Corporate social reporting in Sri Lanka surrounding the tsunami in 2004

There is a growing interest in studying corporate social reporting (CSR) around the world. This interest is specifically growing in developing countries. The importance of encouraging CSR is emphasised by The World Bank mainly because of the benefits associated with CSR to such developing countries. This study examines government influence, research and influence of changes in society expectations on CSR in Sri Lanka a developing country surrounding the tsunami in 2004. Research questions are proposed to examine the change in total quantity of CSR disclosures between the years 2004, 2005, 2006 and 2007. Four directional hypotheses and a null hypothesis are developed based on legitimacy theory and by the review of previous studies. The four directional hypotheses are used to test the increase in CSR disclosures and the increase in category CSR disclosures based on a disclosure classification from 2004 to 2006. A null hypothesis is used to test whether the change in CSR disclosures from 2004 to 2005 and from 2005 to 2006 remained relatively constant after 2006. The hotel industry is selected since it is considered to be a sensitive industry. The main board companies are selected because, they form the significant part of the Colombo Stock Exchange and they are more active than the secondary board compames. Secondary board hotel companies' data was also collected for companson. A disclosure index is prepared using the items disclosed in a report published by a World Bank staff member 0 'Rourke (2004) for the World Bank on CSR in developing countries. Index items are believed to be relevant to Sri Lanka, a developing country, and this is the first time it has been used in research into CSR. Company annual reports of main board hotels industry are analysed using the index by identifying the annual report disclosures related to the items in the index. Items presented are given score of "one" and otherwise "zero" resulting in a total score of each annual report to be used in the statistical analysis. Secondary board hotel data was also collected and analysed in the same manner. Descriptive analysis indicated that more than 75% of companies practice CSR in main board hotel companies in Sri Lanka from 2004 to 2007. Overall descriptive data analysis demonstrated an increase in average number of CSR disclosures from 2004 to 2006 in the main board hotel companies. The 17% change indicated from 2005 to 2006 was higher than the change from 2004 to 2005 (10%). Wilcoxon ii matched-pairs signed rank tests were employed to determine whether the change reported by descriptive analysis was significant. The statistical tests results were shown to be significant (p:S0.05) in both 2005 compared to 2004 and 2006 compared to 2005 in the main board hotels. However, the statistical test results for the secondary board was not significant (p>0.05). Descriptive statistics on average CSR disclosure per category showed an increase in Community economic development and social impacts (CED) and Supply chain management (SCM) categories of the main board hotels. However, the Wilcoxon matched-pairs signed rank tests results did not indicate a significant change in category CSR disclosures from 2004 to 2006 for all categories. It was also shown that the total quantity of category CSR disclosure increased significantly from 2004 to 2005 in corporate payments to governments (CPG) category of the main board hotel companies. This may be because of the pressure perceived by the companies from the government. Study results found that average number of CSR disclosures of main board hotel companies have decreased from 2006 to 2007. However, the Wilcoxon matched-pairs signed rank tests showed that the change was not significant (p>0.05) for the main board from 2006 to 2007. The results of this study suggest that government pressure, research and changes in society expectations may influence CSR of companies after a major social disaster. If companies do not react to CSR up to the level required by society and the government companies' legitimacy will be questioned.