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The Level of Islamic Religiosity of the Local Community and Corporate Environmental Responsibility Disclosure: Evidence from Iran


The purpose of this paper is to examine the relationship between the Islamic religiosity of the local community and the level of corporate environmental responsibility disclosure (CERD) in Iran, an example of an Islamic country. This paper also examines the moderating role of firm size, family ownership, and state ownership. This study is conducted using a sample of 952 observations across firms listed on the Tehran Stock Exchange. The results indicate that CERD increases with an increase in the level of Islamic religiosity of the province where the firm is located. In addition, findings reveal that firm size and family ownership strengthen the aforementioned relationship. However, we provide evidence suggesting that state ownership weakens the positive relationship between the Islamic religious atmosphere and CERD. The results of this research present a new insight suggesting that the Islamic values governing a local community can significantly affect executives’ decisions regarding disclosures, particularly resulting in a decrease in executives’ selfishness and encouraging them to disclose more information about environmental responsibilities.

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Data availability

The data are available upon request.


  1. Our untabulated results also indicate that, when we use robust regression to deal with outliers, the results are still qualitatively similar. Furthermore, to further support this result, this study uses an alternative indicator to measure firm size. To this end, the natural logarithm of the company’s annual sales was utilized as an alternative indicator measuring the firm size. Untabulated results confirm that the firm size, even when represented by an alternative indicator, strengthens the relationship between the religious atmosphere and CERD.

  2. Our untabulated results also indicate that, when we use robust regression to deal with outliers, the results are qualitatively similar, and that family ownership strengthens the positive relationship between the religious atmosphere and CERD.

  3. Our untabulated results also indicate that, when we use robust regression to deal with outliers, the results are qualitatively similar, and that state ownership weakens the positive relationship between the religious atmosphere and CERD.

  4. In the previous section, we also considered some sensitivity tests such as the use of robust regression and alternative indicators for sub-hypotheses (i.e., hypotheses 2, 3, and 4) (please see footnotes 1, 2, and 3). However, the sensitivity tests of this section are considered only for the main research hypothesis. The reason for this, in addition to space limitations, is that, in developing countries such as Iran, the total research sample is relatively small compared to countries such as the United States. For example, the current research uses 952 observations and the sensitivity test related to subsection "Testing the Main Hypothesis with non-Tehran Observations" divides this sample into two parts: 424 observations and 528 observations. In this situation, if we intend to examine the moderating role of family ownership in these two samples separately, the observations will not be enough to reach a reliable result. This is because this moderating variable divides this limited sample again into two samples of family companies and non-family companies. The lack of sufficient variation among the remaining observations is another problem that this condition imposes.


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The authors appreciate the constructive comments from Professor Kaviraj Praveen Parboteeah (Section Editor) and two anonymous reviewers. They further appreciate the helpful comments from Reza Hesarzadeh, Zohre Hajiha, and Stefano Fiori. All errors are the authors’ own.


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Appendix A: Survey Questions Used to Measure Islamic Religious Atmosphere

Dimension I: Religious Beliefs and Attitudes

1. How much do you trust in God when you intend to perform major affairs of life?

2. How close to God do you feel you are?

3. How much do you agree with the belief that good deeds and bad deeds of man are taken into account in the hereafter?

4. How much do you agree with the belief that all of us are obligated to enjoin the good and forbid the bad?

5. How much do you agree with the idea that religiosity lies within a pure heart even if a man fails to say prayers?

Dimension II: Affection for the Prophet Muhammad’s Family

6. To what extent do you show respect and love toward the Household of Prophet Muhammad?

Dimension III: Religious Behavior and Actions

7. How do you practice religious acts?

Dimension IV: The Performance of Religious Rites and Practices

8. How much do you recite the Qur’an?

9. How often do you attend elegiac and mourning assemblies? (Assemblies commemorating the martyrdom of the Prophet of Islam and his Posterity).

10. How much do you give to charity and donate?

11. How often do you make the pilgrimage to the holy sites?

12. How much do you ask for bibliomancy?

13. How much are you bound to say prayers?

14. How much do you keep fasting?

15. How often do you take part in congregational prayers? (Collective prayer service).

16. How often do you appear at the Friday prayers?

17. How often do you appear at the mosque?

18. How much are you bound to pay alms and zakat?

Dimension V: Religion and Society

19. How much do you agree with the idea that one should not communicate with people who do not pray?

20. How much do you agree or disagree with the idea that “publication of books and films bothering devout people should be prevented”?

21. Do you agree or disagree with the idea that the religious beliefs of people should not be relevant in recruitment?

22. How much do you agree or disagree with the separation of religion from politics/state?

23. To what extent do you agree or disagree with the idea that “all women must wear a hijab even if they do not keep faith in it” (forcible hijab)?

Dimension VI: How to Deal with Religious Abnormality?

24. How do you treat women wearing bad hijab?

25. How do you treat irreligious friendship and intimacy of two opposite sexes?

26. How do you treat watching rhythmic music dancing? (It means dancing which provokes passion and sin).

27. How do you treat parties and celebrations that are not observing Islamic considerations?

Note: This appendix presents the questions for the survey conducted by Iran’s Ministry of Culture and Islamic Guidance to measure the Islamic religious atmosphere.

Source: Khodakarami et al. (2021)

Appendix B: Variables Definitions



Dependent variable:



To measure this variable, social responsibility reports presented in the annual activity reports of Iranian companies’ board of directors were examined through content analysis. The present study adopts the environmental category of the corporate social responsibility disclosure checklist used by Fallah and Mojarrad (2019) for measuring CERD. The scoring method used for determining the CERD scores is designed to assign 1 point to a firm for every case of disclosing the environmental activities mentioned in the checklist. Of course, based on Du et al.’s (2016) research, in cases where a firm discloses a specific amount of each of these items in addition to disclosing the environmental responsibility items mentioned in the checklist, 2 points are assigned to the firm instead of 1 point in order to increase the accuracy of measuring CERD. In the next step, the points are summed up, and the final CERD score for each firm is obtained

Independent variable:



To measure this variable, this study employs a survey titled “Iranian National Plan of Values and Attitudes”. Six Islamic dimensions are covered in the survey. The survey is graded on a 5-point Likert scale. The score obtained for each province is divided by the maximum score to estimate the percentage of religiosity in each province (Khodakarami et al., 2021)

Control variables:



Ln (total assets)


Managers’ share ÷ Total stock


Earnings before interest and taxes ÷ Total assets


The total number of independent board members ÷ The total number of board members


Total debts’ book value ÷ Total assets' book value


The ratio of the first shareholder's share to total shares


The total number of women board members ÷ The total

number of board members


Operating cash flows ÷ Total assets


Ln (firm age)


In order to measure this variable, we create a dummy variable; if the company is among state‐owned enterprises, 1 is assigned; otherwise, 0 is assigned

Industry dummies

Industry fixed effects

Year dummies

Year fixed effects

Other variables:



Ln (total sales)

  1. This appendix defines the research variables. As specified in subSect. "Sample and Data Collection", with the exception of religiosity data, this paper obtained its data from the Rahavard-e-Novin database. The paper obtained the Islamic religiosity data from the most recent survey entitled “Iranian National Plan of Values and Attitudes”, conducted by Iran’s Ministry of Culture and Islamic guidance.

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Khodakarami, M., Yazdifar, H., Khaledi, A.F. et al. The Level of Islamic Religiosity of the Local Community and Corporate Environmental Responsibility Disclosure: Evidence from Iran. J Bus Ethics (2023).

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