Corporate Social Responsibility Reporting and Value Relevance of the Banking Sector in Bangladesh

Abstract

Using a sample of listed Bangladeshi banking companies for the period 2009-2017, this study investigated whether these banks which disclosed superior CSR information are more valued by the investors. CSR reports can also affect market value of equity because the sustainability report may be observed by the market participants to be a basis of supplementary and corresponding evidence along with the customary valuerelevant accounting variables. Finally, this study also analyses whether CSR disclosure by Islamic banks operating in banking industries is considered in a different way by investors than CSR disclosure by conventional banks. By using a modified Ohlson model, it is evident that CSR disclosure does have noteworthy positive influence on stock prices. Furthermore, CSR disclosure by Islamic banks is associated with higher market valuations than CSR disclosure by conventional banks. The reason behind the fact is that higher CSR information assists market participants to access the inherent risk associated to potential legal action and impending obligations, by this means sinking information asymmetries and the threat of adverse selection.

Does Managers Opportunistic Motive Moderate the Relationship Between CSR Disclosure and Firms Market Value of Equity? Study on the Listed Banking Companies in the Dhaka Stock Exchange

“…In line with previous studies (Lourenço et al, 2014;Rahman et al, 2020a;Reverte, 2014;Reverte, 2016;Verbeeten et al, 2016) this thesis assesses the previous (Ohlson, 1995) as a mechanism for aggressive earnings management. This process is commonly applied in empirical research on DLLP (Chih et al, 2008;Leventis et al, 2012).…”

“…Moreover, to assess the relationship between CSR performance or disclosure and market value of stocks, some researchers investigate the overall effect of non-financial information in terms of societal, environmentally friendly, and other spaces of business accountability performance or disclosure (De Klerk & De Villiers, 2012). CSR disclosure analysis has previously used the event-study approach to look at a range of corporate issues and their impact on environmental and community responsibility (Rahman et al, 2020a). At the adaptation level, Hassel et al (2005) assessed the financial market and stock market performance in Ohlson (1995) and, in combination, compared the results with equity value on the Stockholm stock exchange.…”

“…To construct an inclusive magnitude of a bank's commitment to sustainability or CSR disclosure, this study considers these issue areas to be more relevant to banks in terms of financial Service Sector (FSS) of GRI and extensive review of prior studies. Following Rahman et al (2020a) and Muttakin et al (2015) the CSRD index is calculated as follows:…”

“…The risk of bankruptcy is determined by variable leverage (LEV). Leverage is measured by total debt to total assets (Rahman et al, 2020a;Zuraida et al, 2015). Moreover, total debt to total assets signifies pertinent risk influences that unfavourably influence price (Muttakin et al, 2015).…”

“…If CSRD is connected with the organizations' share value, hypothetical contentions prompt the induction that the evidence disclosed is essential for shareholders to value the organization (Hassel, Nilsson, & Nyquist, 2005). As indicated by Rahman, Rasid, and Basiruddin (2020a) specialists can understand from value-relevance tests whether the data thing of premium (CSRD regarding this review) is related to the data set that financial specialists use to value the organization's stocks.…”