Corporate social responsibility reporting amongst petrochemical firms in the Kingdom of Saudi Arabia (KSA): practice and perception

The purpose of this study is to look into the disclosure of corporate social responsibility (CSRD) in the context of petrochemical companies in the Kingdom of Saudi Arabia (KSA). In doing so, it responds to a gap in the literature by addressing four main research questions including: 1) In the Saudi petrochemical companies' annual reports, what is the extent and nature of CSRD ?. 2) To what extent did CSRD increase in volume over the period 2012-2017 in the annual reports of the Saudi petrochemical companies? 3) What are the institutional drivers which may drive trends of CSR disclosure in KSA petrochemical sector? 4) What is the relationship between CSRD of petrochemical companies operating in KSA and firm performance? The study is the first to examine the Islamic context, particularly the link among CSRD and company performance in the context of the Saudi petrochemical sector to see how the study assess the patterns, drivers and implications of CSR disclosure in KSA petrochemical sector.\ud \ud The study applied institutional theory to understand the drivers and pressures that may have the impact on CSRD trends by considering the multilevel forces to answer the aforementioned research questions relating to the practice and perception of CSRD in the kingdom of Saudi Arabia. Institutional theory is used to describe a broader aspect of an organisation form used to adopt legitimacy. However, the author focused on the multilevel model of Institutional Forces and the Drivers for KSA' Petrochemical Industry from the institutional theory angle. The Institutional Forces (Coercive, Memetic, and Normative) have demonstrated how pressures interact and interfere with each other at the same level and at times between several levels, as well as how the strength and influence of each pressure varies depending on the level in which it is placed. For instance, in the study the influence of institutional pressures was investigated at four distinct levels including the global industry, national, and company levels. At all the levels, three institutional pressures were evident. Sharia Law emerged as a coercive pressure at all the four levels. On the other hand, reporting initiative, as a mimetic pressure was evident across the levels. Ethics emerged as a normative force at all the levels. The most apparent conclusion is that the Islamic culture, which has its origins in Sharia law, has a significant impact on the petrochemical sector in the Kingdom of Saudi Arabia.\ud \ud The extent and nature of CSRD in the sector was investigated by applying quantitative content analysis to the annual reports published by six sampled companies over the period 2012-2017. The resulting word counts gave an initial overview of general trends in overall CSRD and the four selected disclosure categories (environmental, social, human resources and products and services disclosure). These data were then subjected to descriptive, correlation and regression analysis to test the hypothesised link between CSRD and financial performance.\ud \ud The quantitative findings revealed that all the sampled companies engaged in all four categories of disclosure, and that the volume of this disclosure rose over the study period. Furthermore, a significant positive link was found between CSRD and financial performance over six years, as measured in Return on Assets (ROA), Net Profit Margin (NPM) and Tobin's q. The analysis of the link between CSRD and ROA, NPM and TBQ showed that all the disclosure categories impacted on financial performance in different ways, with environmental and social disclosure having the greatest impact on ROA and environmental and human resources disclosure having the greatest impact on ROE. All disclosure categories were positively correlated with TBQ. The positive relationships help to assess the patterns, drivers and implications of CSRD disclosure in KSA petrochemical sector. The results thus support the hypothesis that there is a relationship between CSRD and financial performance over the period 2012 to 2017.