Overview

Original Research

THE EFFECT OF GOVERNMENT OWNERSHIP ON CORPORATE SOCIAL DISCLOSURE

AHMAD RIYAD ALI ALAZZAM 1, NORMAN MOHD SALEH 2, ROMLAH JAFFAR 3, and NORADIVA HAMZAH 4.

Vol 17, No 11 ( 2022 )   |  DOI: 10.5281/zenodo.7384602   |   Author Affiliation: Ph.D. student at the School of Accounting, Faculty of Economics and Management, Universiti Kebangsaan Malaysia 1; Professor, the School of Accounting, Faculty of Economics and Management, Universiti Kebangsaan Malaysia 2; Associate Professor, Faculty of Economics and Management, Universiti Kebangsaan Malaysia 3; PhD, the chair of Centre of Governance Resilience and Accountability, Faculty of Economics and Management, Universiti Kebangsaan Malaysia 4.   |   Licensing: CC 4.0   |   Pg no: 198–216   |   To cite: AHMAD RIYAD ALI ALAZZAM, et al., (2022). THE EFFECT OF GOVERNMENT OWNERSHIP ON CORPORATE SOCIAL DISCLOSURE. 17(11), 198–216. https://doi.org/10.5281/zenodo.7384602   |   Published on: 11-11-2022

Abstract

This study aims to evaluate the extent of corporate social disclosure (CSD) in the Jordanian context. Also, the study seeks to empirically examine the effect of ownership structure (government ownership) on the extent of CSD found in firms' annual reports. Additionally, this study aims to examine the moderating effect of industry type (IT) on the relationship between government ownership (GO) and CSD. A CSD index is applied, and content analysis is performed to investigate the extent of CSD in the annual reports of listed manufacturing and services firms in the Amman Stock Exchange (ASE). The study applied quantitative research using a sample of 85 firms and 935 annual reports from 2006 to 2016. The Ordinary Least Squares estimator (OLS) was used to test the hypotheses. The two-step system Generalized Method of Moments (GMM) estimator was applied to address the endogeneity problem. The analysis shows that the CSD average is 36 %, higher than the 27% and 31% found by Gerged (2021) and Qa'dan and Suwaidan (2019) for two Jordanian samples during 2010-2014 and 2013-2015, respectively. Also, the findings show that higher government ownership is associated with increased CSD in the annual reports of Jordanian firms. Furthermore, the results display that IT has a positive and significant moderating effect on the relationship between GO and CSD. The current study contributes to the literature by analyzing the role of ownership structure, particularly government ownership, on CSD, a relatively little-researched topic. To the best of knowledge, this study is the first to test the moderating effect of IT on the relationship between GO and CSD. Besides the OLS estimator, a dynamic panel data model, specifically a two-step system GMM estimator, is used to test the study hypotheses. Accordingly, a two-step systematic GMM estimator addresses endogeneity problems, which gives more reliable findings. Second, the current study contributes to the agency theory and its applications in the Jordanian market. The results prove that Jordanian firms apply CSD as a strategic instrument to align the agency conflict with the government (principals) and mitigate agency costs.

Keywords

Agency Theory, Corporate Social Disclosure, Government Ownership, Industry Type.