Corporate transparency and CSR policies in developing countries: the case of listed companies in Palestine and Jordan
The financial scandals have promoted a higher transparency and corporate social responsibility in companies to improve and to restore the confidence of financial markets. Developing countries imitate developed countries practices because they wish to operate in new markets and they have to adopt governance and transparency strategies to reach this purpose. Transparency practices can attract new investors and improve the corporate image within the community that companies operate. Confidence in disclosed information can help to build better relations between companies and stakeholders. Corporate transparency, corporate social responsibility disclosure and corporate governance have become an important topic in academic writing and the business field. Many institutions worldwide strongly emphasize that firms must take into consideration the economic, social and environmental effects of their activities. This PhD dissertation empirically examines corporate transparency and corporate social responsibility policies in developing countries. To that end, this thesis focuses on three research objectives. First, we characterize the corporate transparency and corporate social responsibility disclosure developed by firms in developing countries, specifically Jordan and Palestine. This data let us to conclude if the type of corporate transparency and corporate social responsibility disclosure presents differences respect to developed countries or they follow the same strategies. Secondly, we measure the level of corporate social responsibility disclosure and corporate transparency of listed companies in Palestine stock exchange (PEX) and the first market of Amman stock exchange (ASE) Thirdly, we study the factors that exert an incidence on corporate transparency and corporate social responsibility disclosure, specifically factors of the formal institutional context and governance mechanisms. We adopted institutional theory approach and legitimacy theory as theoretical framework in this study. Institutional theory can explain the different mechanisms of control to supply the legal deficiencies and legitimacy theory can justify the reason of the firms to adopt corporate social responsibility and transparency strategies. The main contributions of this thesis are firstly, we have built a suitable two disclosure indexes for measuring the level of CSRD and CTD in developing countries the case of listed companies in Palestine and Jordan. We have focused on Palestine and Jordan, countries that have received little attention in the literature. Secondly, we have highlighted that in developing countries, where the legal context is weak; the institutional context is reinforced by the existence of other formal control mechanisms such as audit and corporate governance mechanism. Thirdly, we must stress the importance of the existence of patterns of behavior that facilitate implementation in other nearby countries. The first chapter presents the theoretical background on corporate transparency, corporate social responsibility disclosure and corporate governance. In this chapter, we are going also to provide a suitable two indexes for measuring the level of corporate transparency, corporate social responsibility in developing countries. Finally, we will explain the theoretical framework. The purpose of second chapter is to present the outlines about the transparency, corporate governance and corporate social responsibility in developing countries, including Palestine and Jordan. We talk briefly about locations of these countries, their population, economy and financial markets. In the third chapter, we aim to identify those formal institutional factors and governance mechanisms that have a significant influence on the level of corporate transparency in the countries studied. In the chapter four, we studied the formal institutional factors and governance mechanisms that have an incidence on the level of corporate social responsibility in Palestine and Jordan. Finally, we provide the conclusions and relevant contributions of the research and identify the limitations and future research study. The sample of the study consists of 101 companies; the data refer to 2011. Related to corporate transparency, the results show that quality of corporate transparency disclosure in Jordan is higher than in Palestine in all aspects due to the stability of institutions and country, although they give more importance to the same issues, because their cultures are similar. Besides, we found a positive and significant relation between corporate transparency and legal system, corporate governance (e.g. board size, governance committee and board insider) and we can conclude that the existence of rules and internal control mechanisms promote highest level of transparency. Respect to corporate social responsibility disclosure, the results show that levels of corporate social responsibility disclosure in Jordan are higher than in Palestine in all aspects, though it is low in both countries when compared with Western countries. Both countries enhance the same issues but, in relative terms, Palestinian firms present a greater concern with issues related to human resources and commitment towards community. Moreover, we have found a positive association between corporate social responsibility disclosure and the legal system, external auditor firm characteristics and corporate governance (e.g. board size and board audit committee) Other aspects related to corporate governance, such as the existence of board governance committee or board independence, do not affect the level of corporate social responsibility disclosure