Keywords

CSR Disclosure, Saudi Arabia, Family Antecedents.

Introduction

Corporate Social Responsibility (CSR) has many dimensions. CSR focuses not only on the stakeholders needs (external relationship) but, also, on the employees’ needs (internal relationship). These create challenges to companies in dealing with CSR (Werther & Chandler, 2011; Hapsoro & Fadhilla, 2017). It enhances the employee relationships; increases the investment in community outreach; and maintains the interrelationships with various stakeholders (Khoury et al., 1999, Garas & ElMassah, 2018). Therefore, CSR encourages the companies’ commitment towards their internal and external users rather than company complaints which lead to these companies enhancing their values (Novak, 1996; Luetkenhorst, 2004, Garas & ElMassah, 2018).

Further, CSR has gained more attention due to the complexity of business and the need for transparency and corporate citizenship (Jamali & Mirshak, 2007, Garas & ElMassah, 2018). Moreover, CSR represents a key determinant of companies’ performance (Simms, 2002). Companies extend their performance to include not only the economic perspectives but, also, the social and environmental perspectives in order to demonstrate their commitment to their stakeholders (Jamali et al., 2008, Garas & ElMassah, 2018).

Accordingly, there are many definitions of CSR. The World Business Council for Sustainable Development (WBCSD) defines CSR as “the commitment of business to contribute to sustainable economic development, working with employees, their families and the local communities” (WBCSD, 2001). In addition, scholars define CSR as a "situation where the firm goes beyond compliance and engages in “actions that appear to further some social good, beyond the interests of the firm and that which is required by law" (McWilliams et al., 2006, Mandurah et. al., 2012).

CSR represents a voluntary behaviour which is applied in order to maintain the responsibility with stakeholders (Cetindamar & Husoy, 2007). Therefore, there is voluntary disclosure of the CSR’s items and these need to be examined in detail in order to explore whether or not companies disclose reasonable CSR items. Consequently, CSR reporting is a means of communication with stakeholders and fulfils their interests and achieves the companies’ sustainability in the business environment (Hapsoro & Fadhilla, 2017). CSR reporting includes the disclosure of different aspects: First, there is the economic aspect which concentrates on the companies’ financial dimension. Second, there is the environmental aspect which discusses the companies’ activities to deal with environmental issues. Finally, there is the community aspect which presents the procedures taken by companies based on their society. Accordingly, the CSR disclosure enables the companies to create, keep and legitimize their economic, social and environmental contributions (Hapsoro & Fadhilla, 2017).

Family companies are those companies in which their family members hold effective positions either in the top management or on the board of directors or hold meaningful stakes in the companies’ ownership structures (Ali et al., 2007; Chen et al. 2008). Recently, accounting research’s exploration of family- based companies has received much attention (Prencipe et al., 2014; Salvato & Moores, 2010; Songini et al., 2013; Drago et al., 2018; Vural, 2018; Cleary et al., 2019).

In the developed countries, many researchers have examined the association between family and non-family firms and CSR reporting (Ali et al., 2007; Campopiano & De Massis, 2015; Cascinoet al., 2010; Prencipe et al., 2008; Shujun et al., 2011). However, few studies have investigated the association between CSR disclosure and family- related antecedents in the developing countries and, more especially, in Saudi Arabia. This study aims to fill the gap by investigating the relationship between CSR disclosure and the Saudi Arabian listed companies’ family antecedents.

Accordingly, this study’s first objective is to explore the level of Saudi Arabian listed companies’ CSR disclosure during the period from 2015 to 2017. This objective helps to explore these companies’ role in achieving their CSR in relation to their internal and external users. In addition, in the context of Saudi Arabia, this study’s second objective is to investigate the association between family related-antecedents and CSR disclosure.

Saudi Arabia’s environment has many characteristics which have motivated the researcher to conduct this study. First, there are few studies in the accounting literature that have examined the role of family members in general terms. More specifically, three have been no wide-ranging studies on the impact of family antecedents on CSR disclosure in Saudi Arabia. Second, the Saudi Arabian companies were late (only since 2007) in applying the Corporate Governance Code (CGC). Therefore, this has increased the importance of studying the impact of family members’ characteristic as one of the most important variables of corporate governance. Third, the Saudi Arabian Government has placed increased importance on family companies since these companies control about 50% of the country’s non-oil GDP. In 2016, entities, affiliated to the Ministry of Economy and Planning and the Capital Market Authority, announced a joint project to urge Saudi Arabian family businesses to be listed on the Stock market. This added to the researchers’ motivation to conduct this study.

With regard to the research objectives, this study’s findings indicate that there is little CSR disclosure in Saudi Arabia. Consequently, this requires greater attention by Saudi Arabian listed companies so that they increase the level of their CSR disclosure in order to respond to their stakeholders’ needs. Further, the findings indicate that some family antecedents –mainly family ownership and family cross directorship - impact on CSR disclosure. Moreover, the findings reveal that, when compared to non-family companies, family companies disclose more CSR information. All these findings help to achieve this study’s objectives.

This study contributes to the accounting literature in two ways. First, the Saudi Arabian listed companies’ level of CSR is explored rarely. Therefore, this study contributes to accounting studies by examining the CSR descriptive level of either by items or by sectors and, accordingly, provides more clarification about CSR components in different contexts. Second, there have been few studies of Saudi Arabian listed companies’ family attributes. This study fills the gap by investigating the Saudi Arabian listed companies’ different family attributes and examining the impact of such antecedents on CSR.

The rest of this paper is organised as follows. Section 2 discusses briefly the theoretical framework, the literature review and the formulation of the hypotheses. Section 3 presents the research methodology. Section 4 discusses the empirical findings. Finally, Section 5 presents the conclusions.

Theoretical Framework, Literature Review

Companies are willing to communicate effectively with stakeholders in order to respond to their information needs. One way to fulfil theses needs is by disseminating CSR items contained in companies’ annual reports (Nekhili et al. 2017). Family companies represent the companies which have either family members on their boards or companies that have family members who hold stakes in their equity. There are many theories to explain the association between family companies and CSR disclosure.

According to agency theory, family companies can reduce the information asymmetry problem that results from the conflict between themselves as owners and the management. Family owners perform more monitoring roles on the management’s actions and this mitigates the management’s dominance. Further, family owners have access to the required information which alleviates the problem of information asymmetry. Therefore, family companies disclose less CSR information (Chen et al. 2008).

Institutional theory postulates that companies should ensure their survival through responding to the various stakeholders’ needs and perform actions that are compatible with the society’s values in order to mitigate legitimacy gap which may hinder their continuity in the business environment (Gavana et al., 2017a). Therefore, companies are required to behave according to the society’s regulations and values (DiMaggio & Powell, 1983; Scott 1995, 2001; Campopiano & Massis 2015). Companies operate in a broad system of different political, economic and social institutions, which constituted their behaviors, and they are required to respond effectively to environmental pressures (Campbell 2007). Family companies need to behave consistently with the society’s values and their stakeholders’ needs. Therefore, family companies are more likely to disclose CSR in order to legitimise themselves and to present their responses to the community and their stakeholders (Gavana et al 2017a; Nekhili et al 2017).

With regard to stakeholder theory, companies should commit to their stakeholders’ expectations through disclosing CSR items since CSR reporting represents a means of communication with stakeholders (Gray et al. 1995). Family companies have unique characteristics, such as good reputations, greater commitments to ethical values, higher levels of social performance and powerful attitudes towards their stakeholders’ needs, which differentiate them from non-family companies (Dyer and Whetten, 2006; McGuire et al., 2012; Cennamo et al., 2012). Accordingly, when compared to non-family companies, stakeholders regard family companies as being more trustworthy and show greater confidence in them. This results in a more positive response and perception toward family companies. Therefore, in order to maintain their reputations and shape their actions with stakeholders, family companies are more likely to increase their CSR disclosure.

Many studies have explored the antecedents of CSR disclosure such as firm characteristics (e.g. Roberts, 1992; Moneva and Llena, 2000; Ghazali, 2007; Reverte, 2009), shareholder structure (e.g. Brammer and Pavelin 2008; Chan et al., 2014), and corporate governance (Halme & Huse, 1997; Haniffa & Cooke, 2005; Brammer & Pavelin, 2008; Prado- Lorenzo et al., 2009; Frias- Aceituno et al., 2013; Marquis & Quian, 2014). However, few studies investigate the impact of shareholders’ identity on CSR disclosure (Haniffa & Cooke, 2005; Ghazali, 2007; Prado-Lorenzo et al., 2009; Siregar & Bachtiar, 2010; Kuo et al., 2012; Zeng et al., 2012; Khan et al., 2013; Lewis et al., 2014; Marquis & Qian, 2014; Campopiano & Massis, 2015; Grougiou et al., 2016; Sundarasen et al., 2016. One of the most significant shareholders which attract many authors to examine is families blockholder (Cabeza- Garcia, 2017). Few studies have examined either in developed or developing countries, the association between family members’ attributes and CSR disclosure. Previous studies introduced many trends to explore the family companies’ CSR reporting. The majority of the studies distinguished between family and non-family companies when discussing the relationship between CSR disclosure and some determinants. However, there is a lake in investigating the influence of family attributes on CSR disclosure. In the context of Saudi Arabia, this study fills this gap.

Nowadays, the examination of CSR in family companies has received excessive attention (e.g. Muttakin et al., 2015; Sundarasen et al., 2016; Kuttner et al., 2020). Therefore, different scholars have called to extend their CSR research within family firms regarding different crucial points (e.g. Berrone et al., 2010; Van Gils et al., 2014; Preslmayer et al., 2018; Kuttner et al., 2020).

Accordingly, family firms’ unique characteristics have significant implications for different aspects (Cabeza-Garcia, 2017). First; CSR performance. Many scholars examine the strengths and concerns of family firms’ CSR performance and provide mixed findings. Block & Wagner (2014a) demonstrated that family ownership has significant association (either negatively with community dimension, or positively with diversity, employee, environment and product related CSR performance) with different CSR performance dimensions. Moreover Yu et al., (2015) used panel data from 2007 to 2012 of publicly listed firms in Taiwan and found that family firms show higher CSR performance comparing with non-family firms. In addition, Lamb & Butler (2018) used a sample consists of companies ranked between 100 and 300 on the Fortune 500 list each year from 1994 to 2006. The findings indicate that a higher percentage of family owned equity and the presence of a family CEO associated positively with CSR strengths, while institutional owners associated negatively. Moreover, by using feasible generalized least square regression, Shahzad et al., (2018) provide empirical evidence for the positive association between family-controlled business and CSR performance regarding a panel dataset consists of 190 Pakistani firms listed on the Pakistan Stock Exchange over the period of 2007–2016. Similarly, Lopez-Gonzalez et al., (2019a) illustrate that family companies are more likely to increase CSR performance.

While, El Goul et al., (2016) tested the impact of family control on CSR performance by using a sample of 3,400 publicly traded companies in nine East Asian countries in 2002. Their findings present a negative association between family-controlled companies and CSR performance. This suggests that family companies with high levels of ownership demonstrate lower levels of CSR performance. Further, based on agency and socioemotional wealth theories, Labelle et al. (2018) illustrate that family firms exhibit lower CSR performance than non-family firms. In addition, the findings show that the presence of family members has a moderating effect on CSR performance. In family companies, the CSR performance and the level of munificence (as an environmental factor) increase in tandem with the increasing presence of family members on either the board of directors or the management team (as governance factors).

Block & Wagner (2014b) argued for the potential differences between family and founder firms and other firms with respect to CSR concerns in U.S. Based on socioemotional wealth theory, they conclude that family management and family ownership have contradictory impact on CSR concerns which supported the arguments that family firms are a heterogeneous group with respect to CSR. The findings reveal that family ownership has a negative impact on CSR concerns, while the presence of a family CEO has a positive impact. Similarly, Lamb & Butler (2017) provide heterogeneity findings when examining the interrelationship between a firm’s percentage of family ownership and its CSR concerns for a sample of 71 public firms from Fortune 500 companies. They reveal that family owners’ equity in one hand, is positively related to CSR concerns (e.g. diversity oriented), and negatively related to some CSR concerns (e.g. employee relations and environmental aspects), and on the other hand, is not associated with some CSR concerns (e.g. community, product quality and safety, and corporate governance).

Second; the level CSR items’ disclosure. Many studies aim to compare between family and non-family companies regarding the disclosure of CSR contents. Laguire & Elbaz (2014) illustrate that French family firms’ are more socially responsible than non-family firms during the period between 2005 and 2011. Similarly, Elbaz & Laguire (2014) used a combined theoretical framework include stakeholder, legitimacy and stewardship theories and conclude that Moroccan family firms are more likely to disclose CSR items. Further, Kashmiri and Mahajan (2014) found that family firms outperform non- family firms during recession. Based on a sample of large publicly listed U.S firms, the study demonstrates a strong emphasis on CSR for family firms. In addition, Campopiano & Massis, (2015) investigated the impact of family companies on CSR disclosure. After applying content analysis to 98 large and medium sized Italian companies, the findings indicate many differences in the type and content of family companies’ CSR reports. In order to concentrate on CSR topics, family companies are more likely to disclose a stand-alone CSR report and are less likely to follow CSR standards. Moreover, Izzo & Ciaburri (2018) illustrate that family firms are more likely to engage in instrumental, moral or relational CSR practices. To examine the impact of CSR actions on shareholders, Abeysekera & Fernando (2020) demonstrate that family firms are more responsible to shareholders than non-family firms when making environmental investments.

However, some studies find that family firms are less engagement in CSR (Abdullah et al., 2011; Wu et al., 2012). Yet, Cruz et al., (2014) indicate that family firms can be socially responsible and irresponsible simultaneously. Based on socioemotional wealth theory, they demonstrate that family firms have associated positively with external social dimension and negatively with internal one. In Germany, Block et al., (2015) examine the CSR communication of 714 listed German family and non-family firms. By using content analysis, the study reveals that family firms have significant impact on philanthropic and corporate culture as a dimension of CSR. While, non-family firms related to CSR dimension through corporate strategy. Further, Broccardo et al., (2019) introduce the main differences between family and non-family firms in relation to sustainability items. The study concludes that in the family firms, sustainability drivers do not act homogenously.

Third; the impact of some variables in family firms on CSR disclosure and performance. Many studies aim to investigate the impact of some variables on CSR disclosure. Abdullah et al., (2011) conducted a study among Malaysian top 100 to examine the influence of board independence and ownership on the decision of CSR disclosure. The findings indicate that the increase of board of family owned Malaysian firms leads to decrease the level and the quality of CSR disclosure. Further, board independence is not significant on CSR disclosure which supported the ineffectiveness of the board of directors in increasing the level of CSR disclosure. Correspondingly, Rees & Rodionova (2015) used a sample of 46 countries and 3893 firms drawn from 2002 to 2013 to conclude that both closely held equity and family ownership are associated fewer with the three indicators of CSR; environmental, social, and governance. In addition, Cuadrado-Ballesteros et al., (2015) examined whether independent directors had any influence on the family companies’ disclosure of CSR information for a sample consists of 575 non- financial listed companies from 13 different international countries in four different regions. The results show that in relation to the family companies, independent directors have negative impact on CSR disclosure. This indicates that the higher the proportion of independent directors in family companies, the lower the level of CSR disclosure. By analysing a panel of 550 international firms, Rodriguez-Ariza et al., (2017) explore the role of female directors in family and non-family firms with respect to CSR practices. The study concludes that the higher the percentage of female directors, the higher the level of CSR commitment in non-family firms, whereas in the family firms the empirical results illustrated a lower level of CSR behaviour. In Spain, Cabeza-Garcia et al., (2017) analysed a panel data for a sample of Spanish non-financial listed companies to indicate the negative association between both family ownership and family governance on the commitment of CSR reporting. This suggested that family firms achieve worse CSR commitment as family ownership reduces CSR disclosure. Further, Gavana et al., (2017b) investigated the differences in sustainability reporting in family firms using a sample of 230 non-financial Italian listed firms from the period of 2004 to 2013. The findings illustrated that family controls associated positively with sustainability disclosure with the presence of either founder or family CEO on the board. Moreover, Cui et al., (2018) use a sample of hand collected data of family firms included in the S&P 500 index during the period of 2003 to 2010 to explain the role of CEOs’ family membership on CSR disclosure. The study indicates that when CEOs are family member, the level of CSR performance is enhanced in family firms. Recentely, Dick et al., (2020) provide empirical evidence for impact of founder-controlled family firms on the level of CSR engagement. They argued that family firms exhibit low level of CSR which suggesting that family firms limit CSR activities to avoid the restriction over their controlled.

Fourth, the moderate role of some family variables in the relationship between CSR and other variables. Many studies investigated the moderating role of family ownership or management on the association between CSR disclosure or performance and earnings management. Martinez Ferrero et al., (2016) explored whether CSR as a strategic choice mitigate the costs of managerial discretion when manipulating earnings and the role of family ownership in moderating the use of CSR. The findings show that CSR enables the manager who manipulate earnings to entrench themselves and respond to stakeholders demands, and hence managers can use CSR commitment as a strategy to mask their behaviour. However, family ownership restricted the managerial discretion and the use of CSR as entrenchment. The results reveal that family ownership represents an effective internal mechanism that limit the use of CSR as self -defence strategy by the managers to mask their earnings. Correspondingly, Liu et al., (2017) explored the direct and indirect impact of family ownership, management, and governance of a business on the using of earnings management through CSR activities. They used a sample of S&P 500 companies to conclude that family firms are more likely to conduct CSR activities than non-family firms. Further, the results indicate that family firms engage in less earnings management behaviour than those of non-family firms. However, after controlling for family involvement, there is no significant association between earnings management behaviour and CSR performance. Furthermore, by using 226 family and non-family Italian listed companies between 2006 and 2015, Gavana et al., (2017a) investigated the impact of Earnings Management (EM) practices on CSR disclosure. The results demonstrate significant differences in CSR disclosure between family and non-family companies with regard to EM. Family Italian listed companies are more likely to disclose CSR information than non-family companies in the cases of downward earnings management to mask the attention about these practises and convey an ethical image to stakeholders. This suggests that family firms’ engagement in CSR disclosure may not represented a good indicator for the quality of disclosure. In addition, Lopez-Gonzalez et al., (2019b) used an international sample of 6442firm -years observation from 2006 to 2014 to test the moderating impact of family ownership on the relationship between earnings management and CSR performance. The results indicate that there is a significant positive association between earnings management and CSR performance. However, in family- owned firms, this positive association is lower or moderated. This suggesting that family firms show lower earnings management behaviour than non-family firms.

In France, Nekhili et al., (2017) examined the moderating role of family companies on the association between CSR reporting and firm value. By drawing on a sample included 91 French companies and a total of 850 firm-observations that reported information on their social and environmental activities between 2001 and 2010, the findings of multivariate analysis present the family companies’ essential role on the relationship between CSR reporting and their values. For family companies, there is a positive association between market–based financial performance and CSR disclosure whereas, for non-family companies, there is a negative association between market based financial performance and CSR disclosure. Moreover, Gavana et al., (2017c) used a sample of 230 Italian listed firms to justify the disclosing of sustainability items when firms are planning to issue equity/bonds. They illustrated that family control has a moderating impact on the relationship between sustainability disclosure and equity issuance, whereas in the case of issuing bonds family control has not moderating impact. By using a sample of 548 international companies in 17 different countries between 2003 and 2009, Martinez-Ferrero et al. (2018) demonstrated that family ownership moderates the two-way causality relationship between CSR disclosure and information asymmetry. Family owners are more informed investors and this enables them to take advantage of information asymmetry and, hence, mitigate any possible reduction that CSR disclosure may have on information asymmetry. In addition, Gavana et al., (2018) analysed a sample of Italian non-financial listed firms to support the usage of CSR reporting as an effective tool for gaining customers’ support. The findings show that CSR reporting has a significant positive impact on revenues for family firms while this impact is negative for non-family firms. This suggesting that consumers are more likely to trust in family firms’ self -provided information on their CSR commitment than non-family firms. Further, oh et al., (2019) argued the role of board effectiveness in family firms with subject to CSR. The findings reveal that board characteristics have different implications based on the presence of family members on the management for the Korean firms. The study concludes that the higher the outside directors with equity ownership and with diver’s education background, the less CSR engagement in family -managed firms.

Formulation of the Hypotheses

Accordingly, previous studies demonstrate the effect that family companies have on CSR disclosure. However, few studies explored the association between family antecedents and CSR. Therefore, in order to fill this gap, this study examines the impact of some family members attributes on CSR disclosure. The research on CSR in family firms exhibits contradictory and heterogeneity findings which directs the research attention toward the diffusion of social responsibility in family business (Graafland, 2002; Dyer & Whetten, 2006) and open the door for extending this research area especially in the developing countries which suffer from lake of such researches comparing with developed countries (Preslmayer et al., 2020). This increase the motivation for conducting this study in one of the developing countries, namely Saudi Aribia. Further, few studies explored the association between family antecedents and CSR. Therefore, in order to fill this gap, this study examines the impact of some family members attributes on CSR disclosure in the Saudi Arabia context.

Companies, which are characterised by more family members on their boards and by more family members holding high percentages of shares, are more willing to increase the levels of their CSR disclosure according to institutional theory to legitimate themselves and be compatible with the society’s norms and values (Gavana et al., 2017a). Family members can gain many benefits from increasing their family companies’ levels of CSR disclosure. These benefits are reflected in these companies having a greater social image of, good reputation and good social position (Habbash, 2016). However, according to agency theory family companies may not need to extend their level of CSR disclosure due to their access to the required information which alleviates the problem of information asymmetry. Based on the mixed expected results, this study formulated both hypotheses H1 and H2 as follows:

H1: There is a significant association between family members’ representation on the boards and CSR disclosure.

H2: There is a significant association between family ownership and CSR disclosure.

When family members are, also, the CEOs of the companies, they have more power to influence most of their companies’ valuable decisions. This can be referred as family leadership. Based on stakeholder theory, those family members are committed to their stakeholder to protect their interests and can impose their power by increasing the level of CSR disclosure to keep their position safe and to provide their companies with good social images. However, based on agency theory, increasing family leadership may increase the monitoring role on management and mitigate its dominance role in extending the level of CSR disclosure. On this basis, this study formulated hypothesis H3 as follows:

H3: There is a significant association between family leadership and CSR disclosure.

Further, when there is an overlap between the family and the company name, the company’s identity is derived from its family members’ characteristics and the company becomes an innate identity. This situation enables the family members to execute decisions so that they influence the company’s survival in the business world (Drago et al., 2018). In addition, family members have huge responsibilities in ensuring that the company’s behavior does not lead to any actions that damage the company’s image and the reputation of the family members. Consequently, based on institutional theory, they will be more cautious when making any decisions and undertaking any actions related to this behavior and influence their continuity which lead to increase their level of CSR disclosure (Dyer & Whetten, 2006; Gavana et al., 2017a). In addition, according to stakeholder theory, the overlap between the family name and the company name enhances the family’s identity which, in turn, leads family members to make decisions that increase their reputation and image with stakeholders through disclosing more CSR information. On the other hand, the inherent identity between the family members and the company provide more power to those members which reflected on performing their monitoring role on management. Therefore, based on agency theory, family companies’ names are less likely to disclose CSR items due to the reducing of information asymmetry problems. Consequently, this study formulated hypothesis H4 as follows:

H4: There is a significant association between the family companies’ names and CSR disclosure.

Finally, when one board member has a seat on another board, this is referred to as multiple directorships. Family members, who have more than one seat on the board, can influence the level of CSR disclosure because they have gained more experience from other companies. Those members can justify the reason for the disclosure of CSR information and, more especially, if they sit on the boards of other companies that practice this kind of disclosure. Therefore, according to stakeholder theory, increasing the number of family cross-directorship on the board may increase the motivation to respond to stakeholders’ expectations through disclosing CSR items. The findings of previous studies advocate that members who participate on the boards of other companies and share in any strategic changes, may convey these changes to their companies and influence their behaviors (Haniffa & Cooke, 2005). On this basis, this study formulated hypothesis H5 as follows:

H5: There is a significant association between family cross-directorship and CSR disclosure.

Methodology

Sample

This study’s sample includes all the non-financial companies listed on the main Saudi Arabian Stock Exchange market in the period from 2015 to 2017. The researchers applied two criteria in order to obtain the final sample. First, they excluded 45 financial companies, belonging to the bank and insurance sectors, because of their special disclosure requirements. Second, they excluded two companies because they had not presented annual reports. This yielded 384 observations from 128 companies. They extracted the date, related to CSR disclosure and family antecedents, from the board of directors’ annual reports which obtained from the website of Tadawul. Table 1 summarise the final study’s sample.

Research Design

Measurement of CSR Disclosure

This study depends on the listed Saudi Arabian companies’ annual reports as units of measurement. Following the previous studies (Hossain et al., 2006; Rizk et al., 2008; Said et al., 2009; Habbash, 2016; Alotaibi and Hussainey, 2016), this study applies many steps to measure the level of CSR disclosure. First, based on prior studies (Newson and Deegan, 2002; Haniffa and Cooke 2005; Hossian et al., 2006; Rizk et al., 2008; Khasharmeh and Suwaidan, 2010; Alotaibi and Hussainey, 2016; Mousa et al., 2018) this study employs a checklist (see Appendix1) that includes 60 disclosure items related to 7 CSR components. The main components of CSR disclosure are: environment information (includes 11 items); employee information (includes 15 items); community involvement information (includes 17 items); products information (include 4 items); customer information (includes 6 items); energy information (3 items); and finally other Disclosures regarding the Saudi Arabian environment (includes 4 items). Second, we use a manual content analysis in order to analyse all the sampled companies’ annual reports to analysis these annual reports and determine the actual CSR disclosure items. Third, this study depends on unweighted dichotomous scoring procedure by which items are assigned 1 if they are disclosed and assigned 0 if they are not. Finally, we calculated an index of CSR disclosure. We obtained the index by dividing the actual CSR disclosure items in the annual reports by the total number of items in the checklist. We used the following equation to calculate the CSR disclosure index:

CSRD_it = Σ ACSRD/Maximum CSRD

Where:

CSRD: corporate social responsibility disclosure item disclosed by (i) company for (t) year.

ACSDR: actual corporate social responsibility disclosure item.

Measurement of Family Members’ Attributes

This study tests five variables to explore the existence of family members on the boards of Saudi Arabian listed companies. Following previous studies (Klein et al., 2005; Mazzola et al., 2013; El-Ghoul et al., 2016; Drago et al., 2018), we measured the variables related to family members. First, we measured the existence of family members on the board (Fam BD) by the number of family board members. Second, we measured family ownership (Fam Own) by the percentage of shares held by the family members. Third, we measured family leadership (Fam Lead) by using a dummy variable. This takes “1” if the family member is, also, the company’s CEO or, otherwise, takes “0”. Fourth, we measured the overlap between family and company name (Fam Name) by using a dummy variable. This takes “1” if the family name is the same as the company name, or, otherwise, takes “0”. Fifth, we measured family members cross-directorship (Fam Cross) by the number of family members sitting on the boards of directors of other listed Saudi Arabian companies.

Measurement of Control Variables

Based on the previous studies (Haniffa & Cooke 2005; Haji, 2013; Cuadrado-Ballesteros et al., 2015; El-Ghoul et al., 2016; Habbash, 2016; Alotaibi & Hussainey, 2016; Gavana et al., 2017a; Lopez-Gonzalez et la., 2019a), this study includes six control variables. These variables are: company size (size); risk (Lev); profitability (Prof); Auditor type (Aud_Type); Board size (BSize); and Board meetings (Meet). Table 2 presents the proxies of all the study’s variables

Research Model

This study runs Ordinary Least Square (OLS) to examine the association between CSR disclosure and family members’ related variables. This model is as follows:

CSRD = β₀ +β₁ Fam_BD + β₂ Fam_Own + β₃ Fam_Lead + β₄ Fam_Name + β₅ Fam_Cross + β₆ Size + β₇ Lev + β₈ Prof + β₉ Aud_Type + β₁₀ B_Size + β₁₁ Meet + ε

Results and Discussion

Descriptive and Univariant Analysis

The Extant of CSR Disclosure

By using an un-weighted checklist containing 60 CSR items, we examined the extent of CSR disclosure by 128 Saudi Arabian listed companies during the period from 2015 to 2017. Table 3 summarise the descriptive analysis of CSR disclosure.

Table 3 shows that the Saudi Arabian listed companies have a low level (28.6%) of CSR disclosure. This indicates the carelessness in disclosing CSR disclosure in the Saudi environment. However, this result is higher than the average of other Saudi Arabian studies (Macarulla and Talalweh, 2012 (16%); Al-Janadi et al., 2013(14.61%); Habbash, 2016 (24%). Moreover, this result is comparable to that found internationally (Cuadrado-Ballesteros et al., 2015; Martinez- Ferrero et al., 2018; Lopez-Gonzalez et al., 2019a). Further, there is a wide range in the extent of CSR disclosure. While the minimum score of CSR index is 0, the maximum is 65%. This indicates the awareness of some Saudi Arabian listed companies to disclose CSR items in their annual reports. In addition, the findings indicate that 64.8% of the sampled companies have CSR sections in their annual reports while 35.2% do not. This suggests that Saudi Arabian listed companies know the importance of including a separate section for CSR in their annual reports.

We applied further descriptive analysis to demonstrate the Saudi Arabian listed companies’ disclosure of various CSR components. Table 4 and Table 5 present the disclosure of each CSR components along with each component’s sub-items.

Table 4 indicates the variability in the level of disclosing CSR components. The highest mean CSR disclosure index relates to product items (38.6%), while the lowest one relates to energy items (15.1%). This result indicates that, in their annual reports during the study period, Saudi Arabian listed companies disclosed many items related to product information. This suggests that they are interested in disclosing product information in order to reflect their abilities to compete in the Saudi Arabian market.

Table 5 presents the number of Saudi Arabian listed companies disclosing CSR information. Most of them (108 companies with 84.38%) disclose the information related to employees. This means that, during the study period, these companies were keen to disclose at least one item of employee information in their annual reports.

With regard to the Saudi sectors, Table 6 shows the CSR components disclosed by the listed companies in each Saudi sector. There are only three sectors that disclosed for all CSR components: namely Energy; Materials; and Food & Beverages. Further, the information relating to employees, communities and other CSR components are the only ones disclosed by companies in all sectors.

Table 7 summarises the highest disclosed item in each component. The highest disclosed item for environment information is “The company policy toward the environment” item with an average value of 34.45 %. This indicates the listed companies’ awareness in disclosing their environmental policies to the public in order to reflect their cares about environmental issues. The highest disclosed item for employee information is “Human resource development “with an average value of 70.07 %. This reflects the importance of increasing human efficiency by concentrating more on training programme and other programme that enhanced such efficiency. The highest disclosed item for community information is “Relation with local population” with average value of 49.23 %. This indicates that most Saudi Arabian listed companies are keen to communicate with local people and respond quickly to their needs. The highest disclosed item for product information is “Developments related to the company’s products including its packaging” with an average value of 41.79 %. This indicates the Saudi Arabian listed companies’ desire to disclose more information about their developments in order to reflect their contribution to society. The highest disclosed item for customer information is “Information of commercial and marketing” with an average value of 35.38 %. This indicates that Saudi Arabian listed companies want to disclose the information relating to their marketing strategies and how they deliver their products easily to their customers. The highest disclosed item for energy information is “Conservation of energy” with an average value of 7.18 %. This indicates that Saudi Arabian listed companies are keen to disclose the way in which they protect their energy and share this information with society in order to maintain their social positions. The highest disclosed item for other information is “Others” disclosure related to “Sharia activities” with an average value of 52.31 %. This indicates the Saudi Arabian listed companies’ religious customs.

Table 8 shows the descriptive analysis for other independent and control variables. This Table indicates that the number of family members on the board and the number of family member who sit in another board are quite low (approximately an average of one member). Similarly, the percentage of ownership structure for family members is, on average, 8 %. This indicates low holdings. However, the average number of board size is eight members with approximately 5 meeting per year. Most of the sampled companies have different names from their family names (92 %) and have CEOs who are not family members (79%). With regard to the control variables, most of the Saudi Arabian listed companies are characterised, on average, by big size, low risk and low profitability and they are audited by the non-big 4 audit companies.

Table 9 presents the correlation matrix between the dependent, independent and control variables. There is a negative correlation between CSR disclosure and the risk variable. On the other hand, there is a positive correlation between family members, who sit on another board, and family ownership, size and audit type variables. The coefficient of the independent variables does not exceed 0.80. Therefore, there is no multicollinearity problem (Gajarati, 2003).

Multivariate Analysis

We ran the OLS model to test this study’s main hypotheses. Table 10 presents the multivariate analysis results.

The model is significant at p < 0.0000 and the adjusted R² is 20 %. The findings indicate that in the context of Saudi Arabia, there is a significant association between CSR disclosure and two of the five family members’ antecedent variables.

More specifically, the findings show that there is a significant positive association between the Fam Own variable and CSRD at the 5% level. This indicates that companies, which have family members who hold a high percentage of ownership, disclose more CSR information in their annual reports. Companies, which have high levels of family ownership, increase their CSR level in order to reflect their good images and reputations. According to stakeholder theory, increased family ownership in the company’s structure motivates the company to disclose more CSR information in order to convey this good social position to its stakeholders. This result is consistent with the findings of previous studies (Deniz & Suarez, 2005; Block & Wagner, 2014a; Habbash, 2016). Consequently, hypothesis H2 is accepted.

In addition, the findings demonstrate a positive association between CSR disclosure and family member cross-directorship at the 10% level. The higher the number of family members, who sit on more than one board, the higher the level of CSR disclosure. The increased number of family members, who sit on more than one board, can increase those members’ experiences and enable them to share their knowledge. This has a positive impact on CSR disclosure. Those members are willing to protect their prestige and honor in society by maintaining the congruence between the organizational structure embedded in family member cross-directorship and societal concerns embedded in disclosing CSR information. This result is consistent with the findings of previous studies (Zahra and Stanton, 1988; Haniffa and Cooke, 2005). Therefore, hypothesis H5 is accepted.

The study fails to find any significant association between the other family – related antecedents’ and CSR disclosure. Therefore, hypothesis H1, H3 and H4 are rejected.

In terms of control variables, only company size, the number of board meetings and the type of audit have a positive association with CSR disclosure. Previous studies’ findings (Haniffa and Cooke 2005; Haji, 2013; Cuadrado-Ballesteros et al., Gavana et al., 2017a; Lopez-Gonzalez et la., 2019a) confirm this result.

Additional Analysis

In this section, we classify the sampled Saudi Arabian listed companies into two main groups. The first is the family companies’ group and the second is the non-family companies’ group. When classifying the sampled companies, this study followed the approach taken by previous studies (Campopiano & Massis, 2015; Cuadrado-Ballesteros et al., 2015; Nekhili et al., 2017; Martinez- Ferrero et al., 2018; Lopez-Gonzalez et al., 2019a). The companies represent family companies if they meet two criteria. The first criterion is whether or not the family member holds at least 5% of equity stake. The second criterion is whether or not the sampled company’s board of the directors includes at least one family member.

On this basis, we obtained 42 family companies with 104 observations (27.8%) and 86 non family companies with 280 observations (72.2%). Table 11 presents the indices of CSR components for both family and non-family companies.

Table 11 demonstrates that, when compared to non-family companies, Saudi Arabian listed family companies disclose more CSR information. With the exception of energy information, unlike non-family companies, family companies disclose all the components of CSR information. This can be attributed to the family companies’ specific features such as effective corporate governance structures (Randøy and Goel 2003) that require these companies to disclose CSR information. In Saudi Arabia, the adoption of Vision 2030 to diversify resources and economic income and rely not totally on oil as a major resource means that these companies are expected to double their investments provided that they apply the standards of governance. In addition, family companies need to enhance their sustainability through disclosing CSR information in order to reflect their social commitments to the Saudi society within which they perform their activities (Kotlar & De Massis, 2013). Therefore, the Saudi Arabian family companies play a critical role in supporting the Saudi Arabian Government’s digital transformation and economic diversification programs.

Conclusion

CSR information is one of the pieces of crucial information that stakeholders need. Companies respond to this by extending their CSR disclosure. Many previous studies investigated the determinants of CSR disclosure either in developing or in developed countries. However, family antecedents are explored rarely and, more especially, in the context of developing countries. Therefore, by using a sample of Saudi Arabian listed companies during the period from 2015 to 2017, this study’s main aim was to examine the impact of family determinates on CSR disclosure. In addition, this study aimed to explore the level of CSR disclosure in the Saudi environment and to determine which components were most disclosed within this environment.

The descriptive results show that, in Saudi Arabia between 2015 and 2017, there was a low level of CSR disclosure. On average, only 28.6% of the sampled companies disclosed CSR information in their annual reports. However, 64.8% of the sampled companies’ annual reports contained sections on CSR. Further, the highest CSR index related to product information (38.6%), while the lowest one related to energy information (15.1%). However, the highest CSR component, disclosed in the sampled companies’ annual reports, was employee items (disclosed by 84.38% of the sampled companies). Moreover, the Energy, Material and Food & Beverages sectors were the only Saudi sectors that disclosed CSR components in their annual reports. In addition, the study analysed the CSR components in detail in order to demonstrate the highest disclosed item in each component. The findings revealed that “The company’s policy toward the environment” item was the highest disclosed item for environment component (34.45 %); “Human resource development “ was the highest disclosed item for employee information (70.07 %); “Relation with local population” was the highest disclosed item for community information (49.23 %); “Developments related to the company’s products including its packaging” was the highest disclosed item for product information (41.79%); “Information of commercial and marketing” was the highest disclosed item for customer information (35.38%) ; “Conservation of energy” was the highest disclosed item for energy information (7.18%); and “Others disclosure related to Sharia activities” was the highest disclosed item for other information (52.31 %).

The multivariate findings demonstrated that there was a significant positive relationship between CSR and family ownership and family cross directorship which were two of the five family variables. Further, as control variables, company size, board meetings and audit type had significant impacts on CSR disclosure. Moreover, the study applied additional analysis to explore the differences between family and non-family companies. The results indicated that, on average and when compared to non-family companies, Saudi Arabian family companies disclosed more CSR information in their annual reports.

This study’s findings have important implications. For academic researchers, this study extends the previous studies that explored the disclosure of CSR. In the context of Saudi Arabia, this study adds additional insights to CSR disclosure. The descriptive results revealed the importance of CSR components in the Saudi environment. In addition, this study was one of the few to examine the impact of family antecedents on CSR disclosure. Therefore, academic researchers should direct their attentions to examining more family variables. For regulators, the study’s findings shed the light on the influence of family determinants on CSR disclosure and the family companies’ increasing use of CSR disclosure. Accordingly, the regulators should recognize the role played by family companies in Saudi Arabia. For companies, the influence of family members’ antecedents on disclosing CSR information enhances the awareness of both their shareholders and management about the family members’ controlling role on these companies’ boards of directors.

This study had some limitations in this study. First, the study period ranged from 2015 to 2017. Future research may extend this period. Second, this study examined the influence of family variables on CSR disclosure. Future research studies can add more corporate governance and ownership structure variables to this construct. Third, this study depended on the hard copies of the sampled companies’ annual reports to explore CSR disclsoure. Future research studies can examine the Saudi Arabian listed companies’ websites to explore the CSR disclosure. Finally, in order to determine whether or not there are meaningful differences between both methods, future research studies can make comparisons between CSR disclsoure using the traditional methods (such as annual reports) and internet-based methods.

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