Transparency of CSR disclosure, financial
performance and Social Media
A research among companies in customer proximity industries
Master Thesis
MSc Business Administration – Strategy Supervisor: Pushpika Vishwanathan
Jascha Caanen 10060812 01-07-2016
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Statement of originality
This document is written by Jascha Caanen who declares to take full
responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and
that no sources other than those mentioned in the text and its references have
been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision
of completion of the work, not for the contents.
3 Abstract
This study aimed to contribute to the ongoing debate about the relationship between the disclosure of corporate social performance and corporate financial performance. In particular, the relation between the transparency of CSR disclosure and corporate financial performance, in terms of sales and sales growth, is examined among companies in customer proximity industries. Customers require organizations to be transparent about their CSR practices and organizations respond to this demand for transparency by reporting according to global standards like Global Reporting Initiatives (GRI). The use of Social Media, as a two-way communication channel, is expected to have a moderation effect for both the expected positive relation between transparency and sales performance as for the inverse relation, the positive relation between sales performance and transparency. All hypotheses were rejected, which implies that there is no significant relation between transparency and sales or sales growth. Results showed that transparent companies don’t have significant higher sales or sales growth, neither when Social Media are used. The most important finding is that the inverse relation has been proven negative and significant. Companies with high sales revenues are in a lesser extent transparent when they score relatively high on reach and strength in Social Mention.
4 Table of Content 1. Introduction ... 5 2. Literature ... 8 2.1. Focus on investors ... 9 2.2. Stakeholder theory... 10
2.3. Customer proximity industries ... 14
2.4. Transparency ... 15
2.5. Transparency in CSR reports ... 16
2.8.1. Stakeholder involvement ... 23
2.8.2. Key associations of Social Media ... 24
3. Data and Method ... 29
3.2.1. Variable – Transparency ... 31
3.2.2. Variable - Sales ... 33
3.2.3. Control Variables ... 34
3.2.4. Moderate Variable – Social Media ... 35
4. Analysis and results... 38
5. Discussion ... 45 5.1. Findings ... 45 6. Conclusion... 53 7. References ... 55 8. Appendix ... 62
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1. Introduction
Corporate social responsibility (CSR) has reached a high position on the agenda of many companies since corporates are encouraged to behave socially responsible (Dahlsrud, 2008). Over the past decades it has been found that, even though it is not required in most countries, more and more organizations are voluntary disclosing information about Corporate Social Responsibility (CSR) in so-called CSR reports (Mahoney et al., 2013). Considerable researches have been investigating the economic benefits of disclosing CSR practices and found that, to a large extend, the disclosure of CSR practices is significant beneficial for the financial performance of companies (Bowman, Preston, in Margolis & Walsh, 2003;
Dhaliwal et al. 2011). In additions, financial performance turned out to influence the level of CSR disclosure as well. This positive relation is mainly based on the argument of
organizational slack, which states that profitable companies have more economical resources to invest in long-term activities, like CSR disclosure (Belkaoui and Karpik, 1989;
Gamerschlag, Möller and Verbeeten, 2011; Reverte, 2008).
Empirical evidence is mainly drawn from companies that address investors as their main stakeholders, by investigating financial performance in terms of stock price, cost of equity and cash flow. This is quite remarkable, given that investors are not the only
stakeholder group that is interested in a company’s CSR practices. Stakeholders increase the demand for disclosure of CSR practices in order to track the activities and practices of an organization in the CSR area (Dubbink et al., 2008; Kaptein, 2003). Moreover, customers have interest in CSR disclosure, since they exert pressure on companies to be (more)
transparent in their reporting. Companies in industries with high consumer proximity turn out to present CSR reports with a higher level of transparency than companies in industry with low consumer proximity because of the pressure of their consumers to do so (Fernandez-Feijoo, Romero and Ruiz, 2014). Transparency is a key condition for CSR reporting (Kaptein and Van Tulder, 2003; Dubbink et al., 2008; Fernandez-Feijoo et al., 2014). Being
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transparent about CSR efforts is (indirectly) linked to the purchase intention of a consumer. Consumers are more likely to consider a purchase from a company when the company is transparent about its CSR efforts (Kang, 2014). The firm’s profitability, coming from
consumers, are direct earnings from consumers or buyers, which results in sales revenues for a company (Kim, Gon Kim and An, 2003; Schuler and Cording, 2006).
Subsequently it is surprising that upon today, most researches focused only on CSR reporting, an one-way communication towards stakeholders. When examining companies in consumer proximity industries, where companies stand relatively close to the consumer, it is relevant to address a two-way dialogue between company and consumer (Lyon &
Montgomery, 2013). Social Media, as a contemporary communication tool, contribute to the transparency of disclosure the increase of exposure to (potential) consumers and by making it easier to start a dialogue, improve the interaction between organizations and consumers through trust building, information sharing and customer service (Watts & Zimmerman, 1986; Agnihotri, Kothandaraman, Kashyap and Singh, 2012).
From the perspective of stakeholder management, CSR disclosure should be available and accessible for every stakeholder. Since customers are general public and not actively seeking for information about CSR themselves, the use of Social Media might contribute to the accessibility and transparency of CSR disclosure for consumers. In addition a company that is truly involved in being transparent about their CSR will further reduce the information asymmetry by communicating in a dialogue instead of using a one-way communication towards the consumers. Therefore this thesis will seek to answer the following question: RQ: How is transparency of CSR reports related to corporate financial performance among companies in customer proximity industries and how is this relation influenced by the use of Social Media?
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This thesis contributes to the literature by designating a more detailed aspect of the CSP-CFP relation namely, transparency of CSR disclosure and corporate financial performance among companies in customer proximity industries. A stakeholder approach is used to explain how Social Media might play a role in enhancing the relationship between the transparency and financial performance in terms of sales and sales growth. This builds forward on studies that recognized customers as an important stakeholder group in the CSP-CFP relation (Kim, Gon Kim and An, 2003; Schuler and Cording, 2006) and studies that emphasize the importance of Social Media as a relevant communication tool for companies to manage stakeholder
relationships (Agnihotri et al., 2012; Schniederjans, Cao and Schniederjans, 2013).
Subsequently, this study contributes to the literature by providing a richer understanding of the effect of Social Media use on the (inverse) relationship between transparency, sales and sales growth. Especially for companies that are closely related to their customers and value interaction with this stakeholder group, this study might reveal insights that can be translated into practice.
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2. Literature
Ever since organizations were labeled to be corporate social responsible, the interest arouse for what this could mean for the financial outcomes of that organization . Upon to today there is no unanimous agreement on the relationship between CSP and CFP, with most studies confirming a positive relation like Margolis and Walsh (2003) and Orlitzky, Schmidt & Rynes (2003), some finding a negative relation and others not finding correlations at all (Roman, Hayibor and Bradley, 1999) .
In the present dynamic, global and technological social contexts, companies are acting corporate social responsible as a reaction to societal uncertainties. The concept of CSP is linked to stakeholder theory by Surroca and Tribó (2008), who state that thriving for
maximization of CSP relates to the objective of meeting the interests of the stakeholders. To meet expectations of society, firms are investing in corporate social performance (CSP), commonly defined as their voluntary and extralegal participation in social and environmental issues (Mackey, Mackey, & Barney, 2007; McWilliams & Siegel, 2001). The overview of Margolis & Walsh (2003) reveals that CSR disclosure is used to measure the social
performance of companies. The disclosure of CSR can be defined as the information that a company discloses about its environmental impact and its relationship with stakeholders by means of relevant communication channels (Campbell 2004; Gray et al. 2001). Closely related to this concept is CSR communication that is defined by Morsing (2006, p. 171) as “the communication that is designed and distributed by the company itself about its CSR efforts" (Wanderley et al., 2008). To be transparent and complete, CSR disclosure should not only address the environmental impact as stated by Campbell (2004) and Gray et al. (2001), but also include all CSR efforts of every area (Wanderley et al., 2008). In most countries it is not required to disclose this information, but more and more firms are voluntary issuing Corporate Social Responsibility (CSR) reports over the past decades (Mahoney et al., 2013).
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These reports include social and environmental information about a firm’s commitment to related activities that are difficult to find or not available (Belal & Cooper, 2011).
2.1. Focus on investors
From a business perspective, reporting CSR practices is seen an investment for sustainable development (Chen, Feldmann & Chang, 2015). However, the demand to provide
information about CSR, improve the visibility of corporate social performance and publish reports, comes from multiple stakeholders such as investors, consumers, industry peers, media and regulatory forces (Sweeney & Coughlan, 2008; Fernandez-Feijoo et al., 2014). Prior studies have merely focused on investors as the important stakeholders in the
relationship between CSR disclosure and financial performance. On balance, the studies found empirical evidence proving that voluntary disclosing information about CSR can result in beneficial, mixed or non-significant financial outcomes (Margolis & Walsh, 2003; Kapoor & Sandhu, 2010). Evidence for the inverse association of CSR disclosure and cost of equity is presented by Dhaliwal, Li, Tsang and Yang (2011) and Plumlee, Brown, Hayes and Marshall (2010).
The main evidence that Dhaliwal et al. (2011) discovered is that firms initiating a voluntary disclosure of CSR activities are likely to benefit financially, by a reduction in the cost of equity capital. The analyses of 213 disclosing firms from 1993 until 2007 show that this potential benefit motivates firms to publish standalone CSR reports. The actual decrease of cost of equity capital applies to firms who disclose CSR in a standalone report and have superior CSP, compared to their industry peers (Dhaliwal et al., 2011). All disclosure on CSR activities, like annual reports, websites and other (voluntary) reports that a firms dedicates to CSR, provide information about a firm’s corporate social performance (CSP). The
dimensions that are addressed in this disclosure can potentially reduce the information asymmetry and subsequently increase the social transparency of a firm. Dhaliwal et al.,
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(2011) reason that a higher social transparency leads to a lower cost of capital. Plumlee et al., (2010) find full support for the significant relation between the disclosure quality and a component of firm value, future cash flows. The higher the quality of the disclosure is expected to lead to higher future cash flows.
Counterbalance is provided by the research of Richardson & Welker (2001), which reveals that the improved level of social disclosure in annual reports leads to an increase in cost of equity capital and implies that CSR disclosure disadvantageously effects the financial outcomes of an organization. The positive association between CSR disclosure and cost of equity was not expected and in contrast with their preliminary research. However the outcome was attenuated by the authors stating that it doesn’t suggest that ‘social disclosure has an overall negative effect on the firm’ and is due to different biases in social disclosure (Richardson & Welker, 2001).
Hence, from an investor perspective the economic benefits of disclosing CSR information is clear and convincing. In general, stakeholders increase the demand for
disclosure of CSR practices in order to track the activities and practices of an organization in the CSR area (Kaptein, 2003; Dubbink et al., 2008). However, investors are not the only group of stakeholders that need to be addressed when it comes to corporate social
responsibility. The subject also concerns employees, customers, environment, competitors and other stakeholders of a company (Christensen, 2002; Fernandez-Feijoo et al., 2014).
2.2. Stakeholder theory
Already in 1984, Freeman (in Berman et al., 1999) stated that systematic managerial attention to stakeholder’s interest is critical to firm success. The foundation of the stakeholder theory is that managers “need to understand the concerns of shareholders, employees, lenders and suppliers, in order to develop objectives that stakeholders could support” (Sinclair, 2010). Choi & Wang (2009) found that high stakeholder relations rating result in benefits for both
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well-performing firms by helping to sustain superior profits as well for poorly performing firms by helping to move out its disadvantageous position more quickly (Choi & Wang, 2009). An organization’s (financial) success is depending on how well the relationships between stakeholders and the organization are managed. In this paper managing stakeholders means interacting with a number of interrelated social actors like shareholders, employees, customers, natural environment and community (Berman et al., 1999; Hillman & Keim, 2001). The disclosure of CSR practices is a fashion of interaction with interrelated social actors through providing information for stakeholders that are or might be affected by the achievement of the organization’s objectives. Further explained in the following paragraphs, based on the level of seeking for CSR information, each of these stakeholders can be divided in opinion leader or general public type of audience (Du et. al., 2010).
When a company engages in CSR, the intention is to address (all of) the stakeholders and inform them about the (achieved) CSP. From the communication stand of view,
stakeholders can be divided in two types, since they differ in their expectations of business and supply of information (Du et. al., 2010). The first type of stakeholder is an opinion-leader, which proactively searches for CSR records to gather information about the CSR information of an organization. These are, for example, business press, NGO’s and investors (Dawkins, 2004 as mentioned in Du et. al., 2010). In addition, the Dow Jones Sustainability Index (DJSI) highlights that these CSR initiatives are of significant interest for shareholders and (potential) investors (Raub and Blunschi, 2013). The second type of stakeholder is
general public, like consumers and local communities. These stakeholders are not seeking for CSR information and mostly become aware of a company’s CSR activities through
independent channels like, television coverage, press or corporate communication channels (Du et. al., 2010).
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accessible and transparent. Since opinion-leaders search for CSR records themselves, a company will not have to target this type of stakeholders as extensively in their
communication strategy as general public. Fernandez-Feijoo, Romero and Ruiz, (2014) argue that transparency is very important in providing information to opinion-leaders since
communicating CSR transparency will enhance the relationship between investors and the company. Likewise, pressure from stakeholders as investors, employees and consumers are most influential when it comes to the transparency of CSR reporting. Corporate transparency guarantees that a company’s stakeholders understand the information, get on with the CSR activities and then are able to start a constructive interaction with it. Transparent
communication is seen as a strategic instrument for managing stakeholder relationships, both for opinion-leaders and general public (Carrol and Einwiller, 2014). The main
communication tools used to accommodate opinion-leaders with CSR information are the annual report, the annual letter to shareholders, indexes and organizational linkages, non-financial reports and the corporate website (Ziek, 2009).
The second type of stakeholders is not proactively seeking for this information and thus a different communication strategy is required. Servaes and Tamayo (2013) examine under which circumstances CSR involvement may be beneficial concerning general public. The research targets customers and employees with the main focus on the level of awareness. The ability to respond to CSR initiatives by consumers is mostly limited by the lack of customer’s awareness of these initiatives (Schuler and Cording, 2006; Servaes & Tamayo, 2013). A direct relation between CSR and firm value was not found because without
awareness customers are unable to reward CSR involvement. The impact of CSR activities on the firm value is insignificant and negative for low public awareness and subsequently a positive mechanism on firm value was found for a high level of public awareness (Servaes & Tamayo, 2013). In addition, an increased level of awareness positively affects the purchase
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intention of consumers, especially the awareness level of corporate social contribution and local community contribution. This implies that consumers intend to buy products from ‘social responsible’ companies and these ‘good’ companies experience benefits for their sales when the awareness of CSR is high (Lee and Sin, 2010). The positive relationship between CSR awareness and purchase intention is also supported by Sen, Bhattacharya and Korschun (2006) and Pfau, Haigh, Sims and Wigley (2008). In accordance, the latter authors emphasis the importance of moderators like corporate image, the people’s perception of reputation and credibility. However, a challenge associated with CSR awareness, concerning both opinion-leaders and general public, is to minimize stakeholder skepticism (Du et al., 2010). When the public is highly aware of a company’s CSR activities, more likely to be opinion-leaders than general public, it is more probable that a company is ‘punished’ when CSR concerns occur (Servaes & Tamayo, 2013).
The communication tools that Ziek (2009) provides are mostly useful to address opionion-leaders, because they often search for (non)- financial reports and indexes as a form of CSR disclosure. The general public is more likely to visit a corporate website and so (might) become aware of CSR activities of a company. Today, social media are seen as tools to engage different stakeholders, mainly general public, and above all to communicate directly with them bypassing the traditional role of mass media (Sedereviciute and Valentini, 2011).
Eventual, CSR reporting is a way to manage stakeholder relations by disclosing information about CSR practices relevant for both opinion-leaders and general public. Managing stakeholders today, emphasizes more on the interaction between an organization and its stakeholders based on the development of a long-term relationship (Morsing and Schultz, 2006). The publication of (voluntary) CSR reports contributes to the development of a long-term relation and stakeholder management in general.
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2.3. Customer proximity industries
Since opinion-leaders are actively searching for CSR information, the challenge is to convey CSR information to general public. Customers are considered to be primary or secondary stakeholder groups that a company needs to manage (Sweeney & Coughlan, 2008). In general, the customer is passive in acquiring CSR information and thus a more pro-active attitude from companies is required. The need to involve customers in the topic of CSR has not been unnoticed in the scientific world. Schuler and Cording (2006) developed a
behavioral model for consumers in the CSP-CFP relation by linking CSP and information intensity to purchase behavior. Moreover, customers are seen as a stakeholder group that can directly affect the corporate financial performance, which result in earnings from sales (Kim, Gon Kim and An, 2003; Schuler and Cording, 2006).
Sweeney & Coughlan (2008) state that the reported information about CSR is in line with the expectations of the stakeholder. CSR reports are seen as a marketing communication tool because the content is shaped according to the demand of the main stakeholder. Evidence found that companies with customers as their primary stakeholder focus the disclosure of their annual report specifically on customers. We will therefore focus on companies that consider customers as their primary stakeholders, which are companies in customer proximity industries. Before elaborating more on this relationship, a brief explanation about ‘customer proximity industries’ is required. Fernandez-Feijoo (2014) introduces ‘customer proximity’ as overarching industries that are known for the general public as a consumer of its products or services. Companies in ‘customer proximity’ industries are closely related to their
customers in these businesses. These industries emphasize the role of customers and see customers as their primary stakeholders. Moreover, Sweeney and Coughlan (2008)
distinguish retail, telecommunications, health and beauty and financial services as industries that are ‘customer proximity’.
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Reporting in accordance of the stakeholders’ expectations doesn’t imply that companies are able to include information just because it meets the expectations of the customer. Customers express their interest in CSR disclosure, since they exert pressure on companies to be (more) transparent in their reporting. In accordance, companies in industries with high consumer proximity turn out to present CSR reports with a higher level of
transparency than companies in industry with low consumer proximity because of the pressure of their consumers to do so (Fernandez-Feijoo, Romero and Ruiz, 2014).
2.4. Transparency
Transparency is seen as a key circumstance for CSR reporting (Dubbink et al., 2008; Kaptein and Van Tulder, 2003; Fernandez-Feijoo et al., 2014) and, at the same time, CSR reporting is used as a mean to improve transparency (Fernandez-Feijoo et al., 2014; Quaak et al., 2007). Internal and external stakeholders expect to have unrestricted access to corporate information and also demand that companies are held accountable for their strategic choices. The driving force behind transparency in CSR reporting derives from external pressure from stakeholder groups like investors, employees and customers (Christensen, 2002; Fernandez-Feijoo et al., 2014).
Transparency is seen as morally important because it reinforces the attitude of honesty and openness, which is implicit in thinking of CSR (Dubbink et al., 2008). Subsequently, the level of transparency of CSR disclosure determines if an organization meets the demand of needed information of stakeholders. Where investors are more interested in financial
reporting, consumers and employees value the social and environmental efforts. Concerning stakeholder management, this contributes to addressing all stakeholders involved with transparent, extensive information about the business. Moreover, great transparency of CSR disclosure will lead to a reduction of information asymmetry and in more confidence on the organization’s commitment to sustainability (Dando and Swift, 2003; Cheung, Jiang and Tan,
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2010). Yet, not every company will aim to be transparent since it requires companies to be vulnerable. Once the information is shared the control over the information disappears, similar to the knowledge about what people will do with the shared information (Rawlins, 2008). Accordingly, transparency is a concept based on reciprocity and linked to trust, CSR and ethics. The concept gains trust and loyalty from key stakeholders, in customer proximity industries thus from customers (Rawlins, 2008).
2.5. Transparency in CSR reports
Organizations are not obligated to publish a CSR report, in contrast to the publication of the financial report. The decision to report on CSR, and thus provide stakeholders with
information about CSR, makes an organization more transparent than when information about CSR is not or partly available (Dubbink et al., 2008)
Rawlins (2008) argues that transparency does not mean that all information needs to be provided; only the information that is substantial and useful for stakeholders should be included in a CSR report. On the contrary Vurro & Perrini (2011) state that the more
extensive a CSR report is, the better organizations are able to manage their relationships with stakeholders and strengthen its image as a firm that cares for CSR among other stakeholders. The higher the number of CSR topics addressed in a report, the higher the performance in the next year (Vurro & Perrini, 2011).
Globally, several procedural standards for transparency have been developed to secure the quality of information in social reports and social audits. Since there are no
obligations or regulations about CSR reporting, it is associated with a high level of flexibility and freedom (Widiarto Sutantupotra, 2009). Currently, few worldwide reporting standards provide guidelines to in order to be transparent in social reports. Transparency in social reports is indicated by the level of completeness, inclusivity, relevance, comparability, comprehensibility and other indicators (see Appendix 2). Each global guideline is focused on
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a specific area of transparency and covers different indicators (Kaptein, 2003 retrieved from Dubbink et al., 2008). The GRI Guidelines are most frequently used in research about CSR disclosure because firms must include specific indicators to report their CSR practices. The purpose of the GRI is to set up guidelines that are hard to imitate for ‘bad performers’ by containing benchmarks for social, environmental and economic performance (Widiarto Sutantupotra, 2009). Setting reporting standards requires companies to meet these standards, if they want to create a transparent policy and publish reliable and relevant information about their corporate social performance.
The credibility of information should be guaranteed in order to add value to a report by assuring customers that the information provided is true and fair. By using third-party independent assurance, credibility will be enhanced and confidence in the communicated information increased. (Dando & Swift, 2003; Bushman et al., 2004). Moreover, this reasoning is proven in practice. More companies that are voluntary reporting on their CSR activities start to include an assurance statement of their reports, especially the larger
companies. Between 1990 and 2007, Dhaliwal et al. (in Plfugrath et al., 2011) found that 27 percent of the stand-alone CSR reports were assured. Assurance engagement supposes to improve the quality and credibility of the information for report users because in general, assured information is perceived to be more credible than non-assured information (Noronha, Tou, Cynthia & Guan, 2007; Simnett, Vanstraelen & Chua, 2009; Pflugrath, Roebuck & Simnett, 2011). Companies with a higher need to enhance credibility will be more likely to have their sustainability reports assured. This implies that including an assurance statement is beneficial for companies and their reputation (Simnett et al., 2009).
In conclusion, organizations benefit from addressing multiple stakeholder-related themes but should not include information that is neither relevant nor useful for stakeholders. The
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disclosure of CSR information in CSR reports is associated with good stakeholder management because transparent and credible information is provided. For customers, a group of stakeholders that is merely not actively searching for CSR information, it is important that the information that is adopted is at least correct and transparent (BRON). Furthermore, the financial outcomes might positively be influenced when transparency in reporting about CSR is wielded.
Multiple researches in marketing have proven that consumers care about the ethicality of firm’s behavior because it is an important consideration during the purchase decision. Also, ethical behavior increases the willingness to pay for a ‘green’ or ‘fair’ product. Customers that are aware of the corporate social performance of a company are more likely to pay a higher price for a product of services (Creyer, 1997; Kang, Stein, Heo and Lee, 2012; Ha-Brookshire and Norum, 2011). Furthermore, being transparent about CSR efforts is (indirectly) linked to the purchase intention of a consumer. Consumers are more likely to consider a purchase from a company when the company is transparent about its CSR efforts (Kang, 2014). The firm’s profitability, coming from customers, are direct earnings from purchases, which results in sales revenues for a company (Kim, Gon Kim and An, 2003).
Hypothesis 1: The transparency of CSR disclosure positively influences financial performance concerning sales and sales growth
Hypothesis 1a: There is a positive association between the type of GRI that used to report CSR and the sales performance
Hypothesis 1b: There is a positive association between the level of transparency valued by GRI and the sales performance
Hypothesis 1c: There is a positive association between assured CSR reports and the sales performance
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2.6. Financial performance and transparency
In the past years, scholars increasingly emphasized that a firm’s financial performance positively influences the decision to disclose social and environmental information (Belkaoui and Karpik, 1989; Gamerschlag, Möller and Verbeeten, 2011; Reverte, 2008).
Corporate social disclosure is a result of the assumption that a corporation owes a duty to society. According to the legitimacy theory this social contract between a corporation and society incorporates that managers will show society by their actions that the
organization is attempting to comply with society’s expectations (Deegan, Rankin & Tobin, 2002; retrieved from Reynolds & Yuthas, 2007). Similary, Suchman (1995: p574) defines legitimacy as “ generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions”. The disclosure of CSR can be seen as a report or record that shows stakeholders the actions, values and performance of an organization and give them the opportunity to determine whether these are in compliance with the standards of society (or not). In order to evaluate the legitimacy of a company, the information provided should be transparent and credible (BRON). In general, profitable companies are assumed to have more impact on the society and environment. Also in consumer proximity industries, profitable companies are accountable for a larger group of consumers than companies that are not or less profitable. The legitimacy argument proposes that this results in an increased duty to meet society’s expectations and thus an increased demand for transparency.
Moreover, the theory suggests that CSR disclosure acts as a mean to establish or protect the legitimacy of an organization in that they influence the public opinion (Hackstone and Milne, in Said, Haron and Zainuddin, 2008). Organizations are very powerful in shaping the public opinion since they are the ones to decide on the content of the information and which topics to address. By doing so, a specific picture, most likely a positive one, is created
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about an organization’s CSR and supplied to the public. Legitimization is crucial for a company’s existence because via the explanation of their legitimacy in CSR disclosure, a company justifies its actions, operations and therefore its existence (Guthrie and Parker, 1989). With more incidents of ‘good performers’ turning out to be ‘bad performers’ the sincerity of companies is questioned. Companies are not reporting just because they are ‘good performers’ on CSR, but because the media are shaping the public priorities according to the media agenda setting theory. This theory assumes that the degree of salience for the general public is determined by the relative emphasis that is given to various topics by the media. Especially for unobtrusive topics, like the environment, individuals rely on information that is provided by media (Brown & Deegan, 1998). Full transparency of the provided information contributes to minimize the indistinctness and skepticism that is caused, since media have the availability and ability to collect and understand all information on CSR. Based on the media agenda setting theory, companies are reporting transparent about their CSR practices because they want to stand out for the public. Media are emphasizing the importance of (reporting) CSR, which requires companies to disclose information on this topic in order to reach their customers (Said, Haron and Zainuddin, 2008).
2.7. Organizational Slack
The legitimacy theory builds a foundation for the relation between profitable companies and the transparency in CSR disclosure. However, a more important and convincing reason for this relation is associated with organizational slack. Based on organizational slack, it is argued that profitable companies have plenty economical resources and don’t have to focus on activities that directly increase earnings. Hence, companies with organizational slack have the ability to engage in long-term projects that eventually might increase the profitability. Having these economic means gives managers the opportunity to fund the cost of disclosure, where non or less profitable corporations will focus on direct earnings (Cowen et al., 1987;
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Hackston and Milne, 1996; Pirsch et al., 2007 retrieved from Reverte, 2008). Gamerschlag et al. (2011) propose that high profitability is positively associated with CSR disclosure.
Compared to less profitable organizations, highly profitable organizations experience more public exposure, public scrutiny and constraints (Watts and Zimmerman, 1986). Profitability raises questions from stakeholders about where it comes from, how profit is made and if it is in line with societal norms. Therefore, profitable organizations are more likely to explain, via CSR reports, how their profit is generated. The study finds that high profitability is associated with a higher amount of environmental disclosure (Gamerschlag et al., 2013). Likewise, organizational slack allows companies to focus more on stakeholder management, which does not result in direct earnings either. When customers are the primary stakeholders of an organization, the pressure that this group exerts for transparency about CSR information, requires a respond of the company (Fernandez-Feijoo et al., 2014). Transparency through CSR disclosure responds to this demand of the main stakeholder in customer proximity industries. Consequently, organizational slack allows company to improve their stakeholder management through transparency. This suggests the following hypothesis.
Hypothesis 2: Financial performance positively influences the level of transparency of CSR disclosure
2.8. Social Media
CSR reporting provides stakeholders with (transparent) information about environmental, societal and ethical practices, but remains a traditional way of communication (Lyon &
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Montgomery, 2013). Reporting is a one-way communication channel that retains interaction, participation and input from consumers and thus limits the (perceived) level of transparency. The rise of the Internet has changed the concept of transparency and the definition of
Cotterell (2000) is more applicable to the current situation: ‘‘Transparency as a process involves not just availability of information but active participation in acquiring, distributing and creating knowledge’’ (p. 419). The increased accessibility of information through the Internet creates a shift in power, in which customers gain a more powerful position than suppliers (Rawlins, 2008).
The Internet is becoming more important in corporate communication and according to Wanderley et al. (2008) the Internet has become one of the main tools for CSR information disclosure. This results in an increasing concern of communicating ethical and responsible to all the stakeholders. In the U.S.A., two-thirds of large companies now regularly use social media and blogs to communicate (Mullaney, 2012). The definition of social media includes two main concepts, namely Web 2.0 and User Generated Content (UGC). The latter covers all possible ways in which people make use of the various forms Social Media content that are publicly available and created by end-users. Web 2.0. is considered to be the platform for the evolution of Social Media. Software developers and end-users utilize the Word Wide Web in a total new way whereby the content is continuously modified by all users actively participating in creating and shaping the content. Both concepts opened the way to
communicate, collaborate and share content fast and easily with anyone online (Kaplan & Haenlein, 2010; Lyon & Montgomery, 2013). Kaplan & Haenlein (2010) define Social Media as “a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of User Generated Content”.The role of social media has mainly been researched in marketing, where social
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media is seen as a hybrid element of the promotion mix because it enables customers to talk directly to one another (Mangold & Faulds, 2009).
2.8.1. Stakeholder involvement
A transformation in the use of communication channels has taken place from traditional media to emerging social media platforms. This shift requires companies to adopt and integrate these new channels in their communication strategy. Currently, four main types of corporate communication strategies dominate the literature. The first, and most traditional, strategy is stakeholder information, which refers to a one-way communication process that sees stakeholders as important, but passive recipients of information. The stakeholder
response involves two-way communication but is asymmetric. The asymmetric fundament of this strategy refers to the intended interaction between the sender and the stakeholder(s) but the response(s) do not shape the nature of the communication that is delivered. An upcoming strategy mentioned is stakeholder involvement, this two-way, symmetric communication process thrives the sender and the receiver to jointly create an understanding and assessment of their relationship. Lastly, when a firm decides not to communicate on a certain topic in order to avoid risks in communication, scholars refer to defaulted communication (Grunig and Hunt, 1984; Morsing and Schultz, 2006, retrieved from Lyon & Montgomery, 2013). Traditional media, like TV and print media, are slowly clearing the way for more interactive, two-way communication channels like websites and blogs (asymmetric) and social
networking platforms like Twitter and Facebook (more symmetric). Numbers also prove that this shift is happening with over 1,5 billion active users on Facebook, 320 million on Twitter and 550 million active bloggers on Tumbler (Statista.com, 2016). Also in business social media use is expanding, especially in marketing. A survey about social media use among marketers showed that 83% of the marketers indicate that social media is important for their business and 84% of the B2B marketers use social media in some form. More concrete,
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companies in business-to-business and business-to-consumers markets acquired new customers from Facebook (43% and 77%) and the lead-to-close rate is 100% higher than outbound marketing (Hubspot.com, 2016).
2.8.2. Key associations of Social Media
As discussed by Du et al. (2010), customers are categorized as general public who are not actively seeking for information, Social Media, as a communication tool, offers companies to reinforce the stakeholder involvement, and thus formulates a strategy to manage the relation with their customers (Sedereviciute and Valentini, 2011). Where traditional media had to choose to pursue either reach or consumer engagement, Social Media manages to facilitate both reach and engagement with the use of all types of formats and platforms (Hanna, Rohm and Crittenden, 2011).
Marketers have experienced a shift from capturing attention of consumers by reach to capturing the attention and then continue to hold that attention through engagement. Due to this shift adjustments in the definition of ‘media reach’ have been made in the literature. Traditionally reach was equalized to exposure, which referred to the number of individuals that were exposed to specific news content. Contemporary research on this topic considers the following definition of ‘media reach’ more suitable in the digital age: “The degree to which people are able to share in society’s communication resources” (Christen and Huberty, 2007). The global reach capabilities of Social Media enables people to have greater access to information than ever before and an increased influence on the media consumption (Mangold and Faulds, 2009). In accordance, Rawlins (2008) states that the importance of the Internet is accompanied with tools to enhance great organizational transparency. Firstly the accessibility of information has increased enormously. Within a few clicks anyone can find any
information, opinion or subject by a simple search on the Internet. Additionally, it is possible to share the information worldwide in a few seconds, so information expends rapidly. Social
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media offers the opportunity to share information and knowledge among consumers and between consumers and organizations (Rawlins, 2008; Agnihotri, Kothandaraman, Kashyap and Singh, 2012).
Kaplan & Haenlein (2010) make a distinction in Social Media types in collaborative projects, blogs, content communities, social networking sites, virtual game worlds and virtual social worlds. The distinction is based on the level of self-presentation and the level of media richness. Self-presentation refers to the assumption that within all types of social interaction people or organizations have the desire to steer the impression that other people form of them. This is strongly associated and exposed by self-disclosure, the conscious or
unconscious revelation of personal information. When a company wants its customers to find out about their CSR disclosure, they can provide them with this information or link to this information by using Social Media. The media richness theory assumes that the purpose of any communication is to clarify ambiguity and reduce existing uncertainty. Some media will be more successful in achieving the purposes because media differ in the degree of richness. Social networking site score medium on the scale of media richness, which implies that this type of media is quite good in solving ambiguity and reducing uncertainty (Kaplan & Haenlein, 2010).
2.8.3. Social Media and Sales
In context of the relation of CSR disclosure and financial performance, the use of social networking sites creates beneficial impact because the continuous reach, the grip on self-presentation and media richness enables companies to make more customers aware of their CSR practices. As mentioned above, customer awareness positively influences the purchase decision and willingness to pay (Creyer, 1997; Ha-Brookshire and Norum, 2011; Kang, Stein, Heo and Lee, 2012). Social Media contributes to this awareness because of its transparent character. Customers become more aware due to the high accessibility of information, the
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possibility to share and interact with others and the level of self-presentation and media richness that is associated with Social Media (Rawlins, 2008; Mangold and Faulds, 2009; Kaplan & Haenlein , 2010).
Moreover, social media is recognized as cost-effective and efficient means to
communicate with internal and external stakeholders (Schniederjans, Cao and Schniederjans, 2013). The use of social media in impression management, managing an image held by an audience, is positively associated with financial performance in terms. Significant results were found for integration, intimidation, organizational promotion and supplication. However the study did not find empirical evidence for a positive or negative association of social media use in of exemplification on financial performance. The result implies that
organizational behaviors that are used to project integrity, social responsibility and moral worthiness are unnecessary effort(s) to increase return in stock (Schniederjans et al., 2013). The authors do emphasize that this doesn’t mean that exemplification through social media platforms should disappear but that financial benefits shouldn’t be expected. Schuler & Cording (2006) and (Servaes & Tamayo (2013) explain that the limited responsiveness to CSR initiatives can be assigned to the lack of customer’s awareness of these initiatives. The combination of transparency on CSR practices and the use of Social Media are able to bridge this gap of awareness of CSR initiatives.
From a theoretical perspective, Kothandaraman, Kashyap, & Singh (2012) expand the explanation about the value that social media offer in terms of sales. Applications like
LinkedIn, Facebook and Twitter have become more customer-centric, since the tools allow organizations to participate in the interaction between network members (Trainor et al. 2013). Both through firm-customer interactions (directly) and customer-customer interactions
(indirectly), organizations are able to provide better access to customer information, build trust and customer service (Agnihotri et al., 2012). These mechanisms ensure that sales
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increase and in that way value is added to the organization (Hajli, 2013).
Based on surveys and interviews DiStaso and Bortree (2012) found that respondents strongly value Social Media as a transparent communication tool. Moreover, the outcomes of the interviews showed that Social Media were perceived as tools to enhance transparency. Social Media as a contemporary communication tool, contributes to the transparency of disclosure by making it easier to start a dialogue and improve the interaction on the social media platforms with other customers and companies (Watts & Zimmerman, 1986; Agnihotri, Kothandaraman, Kashyap and Singh, 2012).
Hypothesis 4: The relationship between transparency of CSR disclosure and sales performance is positively moderated by the use of Social Media
The rise of Social Media as a communication tool has improved the position of customers in receiving information. The disclosed information about CSR doesn’t only consists of what (traditional) media have chosen to present (Brown & Deegan, 1998), but Social Media allows customers to find any kind of information that is provided, interact with the organization and discuss with other customers.
Profitable organizations are more likely to be transparent because they are more visible and thus higher exposed to public and public scrutiny (Watts & Zimmerman, 1986). In accordance, Gamerschlag et al. (2011) find that companies that are highly visible, and thus are more often covered in (business) press coverage, disclose all issues on environmental and societal information. The accessibility that Social Media provides to obtain information about CSR practices will increase the number of customers that are known with the CSR practices of a company. The use of Social Media as a communication channel increases public
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make stakeholders find the company more easy. This increase in exposure will contribute to the external pressure to be transparent in CSR reports (Fernandez-Feijoo et al., 2014).
Hypothesis 5: Companies with high corporate financial performance will be more transparent in their CSR reporting when Social Media is used
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3.
Data and Method
This chapter addresses the empirical section of this study by elaborating on how, where and why the data are obtained. First the main features of the collected sample will be discussed. Subsequently, more detailed information about the dependent, independent, control and moderation variables is provided. Finally, we will describe the statistical approach that is used to test the hypotheses presented in the previous chapter.
3.1. Sample and Data Collection
This study will employ archival data obtained from multiple databases and published reports, categorized as a database research. In addition to the archival data, primary data are collected through a quantitative analysis of corporate Facebook pages and Social Mention. The
collected data are cross-sectional and cover one point in time, namely CSR reports of 2015 and other (financial) outcomes over the fiscal year 2015.
The theoretical section emphasizes the relevance of addressing consumers when researching transparency of CSR and the use of Social Media. Therefore the sample consists of U.S. companies active in customer proximity industries, explained by Fernandez-Feijoo et al. (2014) as industries that are known for the general public as a consumer of its products or services. A non-probability sample has been drawn from multiple lists composed by leading organizations. The involvement of social media requires location-specific context because stakeholders should be able to access the Internet. In combination with the availability of financial and disclosure data, only U.S companies will be examined.
At first 44 U.S. companies were drawn ‘Top 100 Consumer Goods Company’ from Consumer Goods Technology, the other companies did not have their origins in the U.S. From the ‘Top 250 Global Powers of Consumers Product’ of Deloitte, that identifies the largest consumer product companies around the world, 38 companies were extracted that were meeting the criteria and were not in the sample yet. Accordingly, the sample was
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completed with 19 companies that were drawn from the first 150 companies of the Fortune 500. The companies are selected based on their industry type. Sweeney and Coughlan and Branco and Rodriques (in Fernandez-Feijoo et al., 2014) suggest a range of industry types to be included for ‘ customer proximity industries’ like, energy utilities, financial services, food and beverage products, healthcare, household and personal products, retailers,
telecommunication, textiles and apparel, waste management and water utilities. In total 101 U.S. companies in customer proximity industries are examined (see Appendix 1).
3.1.2 Description of the sample
This sample classifies seven types of industries based on the suggestions mentioned above: internet services and retailing (6.9% of sample size), food, beverage and tobacco (32.7%), financial services (7.9%), retail (18.8%) household, personal and healthcare products (8.9%), other industries (24.8%). Almost a third of the companies does not publish a voluntary CSR report and other companies reports are not related to the GRI standards (n=17). Two
companies More than halve of the companies publish a CSR report in accordance to the GRI guidelines (n=51). On average 16.8% of the sample did externally assure their CSR report. Facebook as a social media tool is not used by every company, 17 out of 95 companies of the sample did not have an official corporate Facebook page. The majority (n=78) of the
companies can be examined based on their corporate Facebook page. The average reach of U.S. companies on social media is 31.31, which is a measure of the range of influence. The strength of a company, in other words the likelihood that your brand is being discussed in social media, is on average 49.02.
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The following section the measurement and the validation of the dependent, the independent and the control variables are discussed.
3.2.1. Variable – Transparency
Transparency has become a key condition for CSR reporting but is also used as an instrument to improve transparency (Fernandez-Feijoo et al., 2014). This can be achieved when using standards that are globally recognized as credible. Therefore the data on voluntary CSR reports are collected from the global reporting initiative (GRI) database, a non-profit organization that is globally accepted as a standard for reporting CSR practices. It is
acknowledged for their aim to maintain the quality of sustainable reporting and transparency by covering economic, environmental and social sustainability (Fernandez-Feijoo et al., 2014; Widiarto Sutantoputra, 2009; Global Reporting Initiative, 2015). GRI covers most procedural standards compared to other guidelines according to Kaptein ( in Dubbinke et al., 2008) as shown in table X. The independent variable transparency is measured by the
combination of three indicators/items GRI type, GRI adherence and assurance (α = 0.74). GRI type
The transparency values attached to the GRI type vary from zero (0.0), organizations that don’t publish a CSR report, to one (1.0) , CSR reports that are in line with the most recent publication of GRI, the G4 standards. Not all reports are in line with GRI G4, older version like GRI G3 (released in 2006) and G3.1 (released in 2011) are still used for CSR reports in 2015 (Hřebíček, Popelka, Štencl and Trenz, 2013). However, older standards contain fewer indicators for disclosure and are not updated with the developments on CSR or transparency upon 2015. Moreover reports in accordance to GRI G3 were coded 0.8 and in accordance to G3.1 as 0.9 because they are considered to be less transparent than following the current standards of G4. Organizations that provide a CSR report that is not linked to GRI are valued 0.5. It is an uncertain situation because these reports might not disclose information in
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accordance with global standards or do disclose according to other CSR standards. However if they do, not as much procedural standards of transparency are covered as with GRI
(Kaptein, in Dubbink et al., 2008). CSR reports that are GRI-referenced are therefore valued higher (coded 0.6).
GRI adherence
Once a CSR report is published based on the GRI principles, the content of the report is valued based on these principles. Companies that report following the GRI G3 principles classified in four different levels. The A-level, is the most transparent level of reporting, responding to all indicators of the GRI framework. B-level of reporting refers to a reasonable level of transparency where 20 out of 79 indicators of each category are addressed. A report that is valued as C-level, needs to cover 10 out of 79 indicators and is least transparent. For A, B and C-level a company is required to disclose the GRI index. The ‘undeclared’ level of a CSR report could be any of the levels mentioned above (A, B or C), the reporter included a G3 content index but did not use the application level system described above to declare a level (Global Reporting Initiative, 2015). Companies that report according to the newest principles, GRI G4, are classified in another way than the GRI G3 levels. The evaluation of a report is ‘in accordance’, when the report is in accordance with the guidelines of GRI G4. When the essential components of the principles of GRI are included, a report contains the ‘In accordance - core’ option. Build up on the ‘core option’, companies can be evaluated as ‘In accordance – comprehensive’ when additional standard disclosures are included in the report. When the principles of GRI are not complied, the report is valued as ‘no adherence’ (Global Reporting Initiative, 2015). The values attached to the adherence are for A and ‘In accordance – Comprehensive’ transparent (value 1), B-level 0.75, C-level 0.50, undeclared reports are valued 0.25 and reports that have no adherence are valued zero (0.0).
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Assured CSR reports
Assured CSR reports are perceived to be more transparent and credible since the content is checked by a third party (Simnett, Vanstraelen & Chua, 2009; Noronha, Tou, Cynthia & Guan, 2007; Pflugrath, Roebuck & Simnett, 2011) . The GRI Reports List provides
information about whether the CSR reports are assured – coded as (1), or not – coded as (0) and is represented in the dataset as a dummy variable. The companies that don’t publish a CSR report are categorized as ‘not externally assured’.
3.2.2. Variable - Sales
Corporate financial performance can be measured by accounting-based, market-based and perceptual performance measures (Orlitzky et al., 2003; Choi & Wang, 2009; Mackey et al., 2007). This study uses three accounting variables to measure CFP: sales/turnover, sales revenue and sales growth. Prior research has mainly focused on the investors interest of financial performance, cost of equity or return on equity. However, in this study consumers are emphasized, profitability of consumers result from direct earnings of sales (Kim, Gon Kim & An, 2003)
Net Sales Revenues
The first indicator of CFP is ‘Net Sales Revenues’. The number of net sales revenues is retrieved from the company’s publication of quarterly financial results. If the financial report was not (publicly) available, data from secondary sources like the overview of quarterly results of Nasdaq.com. For 2015 and 2016 the results of the first quarter of the financial year are analyzed and the sales growth has been computed based on these numbers.
Sales growth rate
The last indicator of CFP, sales growth rate, refers to the difference between the net sales revenue in 2015 and the net sales revenue in 2016. The growth percentage varies from negative to positive numbers.
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3.2.3. Control Variables
In order to reduce the possibility of alternative explanations for the outcomes, relevant control variables are included in the analysis. These variables are chosen to include because of their recognized influence on the dependent variables, both corporate financial outcomes, concerning sales and sales growth and transparency.
Industry – Seven customer proximity industries are distinguished based on the division that Sweeney & Coughlan and Branco & Rodriques (in Fernandez-Feijoo et al, 2014) made in their research. It is generally assumed that companies in a particular industry may be more socially responsible by the nature of their activities (Boutin-Dufresne and Sacaris, in
Sweeney & Coughlan, 2008). Furtermore, each industry has a growth rate itself, one industry might grow more than others, therefore it is required to control for the industry type (Govin, Green and Slevin, 2006; Kapoor & Sandhu, 2010).
Company size - In line with prior research (Fifka, 2011;Fernandez-Feijoo et al., 2014; Kapoor & Sandhu, 2010) the control variable ‘size’ is included. The size of a company determines the extend of exposure to the public, which is a possible determinant of sales and sales growth (Monteiro & Aibar-Guzmán, 2010). Size is classified based on the GRI guidelines and adopts a value of (0) for large, which are companies with a headcount over 250 million, a turnover higher than 50 million and (1) for multinational companies, which are companies who fulfill the requirements of a large company and are multinational. Small and medium enterprises (SME’s) are unlikely to occur in a list with best consumer good companies based on financial outcomes. Therefore SME’s are excluded and the sample contains only large and multinational companies.
Employee size – This variable represent the number of employees working for a company. The number represents the employees working for a company in December, 2015.
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Stock Market - Organizations are classified as whether they are listed on a stock exchange or not listed. Non-listed companies are valued 0, which means that its stock is not offered on stock market exchanges. Companies with the value 1 are called ‘listed companies’ which means that their shares are listed on a stock exchange for public trading. This control variable is added to the model because generally stock listed companies must meet the regularities imposed by authorities, which is associated with quality and transparency of the information disclosed (Monteiro & Aibar-Guzmán, 2010).
3.2.4. Moderate Variable – Social Media
The relation between the transparency of CSR disclosure and financial performance is analyzed for a moderating effect. The moderate variable is ‘ Social Media’ which is acknowledged on different indicators. According to Kietzmann, Hermkens, McCarthy and Silvestre (2011) the Social Media engagement can be evaluated in two ways, based on objective data (e.g. number of views or followers) or based on collective intelligence of the crowd (e.g.rating system). Firstly, Social Media is seen in a broad way, regarding multiple channels and properties. More specifically, this study addresses Facebook in depth, since this is the channel that has most active users and thus concerns most (potential) customers of companies.
Social Mention
Social Mention is given as an example of evaluation, based on collective intelligence of the crowd, by Kietzmann et al. (2011). This tool enables companies to monitor the frequency of mentions. Two variables are extracted from Social Mention, a social media search and analysis platform that aggregates user generated content from more than 100 social media properties including: Twitter, Facebook, FriendFeed, YouTube, Google and more. Since this is a measure of one point in time, the average of 3 moments has been used to measure the following two variables.
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Social Strength – The social strength of a company refers to the likelihood that a company name, or brand, is being discussed in social media. The number of phrase mentions measures this within the last 24 hours, divided by the total possible mentions.
Social Reach – Reach is a measure of the range of influence that a company has. It is the number of unique ‘authors’ referencing a brand/company name, divided by the total number of mentions.
In order to evaluate Social Media based on objective data, one specific channel is used namely Facebook. Quantitative data on the corporate Facebook pages are primary data and retrieved on the 27th of May 2016. At the start I assumed that every company would have a corporate Facebook page today. However during the data collection this assumption was proven wrong and Facebook use was added as a variable. As mentioned above, not every company of the sample has a corporate Facebook page. Therefore a dummy variable was made for ‘the use of a corporate Facebook page’, with value 0 referring to companies that did not have a corporate Facebook page and value 1 for the companies that did have one.
Social Media, as a communication tool used to start a dialogue with consumers, is assumed to be reactive, to provide consumers and other stakeholders with immediate information and to engage stakeholders. Bonson and Ratkai (2013) developed new metrics of social media based on dialog, stakeholder and legitimacy theory that are addressed in the literature section. This study adopted their metrics for commitment, virality and popularity by analyzing the last three published Facebook posts.
Commitment refers to the number of comments placed by stakeholders on each post. C1 measures the percentage of the total posts that have been commented on (number of post with comments/total number of posts), C2 provides the average number of comments per post (total number of comments/total number of posts) and eventually C3 covers the total
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commitment of the Facebook fans ( C2/number of fans*1000). This structure is also provided for virality whereas V2 is a metric to gain the average number of shares per post (total
number of shares/total number of posts) and V3 reveals the virality of messages among fans (V2/number of fans*1000). Finally, the number of fans is similar to the popularity of a company on Facebook and is measured by the number of likes per corporate Facebook page and the average number of likes of each person that ‘liked’ the corporate Facebook page of an organization. On the 27 of May 2016 on average a corporate Facebook page had 569 147 000 likes. Moreover the number of likes per Facebook post is measured by the average of three posts (total number of likes/total number of posts). Furthermore, popularity was measured similar as virality and commitment (P2/number of fans *1000).
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4. Analysis and results
This section of the thesis contains a statistical analysis of the data to test the hypothesis. The first part presents the descriptive statistics and correlations between the variables, followed by a check for multicollinearity. Hypothesis one and two are examined through a regression analysis. The sub-hypothesis of hypothesis one are tested by a linear regression. The final section will test the third hypothesis by executing a simple moderation model that is provided by Andrew F. Hayes. The outcomes of the analysis will be used to draw conclusions on the proposed hypotheses.
4.1. Descriptive statistics
Table 1 represent an overview of the means, standard deviations and correlation coefficients between the constructs that are used in the analysis to test the hypothesis. The dependent variable sales has a mean of 8649.86 and a standard deviation of 62227.06, this means that on average the sales revenues were 8 649 860 for the first quarter of 2016 . The mean of sales growth was 3.44 and the standard deviations 23.72, which refers to an increase of 3.44% of sales in the first quarter of 2016 compared to the first quarter of 2015. Table 1 shows the correlation between the variables that are used in this statistic analysis. The variables transparency (r = .23, p < .05), social mention (r = .25, p < .05), employee size (r = .53, p < .01) and internet, services and retail (r = .29, p<.01) are positively related to the dependent variable sales. For the second dependent variable sales growth there are no correlations found. Overall, with few variables as exception, the correlation between discussed constructs are relatively low. In order to start the analysis, the normal distribution of the variables was checked and, however the variables are not fully normally distributed, approved by means of a histogram, Q-Q plot and P-P plot.
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4.1.2. Multicollinearity
Field (2009) states that strong linear relationships between predictors of a model could harm the reliability of the analysis. To secure the reliability the variables are checked for
multicollinearity by the evaluation of correlations. The existence of multicollinearity can be verified by the strength of correlations. A value above 0.8 suggests very strong relationships between the predictors and decreases the reliability of the analysis (Field, 2009). The highest correlation, presented in table 1, is .58 and all other correlations are less strong which means that multicollinearity can be dismissed based on the correlation test.
4.2. Regression Analyses
Linear regression was performed to test the first hypothesis, the effect of transparency of CSR disclosure on financial performance i.e. in this thesis sales and sales growth. There was a statistically significant effect of transparency on the level of sales (F(1,93) = 4.94, p<.05). The independent variable explained 5% of the variation of sales. In contrast, the level of transparency did not significantly explained variance of sales growth (F(1,92) = 2.63, p>.05).
4.2.1. T-test and ANOVA
An independent t-test was executed to test whether there is a different outcome in sales between assured (value 1) and nonassured CSR reports (value 0). Both for sales (t (93) = -1.21, p = .63) and sales growth (t (92) = .85, p = .63) there was no significant difference found between the companies that provide assured CSR reports and companies that publish non-assured reports. To analyse the in between group differences for GRItype and
GRIadherence on sales and sales growth a one-way ANOVA has been performed. No significant difference was found between the six types of GRI, neither for sales (F(5,89) = 1.20, p = .32) or sales growth (F(5,88) = 1.01, p > .42). The type of GRI standards that is retained, most recent version or older versions does not make a difference for financial performance. In accordance to these results, there is no significant prove for the difference in
