Board diversity and corporate social responsibility: the moderating role of Shariah compliance

Abstract

Purpose The purpose of this study is to investigate the effect of board diversity on corporate social responsibility (CSR) practices and the interaction effect of Shariah compliance of firms with religious and ethical principles. Design/methodology/approach A total of 65 firms listed on the Pakistan Stock Exchange (PSX) were selected. The data were collected from the companies’ financial reports from 2012 to 2018 (n = 455). The data were analyzed using fixed and random effects regression models to test the effect of board diversity on firms’ CSR activities, while hierarchical moderated regression analysis was used to determine the moderating effects of Shariah compliance. Findings The study found evidence for a moderating effect of Shariah compliance on the relationship between board diversity and CSR activities. The findings suggest that a high level of Shariah compliance together with diverse educational backgrounds and presence of both genders among corporate members significantly promoted CSR activities. Research limitations/implications The present study included the demographic variables, gender, ethnicity and education; but excluded language and culture. The results suggest that the Security and Exchange Commission of Pakistan should attach more importance to Shariah compliance by firms in developing their CSR policies to improve social development and human well-being. Policy-makers should encourage more women to become directors on company boards and to increase philanthropic and charitable activities. These findings possess important implications for many Islamic countries irrespective of whether they are developed or developing. Originality/value To the best of the authors’ knowledge, this study provides the first empirical analysis of the relationship between CSR and board diversity from the perspective of Islamic Shariah law. The findings will contribute both theoretically and empirically to the existing body of knowledge.

Ethical disclosure in the Shari’ah annual reports of Islamic banks: discourse on Shari’ah governance, quantitative empirics and qualitative analysis

“…They also find that independent boards of directors and larger board sizes have a positive influence on the level of disclosure. Similar studies to analyse the corporate governance features of IBs and the level of their disclosure are also conducted (Azam et al, 2019;Dalwai et al, 2015;Ghosh, 2017;Nawaz, 2017;Shehata, 2015). However, the existent paucity of literature indicates that most of the available studies regarding the disclosure of IBs neglect to analyse SARs issued by SBs and mostly focus on the level and determinants of disclosure of CSR or other aspects of CG in IBs (Al-Baluchi, 2006;Darmadi, 2013;Farook et al, 2011;Hameed and Sigit, 2005;Rahman et al, 2010;Hassan and Syafri Harahap, 2010;Aribi and Gao, 2010;Mallin et al, 2014).…”

Carroll’s dimensions and CSR disclosure: empirical evidence from Pakistan

“…By and large, CSR in Pakistan represents as the philanthropy of businesses, Protection of rights of workers and implementation of labor laws (Waheed, 2005;Khan, 2012;Sajjad and Eweje, 2014, p. 173). The following recent studies (Malik and Kanwal, 2018;Javaid Lone et al, 2016;Sohail et al, 2017;Khan et al, 2019;Azam et al, 2019) in the Pakistani context have primarily focused on examining the link of CSR disclosure with internal and external corporate governance factors rather than investigating the substance and relevance of CSR disclosure. To provide an in-depth understanding of CSR in the context of Pakistan, it has become pertinent to examine the actual CSR practices through its communiqué and disclosure.…”

Impact of corporate governance, financial and regulatory factors on firms’ acquisition ability

“…Globalization is leading toward wide spread growth of the MNCs throughout the world. Companies are penetrating to the foreign markets through the vehicle of acquisition of local firms (Azam et al, 2019). In Pakistan, this trend is readily observant in telecommunication and pharmaceutical industry (Khan, 2016).…”