Several academics studies examining Corporate Social Responsibility (CSR) reporting have investigated the factors that could influence a firm’s decision to produce CSR reports. Hahn and Kühnen (2013) show that certain variables related to internal aspects of corporate governance are sparsely examined, although some corporate governance variables might influence corporate reporting.
Some papers, however, have explored the relationship between voluntary disclosure and corporate governance. Certain studies have considered corporate governance variables only as one of the determinants of corporate disclosure (Dilling, 2009; Adams, 2002; Brammer and Pavelin, 2006). Other studies, on the contrary, have their focus only on corporate governance variables and their aim is to verify how these variables influence the preparation, the quality or the extent of voluntary disclosures. Within this second group of research only few studies have analysed a sample of Italian companies (Allegrini and Greco, 2013; Patelli and Prencipe, 2007) and their focus on the interplay between some corporate governance variables and the level of voluntary disclosure in annual report, but not in CSR reports.
Our paper fills the gap in the literature by examining the existence of linkages between some corporate governance variables and the production and assurance of CSR reports. The lack of research on this topic with reference to the Italian case and some peculiarities of companies’ corporate governance model make the Italian case interesting to analyse.
In this paper we adopt agency theory as the premise of our theoretical framework. Agency theory predicts that companies may use its corporate governance structures and voluntary disclosure to reduce agency costs arising from the separation between ownership and control (Jensen and Meckling, 1976). Agency theory is also useful to explain the recourse to the assurance of CSR reports (Moroney et al., 2012).
We expect that the characteristics of Italian corporate governance model may be a determinant of the decision to produce and assure CSR reports. We use two models to test our hypotheses. In the first model we test the hypotheses regarding the decision to produce a CSR report estimating the influence of five corporate governance variables, regarding the board structure. Then, in the second model we test the effect of these explanatory variables on the decision to assure CSR reports. We find evidence that Board size and CEO duality, two board characteristic usually associated with the protection of shareholder interests, are positively related to CSR report. Board size and CSR committee have a significant and positive relationship with the decision to assure CSR reports. These findings highlight that larger boards may be able to direct management to produce and assure CSR reports to safeguarding the interests of all stakeholders. From an agency-theoretical viewpoint the positive impact of CEO duality on CSR reporting could indicate that CEO are under pressure of stakeholder and they may provide CSR disclosure to appease stakeholders’ concerns. The existence of a CSR committee might be considered a monitoring device useful to produce an impact on the decision to assure CSR reports.
Keywords: Corporate Governance, CSR report, Assurance, Corporate Board
5a. Corporate sustainability and CSR
