The Influence of Global, Country and Firm-Level Governance on Social and Environmental Reporting: Evidence from Developing Countries
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The influence of global, country and firm-level governance on social and environmental reporting: Evidence from developing countries By: Md. Shahid Ullah A thesis submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy The University of Sheffield Faculty of Social Science Management School 20 January 2020 Declaration I, Md. Shahid Ullah, declare that this thesis titled “The influence of global, country and firm- level governance on social and environmental reporting: Evidence from developing countries” has never been submitted anywhere for the award of any degree and all the sources used have been acknowledged. Signed: Date: 20 January 2020 i Contents Page Number Declaration i Contents ii Acknowledgements v Abstract vi List of abbreviations vii List of figures and tables viii Chapter 1 Introduction 1.1 Background ………………………………………………. 1 1.2 Motivation, objective and research questions …………… 2 1.3 The rationale of the study………………………………. 2 1.4 Theoretical framework…………………………………… 4 1.5 Research methods ………………………………………... 4 1.6 Summary of the findings …………………………... 5 1.7 Contribution of the study ………………………………… 10 1.8 Structure of the dissertation ……………………………… 11 Chapter 2 Research Context 2.1 Introduction ………………………………………………… 12 2.2 Context of developing countries …………………………. 12 2.3 Context of Bangladesh …………………………………… 14 2.3.1 The historical and political context …………………. 15 2.3.2 Socio-cultural-religious context …………………..…… 17 2.3.3 Economic context ……………………………………… 23 2.3.4 Regulatory and institutional context…………..…..…... 25 2.4 Summary …………………………………………………. 29 Chapter 3 Theoretical Framework 3.1 Introduction ……………………………………………... 31 3.2 Institutional theory ………………………………………. 33 3.3 Summary…………………………………………………. 41 ii Chapter 4 Literature Review and Development of Hypotheses 4.1 Introduction ………………………………………………. 43 4.2 SER in developing countries……………………………… 43 4.3 Governance and SER in developing countries …………… 47 4.3.1 Global governance and SER ……………………. 48 4.3.2 Country governance and SER ……………………. 56 4.3.3 Firm-level governance and SER ………………… 61 4.3.4 Development of hypotheses……………………… 66 4.4 Summary 70 Chapter 5 Research Design 5.1 Introduction ………………………………………………. 77 5.2 Research methods ………………………………………… 77 5.2.1 Quantitative study……………………………………... 78 5.2.2 Fieldwork –Interviews ………………………………… 85 5.3 Summary…………………………………………………… 95 Chapter 6 The influence of global, country and firm-level governance on social and environmental reporting in developing countries 6.1 Introduction……………………………………………… 96 6.2 Results and discussion…………………………………… 96 6.2.1 Descriptive statistics…………………………………. 96 6.2.2 Regression results …………………………………… 100 6.3 Additional Analyses……………………………………… 102 6.4 Robustness test……………………………………………. 108 6.5 Summary …………………………………………………. 108 iii Chapter 7 The influence of global, country and firm-level governance on social and environmental reporting in Bangladesh 7.1 Introduction ……………………………………………….. 114 7.2 Global governance ………………………………………… 114 7.2.1 Global governance environment………………………….. 114 7.2.2 Global governance and SER……………………………… 117 7.3 Country governance……………………………………….. 126 7.3.1 Country governance environment………………………….. 126 7.3.2 Country governance and SER……………………………… 135 7.4 Firm-level governance……………………………………… 157 7.4.1 Firm-level governance environment……………………….. 157 7.4.2 Firm-level governance and SER…………………………… 163 7.5 Discussion …………………………………………………. 189 7.6 Summary…………………………………………………. 199 Chapter 8 Conclusion ……………………………………………………….. 201 References ………………………………………………… 210 Appendices Appendix 1: List of social disclosure items………………… 235 Appendix Table 2: List of environmental disclosure items… 236 Appendix 3: Description of variables……………………… 238 Appendix 4: Profiles and details of the interviewees…………. 240 Appendix 5: Case study: Mixed experience of a successful independent director in Bangladesh……………………… 246 Appendix 6: SER in Bangladesh: Boardroom experience of a female director ………………………………………… 250 iv Acknowledgements I am grateful to the Almighty Allah for giving me the ability to accomplish the highest academic degree. I would like to express my sincere gratitude to Professor Katsuhiko Kokubu, my principal supervisor, for his all-out support and encouragement. Besides academic excellence, I found Professor Kokubu as a reflection of humanity, responsibility, and accountability. Despite numerous preoccupations, he was always available whenever I needed his time. Thank you, Professor Kokubu. I am also grateful to my supervisors - Dr Naoko Komori and Professor Ataur Rahman Belal. The ‘why’, ‘how’, and ‘so what’ questions of Dr Komori greatly helped me in developing my critical thinking. Thank you, Komori sensei. The academic support of Professor Belal was commendable in operationalising the fieldwork in Bangladesh and ensuring consistency between the quantitative and qualitative analyses. Thank you, sir. I received financial support from a couple of sources, namely the Kobe City Sugawara Scholarship, Grant Program for Research and Education of Kobe University Rokkodai Foundation, Research Training and Support Grant of The University of Sheffield. I gratefully acknowledge all the supports. I am grateful to Prof. Abdul Hye, Dr Mohammad Badrul Muttakin, Prof. Mohammad Ayub Islam, Dr Bishnu K. Adhikary for their encouragement. I duly recognise the sincere cooperation of Mr M. S. Siddiqui (Bangla Chemical), Prof. Md. Salim Uddin (University of Chittagong), Prof. Mustafizur Rahman (CPD), Dr Badiul Alam Majumdar (SUJAN), Dr Toufic Ahmad Choudhury (Former DG, BIBM) and Prof. S. K. Bala (University of Dhaka) in accessing the elite interviewees in Bangladesh. I am thankful to all the interviewees who participated in the project. I am also thankful to my colleagues, Dr SM Ahsan Habib, Dr Pranshanta K. Banerjee, Prof. Mohiuddin Siddique, Dr Mohammad Tazul Islam, Mr Tofayel and Ms Rahat Banu for their support. I gratefully remember the constant encouragement of my dad late Md. Ismail Hossain, who used to say, ‘I would like to be known as your dad’ and inspired me to achieve the highest possible academic degree. I am also grateful to my mom - Ms Surjaban Begum, mother-in- law - Ms Fazilatunnessa, father-in-law - Maulana Safi Ullah, brother-in-law - Mr Tasaddequl Zannat, for their earnest support to my family during my stay abroad. I am indebted to my wife, Ms Sumaya Akter, for her sacrifices, letting me go abroad and taking care of the family alone. Finally, I am thankful to my daughters, Zaima Shahid (who said ‘dad, if you would like to study, let us study in the same school here; why should you go abroad?’) and Zunaira Shahid, for their sacrifice and encouragement with always smiling faces. Thank you, Zamu and Zunu, my ‘moms’. Shahid v Abstract The study examines the influence of global, country and firm-level governance on social and environmental reporting (SER) in developing countries from the institutional perspective. Using the Bloomberg ESG disclosure, worldwide governance indicators, and other databases for 45 developing countries from 2007–2016, the study examines the influence of global, country and firm-level governance on SER. Results show that all three levels of governance have significant positive influences on SER, with global governance having the strongest influence on SER in developing countries. By interviewing 26 corporate and 23 non-corporate interviewees, the study explores ‘why and how’ the global, country and firm-level governance influence SER in Bangladesh, as a case of developing countries. The findings show that SER in Bangladesh is mainly driven by the coercive pressures from the global market, followed by the normative pressures from the firm-level, and the cultural-cognitive pressures from the country-level. Specifically, SER is primarily aimed at mitigating the coercive pressures from the powerful economic stakeholders, namely international buyers and lenders followed by the normative pressures at the firm-level to be endorsed for SER, thereby branding and expanding the business both at home and abroad. The country governance in Bangladesh is not conducive for SER due to the absence of coercive pressures (there is coercion for political donations, not for SER), normative pressures (lack of national guidelines for SER or CSR), and cultural cognitive pressures (lack of awareness of and interest in SER). The firm-level governance in Bangladesh is mainly superficial, and the inclusion of the so-called independent directors and female directors does not necessarily promote SER. The ‘board independence’ and ‘board gender-diversity’ are ‘in appearance’ rather than ‘in fact’, because of the lack of independent mindset, knowledge and expertise, benefit dependency (co-option), family control, patriarchy, male dominance, and honour culture. Findings indicate that SER is largely symbolic and used as an expedient response to the coercive as well as normative pressures exerted by the international powerful economic stakeholders followed by the normative pressures and expertise of SER at the firm-level for promoting the financial wellbeing of the reporting entities, rather than ensuring accountability, transparency and social justice in developing countries. vi List of abbreviations ADB Asian Development Bank BB Bangladesh Bank BRICS Brazil, Russia, India, China and South Africa BSEC Bangladesh Securities and Exchange Commission CEDAW Convention on the Elimination of All Forms of Discrimination against Women CEO Chief executive officer CSOs Civil society