

 

Board with greater compensation may have more incentives to convince the different groups of stakeholders, other than shareholders, that the board has respected all their interests, and thus, the members deserve this great compensation. Disclose social and environmental information may be viewed as part of the board's strategy to deal with the company's stakeholders and to enhance the board reputation.

 

From the above discussion, it seems reasonable to hypothesis that:

 

H12: The extent of corporate social responsibility disclosure is positively associated with the compensation paid to the board of directors.

 

Ownership Structure:

 

Foreign Ownership

 

Since prior literature indicated that there is a positive relationship between foreign ownership and extent of voluntary disclosure (Barako and Brown, 2008; Barako, et al., 2006; Haniffa and Cooke, 2002; Khan, 2010), it seems reasonable to hypothesis that:

 

H13: The higher the percentage of shares held by foreign investors, the higher the extent of corporate social disclosure.

 

Institutional Ownership

 

Additionally, it is expected from the corporations in UAE to disclose social information to reduce its agency costs as its ownership structure includes institutional investors. Institutional ownership is measured by the percentage of common shares held by institutional investors. Thus, it is reasonable to formulate the following hypothesis:

 

H14: The higher the percentage of shares held by institutional investors, the higher the extent of corporate social disclosure.

 

Governmental Ownership

 

Moreover, companies with high government ownership are expected to disclose more social information in order to emphasise its social responsibility toward the society. Based on some of the prior research, the following hypothesis purports that:

 

H15: The higher the percentage of shares held by government, the higher the extent of corporate social disclosure.

 

The government ownership of the firm is measured as a percentage of common shares owned by government.

 

Family Ownership

 

On the contrary, and consistently with previous research, it is not expected from firms with family ownership to release more voluntary social information since these families have access to the information they need (Chau and Gray, 2010).

 

H16: The extent of corporate social responsibility disclosure is negatively associated with family-controlled firm.

 

5.3信息披露指數-5.3 Disclosure INDEX

 

A disclosure index was necessary to be used in this study as a yardstick to assess the level of social disclosure by the Emirati companies. The disclosure index is a method that provides a quantification of the extent of disclosure for the items investigated (Marston and Shives, 1991). To specify proper items, for the Emirati companies' annual reports, an extensive review of previous indices was concluded to develop a list of social and environmental items that may be voluntarily disclosed by Emirati listed companies.

 

Although some of the literature conducted in emerging economies to examine the extent of social disclosures adapted disclosure indices developed in western countries (Ernst and Ernst, 1978; Gray et. al, 1987), the disclosure index employed in this study was developed after an extensive review of prior studies in emerging economies in general (see for example Gao, S. S., et al., 2005; Haniffa and Cooke, 2005) and within Arab countries context (see for example Naser et al; 2006, Rizk et al; 2008) in particular.

 

In this respect, Kamla (2007) argued that there is a real danger in using western type social reporting techniques in the context of an emerging economy. Therefore, adapting simplified indices developed in the emerging economies' context to measure the extent of social and environmental disclosure might be more appropriate for country like UAE due to different reporting practices of developed and emerging countries.

 

Previous research used two types of indices: weighted and unweighted indexes. While under the unweighted index, all the index items are considered equally important (Akhtaruddin, 2005; Cooke, 1989, Wallace and Naser, 1995), some items could be weighted more heavily than others under the weighted index (Cooke, 1989, 1991; Owusu-Ansah, 1998; Raffournier, 1995) since different items may be relatively more important to different users (Inchausti, 1997).

 

An unweighted approach is a dichotomous procedure in which one score is given to an item if disclosed by a company and zero score if not. The index is, then, measured for a company simply by dividing the total number of social items disclosed by this company by total number of possible items that it could disclose.

 

The weighted index approach, however, depends on the rank attached by researcher to the information disclosure item.

 

Both approaches have been criticised based on their subjectivity. While the unweighted disclosure index was deemed to be a subjective approach as it considers that all items included in the index have the same importance as well as it gives zero score for a not applicable item for that company, the weighted disclosure index was also considered a subjective technique as it attaches subjective different weights to the different items. (Cooke, 1989)

 

However, since the unweighted method seems to have superiority supported by various researchers (Archambault and Archambault, 2003; Chen and Jaggi, 2000; Cooke, 1989, 1991; Wallace et al., 1994) from one hand, and since previous studies showed that same findings or only little difference have been found under both unweighted and weighted indexes (Coombs and Tayib, 1998; Wallace & Naser, 1995) from the other hand, it is decided in this study to use unweighted disclosure index.If an information item has been disclosed in the company's annual report, then ‘1’ will be awarded and if the item is not disclosed, then ‘0’ will be awarded. The total social disclosure score for a company is measured as follows:

 

TSD = Σdi,

 

Where,

 

d = 1 if the item i, is disclosed

 

0 = if the item i is not disclosed

 

Then, the unweighted social disclosure index (CSDIndex) for each Emirati listed company in year 2003 and year 2009 was obtained by dividing the total items a company actually disclosed by total of all possible items that it could disclose.

 

The social disclosure Index (CSDIndex) is measured as below:

 

CSDIndex = Company’s total actual social disclosure score

 

Company’s total possible social disclosure score

 

5.4 實證模型-5.4 Empirical Model

 

The association between the extent of corporate social disclosure and firm characteristics is examined using the following model:

 

Extent = ƒ (company characteristics, corporate governance, ownership structure)

 

CSD = a0 + a1SIZE + a2LEVER + a3PERF + a4INDS1+ a5INDS2+ a6INDS3+ a7INDS4

 

+ a8AUD + a9LOCT + a10INTRST + a11STOCKX + a12INDP + a13 AUDCOM +

 

a14 SHAIKH + a15COMPNS + a16FORN + a17INSTIT + a18GOVER +

 

a19FAML + ε 

 

Table 5.1 summarises the company attributes and their proxies.
 

Table 5.1: Summary of Independent Variables

 

Variable

 

Definition

 

Measurement

 

Company Characteristics

 

SIZE

 

Company size

 

Total assets

 

LEVER

 

Leverage

 

Total liabilities/ Total assets

 

PERF

 

Financial performance

 

Net income / Net sales

 

INDS1

Industry 1: Finance

 

Finance. Dummy variable coded 1 = finance company, 0 = otherwise

 

INDS2

Industry 2: Insurance

 

Insurance. Dummy variable coded 1 = insurance company, 0 = otherwise

 

INDS3

Industry 3: Manufacturing

 

Manufacturing. Dummy variable coded 1 = manufacturing company, 0 = otherwise

 

INDS4

Industry 4: Service

 

Service. Dummy variable coded 1 = service company, 0 = otherwise.

 

AUD

Audit firm

 

Dummy variable coded 1 = a company audited by international affiliation (Big 4), 0 = a company audited otherwise.

 

LOCT

Company Headquarter Location

 

Dummy variable coded 1 = a company located in Abu Dhabi, Dubai, or Sharjah, 0 = a company located otherwise

 

INTRST

Interest

 

Total Interest / Net Income

 

STOCKX

Stock Exchange

 

Dummy variable coded 1 = a company listed in Dubai Financial Market, 0 = a company listed otherwise

 

Corporate Governance

 

INDP

Independent nonexecutive directors

 

proportion of non-executive directors

 

AUDCOM

Audit Committee

 

Dummy variable coded 1 = existence of audit committee, 0 = otherwise.

 

SHAIKH

Shaikh Board Member

 

Dummy variable coded 1 = existence of Shaikh on the board of directors, 0 = otherwise.

 

COMPNS

Board Compensation

 

Amount of compensation to board of directors

 

Ownership

 

FORN

Foreign Ownership

 

Percentage of the company shares owned by foreigners

 

INSTIT

Institute Ownership

 

Percentage of the company shares owned by individual investors.

 

GOVER

Government Ownership

 

Percentage of the company shares owned by government

 

FAML

Family Ownership

 

Percentage of the company shares owned by families

 

5.5信度和效度的內容分析-5.5 Reliability and validity of content analysis
（略）

 

5.6數據分析-5.6 Data Analysis

 

To measure the extent of social disclosure in the annual reports of the companies under study, the levels of this disclosure will be measured by the disclosure index. Also, a regression model will be developed to measure the relationship between the extent of corporate social disclosure and several corporate attributes. A multiple regression analysis will be used in understanding the possible factors leading toward social disclosures practices amongst companies in UAE. Moreover, statistical tests are used to make comparisons and relationships between variables. The type of test is selected based on format of data, level of measurement or number of variables.

 

5.7總結-5.7 SUMMARY

 

This chapter has presented the theoretical framework and research hypotheses for this study. The chapter focused on the research methods applied in this study. In particular discussion concentrates on the measurement of the dependent variable using content analysis and a disclosure index.