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Revisiting the relation between geographical diversification and corporate social responsibility: the role of segment disclosure (SFAS 131) and institutional environment

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Abstract

Previous research has provided contingent results on the relationship between geographic diversification and corporate social responsibility. We revisit this relationship by studying the different levels of corporate social responsibility (CSR) disclosure of the largest US multinationals, using a more rigorous research design. We improve on the previous literature by focusing on geographic segment information under Financial Accounting Standards Statement No. 131 (SFAS 131) and by developing two reliable measures of geographic diversification (Geographic Diversification Depth, Geographic Diversification Breadth). These new measures capture the level information of geographic diversification that the measures used by previous studies. From a sample of 1108 multinationals in 22 countries encompassing 11,080 observations over a period spanning from 2009 to 2018, we find that the geographical diversification of multinationals is negatively associated with CSR scores, which is consistent with the explanation of social interaction. A DID approach shows that the results hold when controlling for endogeneity between geographic diversification and CSR. Moreover, the overall effect of associating higher levels of CSR disclosure with higher levels of geographic diversification is stronger in countries with more democracy, more government effectiveness, and better regulatory quality. Therefore, host country-level characteristics affect the social and environmental behavior of geographically diversified and cross-listed multinationals in the USA.

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Data availability

Data supporting the conclusions of this study are available from the author, upon reasonable request. Ethical clearance: Research tools and procedures for data collection, analysis, management, and sharing have been reviewed by University.

Notes

  1. World Federation of Stock Exchanges. (2016), available at: http://info.worldbank.org/governance/wgi/ index.aspx#home (accessed January 2016).

  2. An SEC panel investigated several of their most pressing concerns regarding accounting and financial reporting in 2014. Luisi (2015), the leader of the panel, highlighted that issues still exist in current segment reporting, including inappropriate identification of the “chief operating decision maker” and unclear definition for operating segment and aggregation.

  3. Psychic distance refers to the uncertainty associated with factors such as ‘‘differences in language, culture, political systems, level of education, or level of industrial development’’ that adversely affect the flow of information between a firm and the market (Johanson and Vahlne 1977, p. 24).

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Acknowledgements

The authors extend their appreciation to the Deanship of Scientific Research at King Khalid University for funding their work through the Research Small Group Project under grant number RGP1/327/44.

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The authors declare that no funds, grants, or other support were received during the preparation of this manuscript.

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Authors and Affiliations

  1. Department of Business, College of Arts and Science Dhahran Al Janoub, King Khalid University, Abha, Saudi Arabia

    Mohamed Toukabri

  2. Faculty of Economics and Management of Nabeul, University of Carthage, Nabeul, Tunisia

    Mohamed Toukabri

  3. Department of Business, Applied College in Khamis Mushait, King Khalid University, Abha, Saudi Arabia

    Mohammed Abdulkareem Al Adawi

  4. California State University, Fullerton, USA

    Mohammed Abdulkareem Al Adawi

  5. Research lab, International Finance Group-Tunisia (IFGT), University of Tunis El Manar, Tunis, Tunisia

    Mohamed Toukabri

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Both authors made substantial contributions to the conception and research design, data collection, analysis as well as to the interpretation of data in this paper. Both authors participated in drafting and revising the paper. Both authors gave the final approval of the version being submitted to this journal.

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Toukabri, M., Al Adawi, M.A. Revisiting the relation between geographical diversification and corporate social responsibility: the role of segment disclosure (SFAS 131) and institutional environment. Environ Dev Sustain (2023). https://doi.org/10.1007/s10668-023-03390-y

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