Determinants of sustainability reporting decision: evidence from Pakistan

Figures & data

Table 1. Sample composition by industry.

Industry		Leading Firms		Conventional Firms		All Firms
		n	%	n	%	n	%
Oil and Gas	(IND_OIL)	3	13%	9	8%	12	9%
Technology and Communication	(IND_TECH)	3	13%	11	10%	14	10%
Power and Utilities	(IND_POW)	2	9%	6	5%	8	6%
Chemical and Fertiliser	(IND_CHEM)	7	30%	12	10%	19	14%
Construction and Property	(IND_CONS)	1	4%	10	9%	11	8%
Food and Personal Care	(IND_CARE)	1	4%	16	14%	17	12%
Textile and Household	(IND_TEX)	0	0%	25	22%	25	18%
Pharma and Packaging	(IND_PHAR)	4	17%	14	12%	18	13%
Travel and Auto	(IND_AUTO)	2	9%	12	10%	14	10%
		23	100%	115	100%	138	100%

Table 2. Definition of variables.

Variable	Definition	Pred Sign	Measure	Key Reference
Dependent Variable
SRD	Sustainability Reporting Decision		A dummy variable, takes 1 if the firm issues a sustainability report, otherwise 0.	Herda, Taylor, and Winterbotham (2012), Hu and Loh (2018)
Independent Variables
BSIZE	Board Size	+	Total number of directors on the board.	Coffie, Aboagye-Otchere, and Musah (2018), Girella, Rossi, and Zambon (2019)
BIND	Board Independence	+	Proportion of independent directors to total board members.	Khan, Muttakin, and Siddiqui (2013), Ong and Djajadikerta (2018)
BGD	Board Gender Diversity	+	Proportion of female directors to total board members.	Abad et al. (2017), Sarhan and Ntim (2019)
BMEET	Board Meetings	+	Number of board meetings held during the financial year.	Alnabsha et al. (2018), Hu and Loh (2018)
COWN	Ownership Concentration	−	Percentage of total shares outstanding belonging to block holders having 5% or more shares.	Lourenço and Branco (2013), Kiliç, Kuzey, and Uyar (2015)
IOWN	Institutional Ownership	+	Percentage of total shares held by institutional investors.	Boone and White (2015), Soliman, El Din, and Sakr (2013)
MOWN	Managerial Ownership	−	Percentage of total shares belonging to the board of directors.	Faller and zu Knyphausen-Aufseß (2018), Oh, Cha, and Chang (2017)
FOWN	Foreign Ownership	+	Percentage of total shares outstanding held by foreign investors.	Faller and zu Knyphausen-Aufseß (2018), Kolsi (2017)
AUDS	Audit Committee Size	+	Total number of members serving on the audit committee.	Alotaibi and Hussainey (2016), Appuhami and Tashakor (2017)
AUDI	Audit Committee Independence	+	The fraction of independent audit committee members to audit committee size.	Herda, Taylor, and Winterbotham (2012), Buallay and Al-Ajmi (2019)
Control Variables
BIG4	Big Four Auditors	+	A dummy variable, takes 1 if the auditor is from big 4, otherwise 0.	Sarhan and Ntim (2019), Alnabsha et al. (2018)
SIZE	Firm Size	+	Natural logarithm of the operating revenues of a firm.	Herda, Taylor, and Winterbotham (2012), Liao, Lin, and Zhang (2018), Oh, Cha, and Chang (2017)
ROA	Firm Performance	+	Ratio of income before tax to total assets.	Muttakin and Khan (2014), Masud, Nurunnabi, and Bae (2018)
LQ	Firm Liquidity	+/−	Ratio of the current assets to current liabilities.	Alotaibi and Hussainey (2016), Herda, Taylor, and Winterbotham (2012)
FCF	Financial Capacity	+/−	Free cash flow of a firm divided by its net sales	Artiach et al. (2010), Okpa et al. (2019)
LEV	Firm Leverage	−	Ratio of a firm’s total debt to its total assets.	Herda, Taylor, and Winterbotham (2012), Khan, Muttakin, and Siddiqui (2013)
MTB	Growth Opportunities	+/−	Market value of a firm’s equity divided by its book value.	Girella, Rossi, and Zambon (2019), Masud, Nurunnabi, and Bae (2018)
DIV	Dividends	+/−	A dummy variable, takes 1 if the firm paid any dividends, otherwise 0.	Alotaibi and Hussainey (2016), Naseem et al. (2017)
AGE	Firm Age	+/−	Natural logarithm of the number of years a firm operates in the market.	Khan, Muttakin, and Siddiqui (2013), Musallam (2018), Sarhan and Ntim (2019)
EMP	Number of Employees	+/−	Natural logarithm of a firm's total number of employees.	Kim et al. (2018)
SUB	Number of Subsidiaries	+/−	A firm's total number of subsidiaries.	Kim et al. (2018)
IND	Industry	+/−	See Table 1.	Appuhami and Tashakor (2017), Herda, Taylor, and Winterbotham (2012), Lourenço and Branco (2013)

Table 3. Descriptive statistics and comparison tests.

	Leading Firms					Conventional Firms					Comparison Tests
Variable	N	Mean	S.D.	Min	Max	N	Mean	S.D.	Min	Max	t-stat	z-value
Panel A: Continuous Variables
BSIZE	230	9.09	2.11	6.00	14.00	1150	8.06	1.60	5.00	17.00	8.47***	8.10***
BIND	230	0.19	0.13	0.00	0.60	1150	0.15	0.12	0.00	0.71	4.07***	3.13***
BGD	230	0.05	0.08	0.00	0.33	1150	0.08	0.13	0.00	0.71	−3.56***	−2.49**
BMEET	230	5.90	2.69	3.00	19.00	1150	5.40	2.04	2.00	19.00	3.17***	2.95***
COWN	230	0.67	0.22	0.14	0.99	1150	0.64	0.18	0.00	0.96	2.46**	3.38***
IOWN	230	0.65	0.26	0.04	0.98	1150	0.39	0.31	0.00	0.98	11.97***	11.60***
MOWN	230	0.01	0.03	0.00	0.12	1150	0.12	0.20	0.00	0.87	−8.17***	−10.66***
FOWN	230	0.30	0.32	0.00	0.98	1150	0.17	0.27	0.00	0.95	6.23***	7.29***
AUDS	230	3.98	1.14	3.00	8.00	1150	3.43	0.70	2.00	7.00	9.64***	7.80***
AUDI	230	0.30	0.20	0.00	1.00	1150	0.29	0.23	0.00	1.00	0.75	0.46
SIZE	230	17.39	1.39	13.61	20.05	1150	15.63	1.91	7.50	20.90	13.28***	13.60***
ROA	230	0.10	0.10	−0.12	0.47	1150	0.08	0.14	−0.60	1.00	2.35**	2.68***
LIQ	230	0.98	0.76	0.17	5.41	1150	1.03	1.14	0.01	8.98	−0.58	2.11**
FCF	230	0.08	0.13	−0.31	0.50	1150	0.06	0.19	−0.73	0.68	0.95	0.88
LEV	230	0.20	0.20	0.00	0.74	1150	0.27	0.24	0.00	1.70	−4.47***	−4.62***
MTB	230	4.00	7.88	0.16	56.27	1150	1.92	3.19	0.04	41.71	6.64***	6.24***
AGE	230	3.70	0.51	1.79	4.65	1150	3.44	0.60	0.69	5.06	6.15***	6.58***
EMP	230	7.27	0.97	5.25	9.42	1150	6.53	1.43	2.89	10.15	7.57***	7.70***
SUB	230	4.78	6.26	0.00	21.00	1150	5.62	12.34	0.00	89.00	−1.00	1.52
Panel B: Binary Variables
BIG4	230	0.91	0.28	0.00	1.00	1150	0.59	0.49	0.00	1.00		9.35***
DIV	230	0.58	0.49	0.00	1.00	1150	0.50	0.50	0.00	1.00		2.43**

***p < 0.01, **p < 0.05, *p < 0.1.

Table 4. Pearson/Spearman correlation matrix.

	SRD	BSIZE	BIND	BGD	BMEET	COWN	IOWN	MOWN	FOWN	AUDS	AUDI
SRD		0.218***	0.084***	−0.067**	0.079***	0.091***	0.312***	−0.287***	0.196***	0.210***	0.012
BSIZE	0.222***		−0.041	−0.063**	0.158***	−0.055**	0.201***	−0.222***	0.037	0.405***	0.055**
BIND	0.109***	0.107***		−0.092***	0.109***	0.044	0.169***	−0.247***	0.120***	0.107***	0.769***
BGD	−0.095***	−0.099***	−0.138***		−0.056**	−0.058**	−0.291***	0.261***	−0.182***	−0.119***	−0.073***
BMEET	0.085***	0.197***	0.138***	−0.089***		−0.095***	0.016	−0.055**	−0.098***	0.116***	0.089***
COWN	0.066**	−0.072***	0.050*	−0.061**	−0.078***		0.426***	−0.213***	0.308***	−0.051*	0.120***
IOWN	0.307***	0.198***	0.190***	−0.286***	0.024	0.449***		−0.752***	0.549***	0.243***	0.173***
MOWN	−0.215***	−0.148***	−0.175***	0.205***	0.006	0.152***	−0.648***		−0.456***	−0.242***	−0.202***
FOWN	0.166***	−0.033	0.046*	−0.140***	−0.168***	0.381***	0.562***	−0.320***		0.141***	0.094***
AUDS	0.251***	0.479***	0.148***	−0.130***	0.188***	−0.071***	0.230***	−0.221***	0.043		−0.092***
AUDI	0.02	0.084***	0.735***	−0.106***	0.099***	0.122***	0.176***	−0.139***	0.064**	0.004
BIG4	0.252***	0.265***	0.116***	−0.166***	0.071***	0.048*	0.407***	−0.313***	0.356***	0.312***	0.069**
SIZE	0.337***	0.314***	0.178***	−0.263***	0.209***	0.076***	0.400***	−0.250***	0.196***	0.317***	0.086***
ROA	0.063**	0.121***	0.084***	−0.083***	0.003	0.069**	0.204***	−0.135***	0.223***	0.154***	0.021
LIQ	−0.016	0.066**	0.147***	−0.026	0.108***	−0.004	0.128***	−0.139***	0.074***	0.129***	0.108***
FCF	0.025	0.186***	0.065**	0.001	0.028	0.025	0.158***	−0.112***	0.066**	0.203***	0.005
LEV	−0.120***	−0.125***	−0.096***	0.052*	0.028	−0.110***	−0.326***	0.222***	−0.355***	−0.185***	−0.061**
MTB	0.176***	0.096***	0.055**	−0.041	−0.046*	0.208***	0.227***	−0.122***	0.316***	0.101***	0.050*
DIV	0.065**	0.104***	0.104***	−0.137***	0.068**	−0.072***	0.157***	−0.166***	0.141***	0.141***	0.067**
AGE	0.163***	0.137***	0.154***	−0.122***	0.032	0.023	0.111***	−0.088***	0.150***	0.082***	0.092***
EMP	0.200***	0.201***	0.103***	−0.111***	0.203***	−0.021	0.134***	−0.100***	0.070***	0.238***	0.043
SUB	−0.027	0.047*	−0.029	−0.105***	0.116***	−0.157***	0.004	−0.062**	−0.027	0.075***	−0.052*

	BIG4	SIZE	ROA	LIQ	FCF	LEV	MTB	DIV	AGE	EMP	SUB
SRD	0.252***	0.366***	0.072***	0.057**	0.024	−0.124***	0.168***	0.065**	0.177***	0.207***	0.041
BSIZE	0.262***	0.287***	0.130***	0.141***	0.175***	−0.111***	0.222***	0.109***	0.173***	0.224***	0.155***
BIND	0.101***	0.170***	0.073***	0.089***	0.035	−0.062**	0.176***	0.095***	0.139***	0.029	0.077***
BGD	−0.125***	−0.238***	−0.026	−0.037	0.042	0.063**	−0.036	−0.090***	−0.083***	−0.081***	−0.075***
BMEET	0.102***	0.191***	0.024	0.061**	0.034	0.028	0.042	0.065**	0.009	0.109***	0.247***
COWN	0.049*	0.079***	0.041	−0.029	0.002	−0.184***	0.212***	−0.068**	0.044	−0.006	−0.330***
IOWN	0.418***	0.435***	0.200***	0.237***	0.139***	−0.357***	0.295***	0.173***	0.169***	0.141***	−0.035
MOWN	−0.377***	−0.393***	−0.118***	−0.189***	−0.127***	0.312***	−0.255***	−0.138***	−0.134***	−0.081***	0.022
FOWN	0.416***	0.343***	0.236***	0.208***	0.107***	−0.397***	0.315***	0.184***	0.150***	0.156***	−0.034
AUDS	0.319***	0.295***	0.145***	0.186***	0.201***	−0.175***	0.234***	0.131***	0.086***	0.207***	0.159***
AUDI	0.051*	0.066**	0.022	0.079***	−0.003	−0.073***	0.105***	0.063**	0.132***	−0.024	0.003
BIG4		0.377***	0.316***	0.262***	0.240***	−0.318***	0.352***	0.244***	0.041	0.066**	0.197***
SIZE	0.411***		0.337***	0.171***	0.203***	−0.206***	0.299***	0.380***	0.170***	0.593***	0.285***
ROA	0.304***	0.352***		0.487***	0.441***	−0.504***	0.537***	0.518***	0.111***	0.169***	0.118***
LIQ	0.179***	0.031	0.307***		0.215***	−0.572***	0.267***	0.305***	0.066**	0.021	0.153***
FCF	0.240***	0.335***	0.389***	0.116***		−0.249***	0.268***	0.241***	0.006	0.186***	0.071***
LEV	−0.332***	−0.287***	−0.461***	−0.402***	−0.246***		−0.366***	−0.237***	−0.182***	−0.018	−0.015
MTB	0.175***	0.167***	0.351***	−0.018	0.158***	−0.134***		0.290***	0.138***	0.026	−0.025
DIV	0.244***	0.387***	0.457***	0.164***	0.242***	−0.256***	0.115***		0.141***	0.235***	0.126***
AGE	0.04	0.158***	0.091***	0.021	0.033	−0.206***	0.106***	0.141***		0.306***	0.200***
EMP	0.065**	0.615***	0.166***	−0.014	0.242***	−0.075***	0.084***	0.238***	0.315***		0.291***
SUB	0.033	0.133***	0.095***	0.079***	0.031	−0.065**	−0.032	0.125***	0.095***	0.157***

Note: Lower-triangular cells report Pearson's correlation coefficients, upper-triangular cells are Spearman’s rank correlation.

***p < 0.01, **p < 0.05, *p < 0.1.

Table 5. Logistic regression results.

Variables	Coefficient	Std. Error	Wald Chi2	Significance	Odds Ratio	VIF	Tolerance
Intercept	−22.935	2.124	116.640	0.000***
BSIZE	−0.008	0.066	0.014	0.905	0.992	1.580	0.633
BIND	−1.231	1.199	1.061	0.305	0.292	3.128	0.320
BGD	1.677	0.907	3.423	0.064*	1.861	1.213	0.825
BMEET	−0.018	0.056	0.109	0.740	0.982	1.209	0.827
COWN	−2.341	1.095	4.580	0.032**	0.096	2.767	0.361
IOWN	3.300	0.981	11.290	0.001***	27.103	5.587	0.179
MOWN	−5.385	2.742	3.842	0.050**	0.005	3.406	0.294
FOWN	−1.501	0.464	10.498	0.001***	0.223	2.098	0.477
AUDSIZ	0.395	0.131	9.120	0.002***	1.485	1.573	0.636
AUDIND	−1.742	0.678	6.605	0.01**	0.175	2.874	0.348
BIG4	0.380	0.345	1.210	0.271	1.462	1.836	0.545
SIZE	1.009	0.126	64.481	0.000***	2.743	4.058	0.246
ROA	−1.864	1.184	2.465	0.115	0.155	2.052	0.487
LIQ	0.020	0.143	0.020	0.891	1.020	1.441	0.694
FCF	−3.565	0.801	19.803	0.000***	0.028	1.354	0.739
LEV	−1.121	0.692	2.624	0.105	0.326	1.866	0.536
MTB	0.055	0.021	6.605	0.010**	1.057	1.393	0.718
DIV	−0.303	0.226	1.796	0.181	0.739	1.455	0.687
AGE	1.059	0.219	23.426	0.000***	2.884	1.370	0.730
EMP	−0.038	0.128	0.090	0.766	0.963	3.061	0.327
SUB	−0.041	0.014	8.468	0.004***	0.959	1.128	0.886
IND_OIL	−0.669	0.519	1.664	0.198	0.512	2.278	0.439
IND_TECH	2.929	0.439	44.489	0.000***	18.707	1.525	0.656
IND_POW	−1.536	0.670	5.244	0.022**	0.215	2.134	0.469
IND_CHEM	2.854	0.430	43.957	0.000***	17.359	1.867	0.536
IND_CONS	1.112	0.509	4.796	0.029**	3.042	1.519	0.658
IND_CARE	0.251	0.550	0.212	0.649	1.285	1.633	0.612
IND_PHAR	2.637	0.407	41.861	0.000***	13.965	1.493	0.670
LR Chi2		533.13***
Hosmer-Lemeshow Test		7.710

***p < 0.01, **p < 0.05, *p < 0.1.

Herda, D. N., M. E. Taylor, and G. Winterbotham. 2012. “The Effect of Board Independence on the Sustainability Reporting Practices of Large US Firms.” Issues in Social & Environmental Accounting 6 (2): 178–197.

 Google Scholar

Hu, M., and L. Loh. 2018. “Board Governance and Sustainability Disclosure: A Cross-Sectional Study of Singapore-Listed Companies.” Sustainability 10 (7): 2578.

 Web of Science ®Google Scholar

Coffie, W., F. Aboagye-Otchere, and A. Musah. 2018. “Corporate Social Responsibility Disclosures (CSRD), Corporate Governance and the Degree of Multinational Activities.” Journal of Accounting in Emerging Economies 8 (1): 106–123.

 Web of Science ®Google Scholar

Girella, L., P. Rossi, and S. Zambon. 2019. “Exploring the Firm and Country Determinants of the Voluntary Adoption of Integrated Reporting.” Business Strategy and the Environment 28 (7): 1323–1340.

 Web of Science ®Google Scholar

Khan, A., M. B. Muttakin, and J. Siddiqui. 2013. “Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy.” Journal of Business Ethics 114 (2): 207–223.

 Web of Science ®Google Scholar

Ong, T., and H. G. Djajadikerta. 2018. “Corporate Governance and Sustainability Reporting in the Australian Resources Industry: An Empirical Analysis.” Social Responsibility Journal 16 (1): 1–14.

 Web of Science ®Google Scholar

Abad, D., M. E. Lucas-Pérez, A. Minguez-Vera, and J. Yagüe. 2017. “Does Gender Diversity on Corporate Boards Reduce Information Asymmetry in Equity Markets?” BRQ Business Research Quarterly 20 (3): 192–205.

 Web of Science ®Google Scholar

Sarhan, A. A., and C. G. Ntim. 2019. “Corporate Boards, Shareholding Structures and Voluntary Disclosure in Emerging MENA Economies.” Journal of Accounting in Emerging Economies 9 (1): 2–27.

 Web of Science ®Google Scholar

Alnabsha, A., H. A. Abdou, C. G. Ntim, and A. A. Elamer. 2018. “Corporate Boards, Ownership Structures and Corporate Disclosures.” Journal of Applied Accounting Research 19 (1): 20–41.

 Web of Science ®Google Scholar

Lourenço, I. C., and M. C. Branco. 2013. “Determinants of Corporate Sustainability Performance in Emerging Markets: The Brazilian Case.” Journal of Cleaner Production 57: 134–141.

 Web of Science ®Google Scholar

Kiliç, M., C. Kuzey, and A. Uyar. 2015. “The Impact of Ownership and Board Structure on Corporate Social Responsibility (CSR) Reporting in the Turkish Banking Industry.” Corporate Governance 15 (3): 357–374.

 Web of Science ®Google Scholar

Boone, A. L., and J. T. White. 2015. “The Effect of Institutional Ownership on Firm Transparency and Information Production.” Journal of Financial Economics 117 (3): 508–533.

 Web of Science ®Google Scholar

Soliman, M., M. El Din, and A. Sakr. 2013. Ownership Structure and Corporate Social Responsibility (CSR): An Empirical Study of the Listed Companies in Egypt. Available at SSRN 2257816.

 Google Scholar

Faller, C. M., and D. zu Knyphausen-Aufseß. 2018. “Does Equity Ownership Matter for Corporate Social Responsibility? A Literature Review of Theories and Recent Empirical Findings.” Journal of Business Ethics 150 (1): 15–40.

 Web of Science ®Google Scholar

Oh, W. Y., J. Cha, and Y. K. Chang. 2017. “Does Ownership Structure Matter? The Effects of Insider and Institutional Ownership on Corporate Social Responsibility.” Journal of Business Ethics 146 (1): 111–124.

 Web of Science ®Google Scholar

Kolsi, M. C. 2017. “The Determinants of Corporate Voluntary Disclosure Policy.” Journal of Accounting in Emerging Economies 7 (2): 249–265.

 Web of Science ®Google Scholar

Alotaibi, K. O., and K. Hussainey. 2016. “Determinants of CSR Disclosure Quantity and Quality: Evidence from non-Financial Listed Firms in Saudi Arabia.” International Journal of Disclosure and Governance 13 (4): 364–393.

 Web of Science ®Google Scholar

Appuhami, R., and S. Tashakor. 2017. “The Impact of Audit Committee Characteristics on CSR Disclosure: An Analysis of Australian Firms.” Australian Accounting Review 27 (4): 400–420.

 Web of Science ®Google Scholar

Buallay, A., and J. Al-Ajmi. 2019. “The Role of Audit Committee Attributes in Corporate Sustainability Reporting.” Journal of Applied Accounting Research 21 (2): 249–264.

 Web of Science ®Google Scholar

Liao, L., T. P. Lin, and Y. Zhang. 2018. “Corporate Board and Corporate Social Responsibility Assurance: Evidence from China.” Journal of Business Ethics 150 (1): 211–225.

 Web of Science ®Google Scholar

Muttakin, M. B., and A. Khan. 2014. “Determinants of Corporate Social Disclosure: Empirical Evidence from Bangladesh.” Advances in Accounting 30 (1): 168–175.

 Google Scholar

Masud, M. A. K., M. Nurunnabi, and S. M. Bae. 2018. “The Effects of Corporate Governance on Environmental Sustainability Reporting: Empirical Evidence from South Asian Countries.” Asian Journal of Sustainability and Social Responsibility 3 (1): 1–26.

 Google Scholar

Artiach, T., D. Lee, D. Nelson, and J. Walker. 2010. “The Determinants of Corporate Sustainability Performance.” Accounting & Finance 50 (1): 31–51.

 Web of Science ®Google Scholar

Okpa, I. B., A. John, J. A. Nkwo, and R. N. Okarima. 2019. “Implications of Environmental, Social and Governance Dimensions of CSR Practice on Firms’ Profitability, Value and Cash Flows in the UK.” Journal of Business and Management 21 (5): 1–10.

 Google Scholar

Naseem, M. A., R. U. Rehman, A. Ikram, and F. Malik. 2017. “Impact of Board Characteristics on Corporate Social Responsibility Disclosure.” Journal of Applied Business Research (JABR) 33 (4): 801–810.

 Google Scholar

Musallam, S. R. 2018. “The Direct and Indirect Effect of the Existence of Risk Management on the Relationship Between Audit Committee and Corporate Social Responsibility Disclosure.” Benchmarking: An International Journal 25 (9): 4125–4138.

 Web of Science ®Google Scholar

Kim, C., J. Kim, R. Marshall, and H. Afzali. 2018. “Stakeholder Influence, Institutional Duality, and CSR Involvement of MNC Subsidiaries.” Journal of Business Research 91: 40–47.

 Web of Science ®Google Scholar