Impact of corporate social responsibility disclosure on shareholder value across manufacturing firms listed in Pakistan Stock Exchange

Abstract

Corporate social responsibility (CSR) is an imperative product or service strategy established to maintain a competitive advantage. CSR has accomplished a broader recognition and a more vigorous acceptance in corporate practices and academic literature. It is evident that CSR is ever-expanding and encompasses a wide area of research and practice. Companies engage in CSR disclosure to fulfil stakeholders' expectations and build healthy relationships with them. Furthermore, literature on CSR practices and disclosure is mainly conducted in developed countries. It remains under-researched in developing countries such as Pakistan. This study investigates the determinants influencing shareholder value among manufacturing companies listed at Pakistan Stock Exchange (PSX). Primarily, it examines the direct impact of CSR disclosure on shareholder value (dividend yield and share price). It further highlights the mediating effect of brand equity in the relationship between CSR disclosure and shareholder value (dividend yield and share price) among manufacturing companies. Finally, it examines the moderating effect of leverage in the relationship between CSR disclosure and shareholder value (dividend yield and share price). Using quantitative design and census sampling, secondary data has been collected from 106 manufacturing companies listed at PSX. The measurement model was tested using descriptive statistics, correlation, ordinary least square (OLS) and random effects. Additionally, Baron & Kenny approach and process macros were used to test the mediating effect. This study found a positive and significant relationship between CSR disclosure and shareholder value (dividend yield and share price). Moreover, although this study discovered an insignificant contribution of the moderator (leverage) between CSR disclosure and dividend yield, it found a significant and positive contribution of the moderator (leverage) between CSR disclosure and share price. Furthermore, brand equity mediates the relationship between CSR disclosure and shareholder value (dividend yield and share price). This study suggests different measures to improve CSR practices and their disclosure among manufacturing companies. The outcomes of this study provide functional insights for various stakeholders such as academic’s researchers, shareholders, corporate strategy formulators and policymakers/regulators to highlight the important factors and their implications on shareholder value.