Abstract
The thesis aims to explore the UK regulation Act of 2006 (Strategic Report and Directors' Report) Regulations 2013 which mandates corporate social responsibility (CSR) reporting. To acieve this aim, the thesis reviewed relevant theories which link between CSR-related regulation and CSR reporting quality, earnings management, and future performance. These include legitimacy theory, and impression theory. The legitimacy theory explains the relationship between CSR-related regulation and CSR reporting quality. The impression theory and the opportunistics perspective of agency theory clarify the impact of mandating CSR on earnings management practices in the firms. Lastly, the theories of the neoclassical economic theory, agency theory, and stakeholder and signalling explicit the influence of mandating CSR reporting on the subsequent performance of the firms.In addition, the thesis eaxamines how mandatory reporting of CSR influences the quality of CSR reporting using Ordinary Least Squares (OLS) regression for the period 2009 to 2017. The empirical analysis utilises the FTSE All-Share firms listed in the UK to find that madatory CSR reporting has helped to enhance CSR reporting quality in the UK significantly. Also, three firm characteristics enhance the quality of CSR reporting in the context of mandatiry CSR reporting; these are corporate governance (GG), international listing, and firms listed in sensitive industries. In an additional test, high and low CSR reporting score is used as a sustitute dependent variable, I find that mandatory CSR reporting alter the behaviour of providers of low CSR quality, specifically those who are more mature and listed in multinational markets. Compared to providers of high-quality CSR reports, I find that large firms are impacted by the new regulation to improve their reporting quality.
The thesis also exlores the impact of mandating corporate social responsibility reporting on earnings management (EM) practices through real earning management (REM) and accrual earnings management (AEM). The empirical analysis uses the UK's FTSE All-Share data set for the period 2009-2017, employing OLS model. I document two main findings: first, I find a positive relationship between voluntary CSR reportinf and REM, indicating that managers will report CSR to cover their earnings manipulation practices. Second, I find that mandating CSR repoting has helped to restrict the opportunistic behaviour of REM in the UK. In an additional test I document that mandating CSR reporting restricts providers of both high and low CSR reporting quality in practising REM activities; specifically, it has a greater effect on firms reporting low CSR quality. However, the analysis finds no evidence that mandating CSR reporting has an impact on the AEM practice.
Finally, the thesis investigates the influence of mandating corporate social responsibility reporting on subsequent financial performance through accounting-based measures and market-based measures. It provides evidence about the negative impact of reporting CSR voluntarily on the firm's future performance due to the increaed spending on and costs related to such activities. On the contrary, mandating CSR reporting enhances firms' future performance by signalling to the market about the firm's positive stance towards sustainability issues in the UK. In an additional test, I find that the impact of mandating CSR reporting appears clearly in the two-years-ahead and three-years-ahead.
| Date of Award | Jan 2019 |
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| Original language | English |
| Awarding Institution |
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| Supervisor | Khaled Hussainey (Supervisor) & Imad Chbib (Supervisor) |