Corporate political connection and corporate social responsibility disclosures: A neo-pluralist hypothesis and empirical evidence

Abstract

Purpose

The purpose of this paper is to examine the association of corporate political connection with the level of voluntary corporate social responsibility (CSR) disclosures to determine how the relationships between the state and the corporate sector influence CSR engagement.

Design/methodology/approach

Based on a neo-pluralist view of legitimacy theory, which conceptualizes the state as a concentration of power amenable to exploitation by the corporate sector, the study develops and empirically tests a hypothesis that CSR disclosures are inversely associated with political connection. A sample of 936 firm-year observations is used with data collected from annual reports of companies listed on the Dhaka Stock Exchange in Bangladesh from 2005 to 2013.

Findings

Results indicate that corporate political connection is associated with reduced CSR disclosures. This finding suggests that the perceived need for CSR disclosures as a legitimation strategy diminishes for politically connected firms. The finding supports a neo-pluralist argument that political connection could enable firms to eschew stakeholder pressure associated with potential legitimacy threats originating from poor CSR performance. This conclusion challenges the pluralist view of legitimacy theory that considers the state as a neutral arbiter resolving conflict among stakeholder groups in society.

Originality/value

The study makes a significant contribution to the literature by developing a neo-pluralist theorization of voluntary CSR disclosures within legitimacy theory and empirically testing it. Because prior empirical CSR disclosure research is largely underpinned by the pluralistic conception of society, examining this phenomenon from a neo-pluralist perspective enables a more complete understanding of CSR disclosure behaviors of firms.

Citation

Muttakin, M.B., Mihret, D.G. and Khan, A. (2018), "Corporate political connection and corporate social responsibility disclosures: A neo-pluralist hypothesis and empirical evidence", Accounting, Auditing & Accountability Journal, Vol. 31 No. 2, pp. 725-744. https://doi.org/10.1108/AAAJ-06-2015-2078