The Relationship between Return Equities, Independence of the Board of Directors and Environmental Sensitivity of Industry Group and the Social Responsibility

Document Type : Finance

Authors

• Zohreh Hajiha ¹
• Hossein Rajabdorri ²
• Manoochehr Khoramin ²
• Behrooz Ahmadi ³

¹ Associate Prof, Department of Accounting Faculty of Social Sciences Branch East Tehran,

² , Ph.D. Student of Accounting and Member of Young Researchers and Elite Club, Bandar Abbas Branch, Islamic Azad University, Bandar Abbas, Iran

³ MSc Student in Accounting, Department of Accounting, Bastak Branch, Islamic Azad University, Bastak, Iran

10.22067/ijaaf.v2i1.66881

Abstract

The current research aims to analyze the relationship among return of stockholders’ equities, independence of the board of directors, and environmental sensitivity of industry group with the social responsibility of enterprises based on integrating factors of sustainable development. The social responsibility includes the obligations for which the enterprise is responsible to contribute to the community where it acts. The integrated factors of sustainable development review the cases of backgrounds for disclosure, the framework of disclosure, report of the board of directors, concentration of stockholders, goals of sustainable development and achievement of these objectives. The study period is related to years (2012-16) and the selected sample is composed of 82 enterprises. The Ordinary Least Square (OLS) regression method was adapted to test research hypotheses. The research findings indicate that there is positive and significant relationship among return of equity of stockholders, independence of board of directors, and environmental sensitivity of industry group with social responsibility of enterprises based on the integrated factors of sustainable development after controlling ratio of book value to market value for equity of stockholders and systematic risk (market risk). Namely, by rising in the rate of return on equity of stockholders and independence of the board of directors, the level of social responsibility increases. Similarly, social responsibility was more observed environmentally in the sensitive enterprises. As a result, it is suggested to enterprises to address specifically return of stockholders’ equity and independence of the board of directors to increase the level of social responsibility as an important topic. Likewise, it is suggested to the sensitive enterprises to try for improving social responsibility.

Keywords

• social responsibility
• return of stockholders’ equity
• Independence of board of directors
• Environmental sensitivity
• Integrated factors of sustainable development

---

References

Poormohammad, M., Saadi, A. (2016). Analysis on role of social
responsibilities in activity of petrochemical industries (Case study:
90 Iranian Journal Of Accounting, Auditing & Finance
Shazand petrochemical Company), Conference on corporate social
responsibility- social responsibility of oil industry, Tehran, Research
institute in management and planning for energy, University of Tehran.,
https://www.civilica.com/Paper-PETROCSR01-PETROCSR01_034.html
Hajiha, Z., and Sarfaraz, B. (2014). The Relation between Corporate Social
Responsibility and Cost of Equity Capital of Firms Listed in Tehran
Stock Exchange. Journal of empirical in accounting, 4(2), pp. 105-123,
DOI: 10.22051/jera.2015.1905
Hejami, M. (2012). Analysis of relationship among disclosure of social
responsibility and institutional ownership in the listed enterprises in
TSEO., Journal Management System, 3 (2), pp. 135-150,
http://jmaak.srbiau.ac.ir/article_7622_1427.html
Razmjooei, P., Ghahremani A., and Partov Noor Elahi, S. (2015). The effect
of ownership structure and composition of board of directors on social
responsibility of enterprises, International conference on management
and human sciences, USE, Dubai, Institute of Modiran Idehpardaz
Paytakht Vira
French, Wendell, H. Bell Cecil. (2004). Change management in
organization, Transl. by Seyed Mehdi Alvani & Hassan Danaei Fard, 3rd
Ed., Tehran: Saffar Pub
Forooghi, D., Mir Shams Shahshahani, M., Poorhossein, S. (1999). Attitude
of directors toward disclosure of social accounting information: The
admitted enterprises in TSEO. Journal of accounting and auditing
studies, 15 (52), pp. 55-70,
https://acctgrev.ut.ac.ir/article_27255_68c9c0efcdced566d16cec7391a6e
e90.pdf
Mahdavi, G.H. H., Daryaei A. A., Alikhani R., and Meranjoori M. (2015).
The Relation of Firm Size, Industry Type and Profitability to Social and
Environmental Information Disclosure. Journal of empirical Research in
accounting, 4 (3), pp. 87-103., DOI: 10.22051/jera.2015.1994
Güler, A., and Crowther, D. (2009). Corporate Sustainability reporting: a
study in disingenuity? Journal of Business Ethics, 87 (1), pp. 279-288,
http://www.jstor.org/stable/40294968
Bassen, A., Kov_acs, A.M., (2008), Environmental, social and governance
key performance indicators from a capital market perspective. Journal
for Business, Economics & Ethics, 9 (2), pp. 182-192, DOI:
10.1688/1862-0043_zfwu_2008_02_bassen
Crane, A., Matten, D., and Spence, L. (2008). Corporate Social
The Moderating Effect of Audit Committee on the Relationship between … 91
Responsibility: In Global context. In: Corporate Social Responsibility:
Readings and Cases in Global Context, Routledge, London, 3–20,
https://ssrn.com/abstract=2322817
Daub, C.H. (2007). Assessing the quality of sustainability reporting: an
alternative methodological approach., Journal of Cleaner Production., 15
(1), pp. 75-85, DOI: 10.1016/j.jclepro.2005.08.013
Dilling, P.F. (2010). Sustainability reporting in a global context: what are
the characteristics of corporations that provide high quality sustainability
reportsean empirical analysis. Int. Bus. Econ. Res. J. IBER 9 (1), pp.
19e30.
Dyllick, T., and Hockerts, K. (2002). Beyond the business case for
corporate sustainability. Business Strategy and Environment, 11 (2), pp.
130-141, DOI: 10.1002/bse.323
Elkington, J. (1998). Cannibals with Forks: The Triple Bottom Line of 21st
Century., New Society Publishers, Gabriola.,
https://www.amazon.com/Cannibals-Forks-Triple-Century-
Business/dp/1841120847
Figge, F., Hahn, T., Schaltegger, S., and Wagner, M. (2002). The
sustainability balanced scorecard linking sustainability management to
business strategy. Business Strategy and the Environment, 11 (5), pp.
269-284, DOI: 10.1002/bse.339
Gelb, D., Strawser, J.A. (2001). Corporate Social Responsibility and
Financial Disclosures: An Alternative Explanation for Increased
Disclosure. Journal of Business Ethics, 33 (1), pp. 1–13,
http://www.jstor.org/stable/25074585
Giovannoni, E., and Fabietti, G. (2013). What is sustainability? A review of
the concept and its applications, in: Busco, C.,
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=
1&cad=rja&uact=8&ved=0ahUKEwi486WW_NzaAhXiCJoKHd6XA7E
QFggkMAA&url=https%3A%2F%2Fwww.springer.com%2Fcda%2Fco
ntent%2Fdocument%2Fcda_downloaddocument%2F9783319021676-
c1.pdf%3FSGWID%3D0-0-45-1429317-
p175460664&usg=AOvVaw0JYoAwmHuov2NYFgCHzv03
Henri, J.-F., and Journeault, M. (2008). Environmental performance
indicators: an empirical study of Canadian manufacturing firms. Journal
of Environmental Management, 87 (1), pp. 165-176, DOI:
10.1016/j.jenvman.2007.01.009
Kim, Y., Park, M.S., and Wier, B. (2012). Is Earnings Quality Associated92 Iranian Journal Of Accounting, Auditing & Finance
with Corporate Social Responsibility? The Accounting Review, 8 (3), pp.
761–796, DOI: 10.2308/accr-10209
Kim, Y., Li, H., and Li, S. (2014). Corporate Social Responsibility and
Stock Price Crash Risk. Journal of Banking & Finance, 43, pp. 1–13,
DOI: 10.1016/j.jbankfin.2014.02.013
Kolk, A., (2004)., A decade of sustainability reporting: developments and
significance., International Journal of Environment and Sustainable
Development.,3 (1)., 51-64., DOI: 10.1504/IJESD.2004.004688
Lozano, R., Huisingh, D. (2011). Inter-linking issues and dimensions in
sustainability reporting. Journal of Cleaner Production, 19 (2-3), pp. 99–
107, DOI: 10.1016/j.jclepro.2010.01.004
Mishra, D.R., Ghoul, S. El., Guedhami, O., and Kwok, C.C.Y. (2011). Does
Corporate Social Responsibility Affect the Cost of Capital?, Journal of
Banking & Finance, 35 (9), pp. 2388-2406,
https://ssrn.com/abstract=1546755
Reddy, K., and Gordon, L.W. (2010). The effect of sustainability reporting
on financial performance: an empirical study using listed companies,
Journal of Asia Entrepreneurs. Sustain., 6 (2), pp. 19-42,
https://www.semanticscholar.org/paper/The-Effect-of-Sustainability-
Reporting-on-Financial-Reddya-
Gordonb/f997fa95fe466b67490c88832d39bb69625b619e
Schaltegger, S., and Wagner, M. (2006). Integrative management of
sustainability performance, measurement and reporting, International
Journal of Accounting Auditing and Performance Evaluation., 3 (1), pp.
1-19, DOI: 10.1504/IJAAPE.2006.010098
Serafeim, G., Ioannis, I., and Beiting, C. (2011). Corporate Social
Responsibility and Access to Finance. Strategic Management Journal, 35
(1), pp. 1-23, DOI: 10.2139/ssrn.1847085
Stacchezzini, R., Melloni, G., and Lai, A. (2016). Sustainability
management and reporting: The role of integrated reporting for
communicating corporate sustainability management. Journal of Cleaner
Production., 136 (part A), pp. 1- 23, DOI: 10.1016/j.jclepro.2016.01.109
Dissanayake, D., Tilt, C., and Lobo, M. X. (2016). Sustainability Reporting
by Publicly Listed Companies in Sri Lanka. Journal of Cleaner
Production, 129, pp. 169-182, DOI: 10.1016/j.jclepro.2016.04.086
Fleming, M. (2002). What Is Safety Culture? Railway Safety Ever Green
House.
PradoThe Moderating Effect of Audit Committee on the Relationship between … 93
Stakeholder engagement and corporate social responsibility reporting: the
ownership structure effect. Corporate Social Responsibility and
Environmental Managemen.,16 (2), pp. 94-107, DOI: 10.1002/csr.189