Journal of Financial Reporting and Accounting

Board diversity and corporate social responsibility in Jordan

Abdul Hadi Ibrahim, Mustafa Mohd Hanefah,
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Board diversity and corporate Board

diversity
social responsibility in Jordan
Abdul Hadi Ibrahim
Faculty of Economics and Muamalat,
Universiti Sains Islam Malaysia (USIM), Nilai, Malaysia, and
279
Mustafa Mohd Hanefah Received 11 June 2015
Revised 3 March 2016
Islamic Finance and Wealth Management Institute (IFWMI), Accepted 29 April 2016
Faculty of Economics and Muamalat,
Universiti Sains Islam Malaysia (USIM), Nilai, Malaysia
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Abstract
Purpose – This study aims to investigate the impact of board diversity characteristics, namely,
independence, gender, age and nationality of directors on the level of corporate social responsibility
(CSR) disclosures.
Design/methodology/approach – Content analysis was used to determine CSR disclosure. This
study used panel data analysis to investigate the influence of board diversity characteristics on CSR
disclosures.
Findings – Panel data analysis show that the level of CSR disclosure has increased over the period of
study. Results also reveal a positive and significant association between the level of CSR disclosure and
board diversity variables.
Research limitations/implications – This study examined only companies listed on Amman
Stock Exchange. Therefore, the generalisation of the results might be limited to the listed companies
only.
Practical implications – Findings are relevant to policymakers, professional organisations and
practitioners in Jordan and in other Arab countries.
Social implications – The role of women in the boardroom is important to ensure more CSR
activities by the listed companies. Jordan being a Muslim country should take the initiative to introduce
laws to increase the number of women to the board.
Originality/value – This study offers significant contributions to existing CSR literature in Jordan
and in other Arab countries by introducing female directors. Findings are important to policymakers.
They should implement quotas for women in the boardroom, and adopting such a policy will increase
the participation of women in the decision-making process of the companies and reduce gender bias.
Keywords Disclosure, Financial reporting, Private sector, Corporate reporting
Paper type Research paper

1. Introduction
In contemporary business, there is a growing global concern on the role of businesses in
society. It is therefore timely that businesses are now paying attention to the increasing
concern in this role. One aspect of this concern is the state of corporate social
Journal of Financial Reporting and
responsibility (CSR) disclosures (Darus et al., 2009). CSR disclosure has become an Accounting
important issue amongst companies because of the increased demand of such Vol. 14 No. 2, 2016
pp. 279-298
information by stakeholders, especially investors (Saleh et al., 2011). According to them, © Emerald Group Publishing Limited
1985-2517
investors are more likely to invest in companies that engage in CSR activities because DOI 10.1108/JFRA-06-2015-0065
 JFRA CSR improves financial performance and access to capital, reduces operating costs,
14,2 enhances corporate reputation and increases customer loyalty (Said et al., 2009).
In Jordan, which is a small country with limited natural resources, CSR activities and
disclosures have received a great deal of attention from the government. Significant
steps have been taken by the Jordanian Government to improve CSR, which includes the
enactment of legislation and regulations that mandate Jordanian organisations to
280 disclose social and environmental information in their annual reports, to ensure the
quality and reliability of the annual report as a means to attract foreign investment
(Naser et al., 2002; Ismail and Ibrahim, 2008). Despite attempts by the Jordanian
Government to improve CSR activities, research in this area has been limited, and is still
in its infant stages (Al-Khadash, 2003). In practice, there remains a low level of CSR
disclosure from listed Jordanian companies (Abu-Baker and Naser, 2000; Al-Khadash,
2003; Suwaidan et al., 2004; Ismail and Ibrahim, 2008; Al-Hamadeen and Badran, 2014).
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Thus, the question is: Who is responsible? In Jordan, the board of directors is
responsible for setting up a company’s disclosure and transparency policies, and is also
responsible for managing information disclosure in annual reports (Jordan Securities
Commission, 2009). Nowadays, the role of the board of directors has expanded. Its aims
are not only to achieve shareholders’ goals but also to take into account the interests of
other stakeholders. As such, the board must meet its obligation of accountability to both
shareholders and stakeholders alike (Ayuso and Argandona, 2007). Because the board
plays an important role, it needs to ensure that its representation is balanced and reflects
the firm’s stakeholders and other groups in society. Some ways to achieve this is to
appoint women, young people and minorities to the board. Therefore, having a diverse
mix of individuals on a board of directors will increase board effectiveness and
independence (Erhardt et al., 2003; Carter et al., 2007), improve the board’s
decision-making (Walt and Ingley, 2003; Carter et al., 2003; Ayuso and Argandona, 2007;
Ruigrok et al., 2007; Ness et al., 2010), increase the level of charitable giving (Coffey and
Wang, 1998; Wang and Coffey, 1992; Williams, 2003), improve social performance
(Siciliano, 1996) and improve CSR (Ayuso and Argandona, 2007; Khan, 2010; Bear et al.,
2010; Post et al., 2011).
Given the many aforementioned benefits, this study attempts to achieve the
following objectives: first, to assess the extent of CSR disclosure in the annual reports of
the Jordanian listed companies; second, to examine whether the level of CSR disclosure
is influenced by board diversity characteristics, including independence, gender, age
and nationality of directors.
However, the majority of the empirical studies on the relationship between board
diversity and CSR were carried out in developed countries (Wang and Coffey, 1992;
Williams, 2003; Webb, 2004; Schnake et al., 2006; Ayuso and Argandona, 2007; Bernardi
and Threadgill, 2010; Bear et al., 2010; Post et al., 2011; Jo and Harjoto, 2011; Feijoo et al.,
2012; Zhang et al., 2013), with little to no discussion of this topic in developing countries,
especially the Arab world (Khan, 2010; Barako and Brown, 2008; Handajani et al., 2014)
Jordan as an Arab country provides an interesting avenue to study the issue of board
diversity and CSR disclosure, this due to cultural factors and unique ownership
structure which is characterized mainly by high concentration of family and
government ownership (Haddad et al., 2015). The Jordanian society is also characterized
based on Hofstede’s cultural dimensions (Hofstede, 1984) by a high uncertainty
avoidance, collectivism, low future orientation and large power distance. Gray (1988)
 argued that societies with previous dimensions tend to be secretive with statutory Board
control, uniformity and conservatism (Haddad et al., 2009) which in turn lead to less diversity
information disclosure, especially social and environmental information (Williams,
1999).The difference in culture and ownership structure may affect the board
composition and the level of board diversity in the country (Zainal et al., 2013), as well as
the level of voluntary disclosure (Haddad et al., 2015). Accordingly, this study is
important because it aims to bridge the gap in existing CSR literature in Jordan, as well 281
as in the Arab countries, which relatively have a low level of voluntary disclosure.
Moreover, this study sheds light on the role of board diversity on determining the level
of CSR, especially the issue of the representation of women on the board of directors and
how it may influence on the level of CSR disclosure, as gender equality in Arab countries
is not supported in employment, especially at the management level (Lamki, 1999).
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2. Corporate social responsibility in Jordan

Jordan is a small country with limited natural resources. In recent years, poverty and
unemployment have become major issues challenging Jordan, with approximately 14.2
per cent of the country’s population in poverty as of 2008 (DOS, 2011). The
unemployment rate also remains high with around 18 per cent in 2010. As the Jordanian
Government appears to be unable to solve these issues, the government has focused its
attention to the role of the private sector to advance the Jordanian economy and by it
reduce poverty and unemployment (Elian, 2014). Al-Hamadeen and Badran (2014)
stated that the Jordanian private sector has a responsibility to engage in solving
sustainability issues related to poverty, unemployment and other social concerns. One
way of achieving this is through adopting and implementing CSR practices and
reporting as tools that help firms to fulfil their duties towards society and the
environment (Gray et al., 1996).
Towards this end, the government enactment of legislation and regulations that
mandate Jordanian organizations to disclose social and environmental reporting in their
annual reports. An example of such a law is the Environmental Protection Law (1996),
which was enacted to ensure the compliance of companies with its environmental
control standards. Another significant step was the Securities Commission Law of 1998,
which required listed companies to disclose information about social and environmental
issues in their annual reports. In 2004, the Jordan Securities Commission issued the
“Instructions for Issuing Company’s Disclosure, Accounting, and Auditing Standards”.
This meant that the board of directors’ report must include information about the
company’s contribution to environmental protection and local community services. The
Securities Commission also has issued a guide for the preparation of annual reports.
These guides require companies to explain (in detail) the company’s contribution to local
community services and the protection of the environment (if any), listing all of the
services that the company provides. If the company does not contribute to local
community services and the protection of the environment, this should be stated clearly,
as follows:
The Company makes no contribution to the service of the local community and the protection
of the environment.
In 2009, the Jordan Securities Commission issued the corporate governance code for
companies listed on the Amman Stock Exchange (ASE), which requires companies to
 JFRA disclose social and environmental information in their annual reports. This is covered
14,2 under Chapter 5 (Disclosure and Transparency), Article (5), that states: “The company
shall disclose its policy regarding the local community and the environment” (Jordan
Securities Commission, 2009).
In Jordan, research on CSR disclosure is limited (Al-Khadash, 2003; Jahamani, 2003).
However, majority of research conducted in Jordan have thus far focused on examining
282 the influence of corporate characteristics on CSR (Abu-Baker and Naser, 2000;
Al-Khadash, 2003; Suwaidan et al., 2004; Ismail and Ibrahim, 2008; and Al-Hamadeen
and Badran, 2014). Most of these studies used content analysis to measure the extent of
CSR. The findings indicate that the most popular disclosure themes were human
resources and community involvement, whereas the environmental issue had the lowest
disclosure among all of these studies. Previous studies revealed that the level of CSR
disclosure remains relatively low. For example, Al-Khadash (2003) found that 26 per
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cent of the companies did not have any form of social and environmental disclosure in
their annual reports. Suwaidan et al. (2004) found that only three companies received
disclosure scores of more than 30 per cent of CSR disclosure items. The study by
Abu-Baker and Naser (2000) examined the level of CSR of Jordanian listed companies in
1997 and found that Jordanian companies achieved a weighted average of 0.45 pages
that were devoted to social disclosure. He also found that environmental, product and
energy reporting needed more attention and concentration from Jordanian companies.
This was consistent with a study by Jahamani (2003) who found that only 9 out of 86
Jordanian companies issued environmental reports. Using a sample of 60 companies
chosen from the manufacturing and service sectors, Ismail and Ibrahim (2008) found
that 15 per cent of the companies in the sample did not disclose any information related
to CSR activities.
There are a limited number of studies in Jordan that investigate the relationship
between the corporate governance and information disclosure in general (Al Sawalqa,
2014; Sartawi et al., 2014; Haddad et al., 2015). Al Sawalqa (2014) examined the extent of
voluntary disclosure and the level of compliance with corporate governance code on the
annual reports of 13 Jordanian banks listed in ASE in 2012. He found that the level of
compliance with corporate governance code was 90.9 per cent. The result also indicated
that Jordanian banks, on average, disclosed 61 per cent of items. This was consistent
with a study by Mardini (2015) who found that the mean disclosure was 59.5 per cent in
Jordanian banks. Al Sawalqa (2014) stated that Jordanian banks tend to hide some
information because of the high competition among Jordanian banks where some
information is more sensitive. Another study conducted by Haddad et al.(2015)
examined the influence of ownership structure and family members on the board on the
voluntary disclosure. Using a sample of 57 companies listed on the ASE in 2004, they
concluded that the level of voluntary disclosure has a positive relationship with
government ownership and a negative relationship with family members on the board
and managerial ownership. They stated that Jordan, which has a concentrated
ownership structure, will suffer from the second type of agency problems that arises
between controlling and non-controlling shareholders (i.e. minority shareholders),
which, in turn, lead to a low level of disclosure, as they have better access to internal
information. Sartawi et al. (2014) supported this view and found that a negative
relationship existed between ownership concentration and the level of voluntary
disclosure in Jordan.
 To bridge the gap in the existing CSR literature in Jordan, the current study focuses Board
on examining the influence of board diversity characteristics, specifically on the level of diversity
CSR disclosures in the annual reports of the Jordanian listed companies.

3. Literature review and hypotheses development

In recent years, board diversity has been considered as one of the most significant
governance issues (Barako and Brown, 2008). Board diversity, defined by Walt and 283
Ingley (2003), is a “varied combination of attributes, characteristics and expertise
contributed by individual board members in relation to board process and decision
making”. However, the demand for more board diversity becomes urgent because of the
increased diversity in the workforce in terms of gender, age and ethnicity (Darmadi,
2011). Board diversity is an advantage to firms, as it improves the effectiveness of
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corporate leadership, develops a better understanding of the marketplace, provides

legitimacy to firms, provides global relationships and enhances corporate governance
(Erhardt et al., 2003; Walt and Ingley, 2003; Carter et al., 2007).
A number of theories have been used to study the relationship between board
diversity and CSR, such as agency theory and resource dependence theory. From agency
theory perspective, the more diverse the board, the more it will lead to better monitoring
of management, because board diversity leads to increased board independence (Carter
et al., 2007). Thus, firms tend to disclose more information to reduce agency costs, reduce
the information asymmetry and to protect their reputation (Lim et al., 2007; Htay et al.,
2012). On the other hand, resource dependence theory suggests that board diversity will
increase the resources provided by board members, such as skills, information,
legitimacy and access to key constituents (e.g. suppliers, buyers, public policy
decision-makers and social groups) (Hillman et al., 2000). Therefore, diverse directors
(through age, gender and ethnicity) would provide unique information to the
management for better decision-making (Ayuso and Argandona, 2007).
Because of the fact that the board of directors is responsible for managing
information disclosure in annual reports, this study focuses on resource dependence
theory, as a possible explanation to underpin how board diversity influences the level of
CSR disclosure. This theory asserts that the provision of resources needed by the firm is
the main function of the board, and this function refers to the ability of the board to bring
resources to the firm by linking the firm with its external environment (Hillman and
Dalziel, 2003). Resource dependence theory provides a key argument for board diversity.
The theory suggests that board diversity brings new insights and perspectives to the
firm and increasing creativity and innovation (Walt and Ingley, 2003; Carter et al., 2007;
Thomsen et al., 2009; Miller and Triana, 2009). Accordingly, more diverse board
members lead to better understanding and problem-solving, enabling the board to
effectively address the business environment and encourage positive ratings for CSR
(Bear et al., 2010).
Several studies have examined the relationship between board diversity and CSR
(Wang and Coffey, 1992; Williams, 2003; Webb, 2004; Schnake et al., 2006; Ayuso and
Argandona, 2007; Barako and Brown, 2008; Bernardi and Threadgill, 2010; Khan, 2010;
Bear et al., 2010; Post et al., 2011; Jo and Harjoto, 2011; Feijoo et al., 2012; Zhang et al.,
2013). These studies use one or more attributes as proxies for board diversity. For
example, Barako and Brown (2008) and Khan (2010) used female and foreign directors.
Meanwhile, Post et al. (2011) used age and female directors. Gender diversity was the
 JFRA most widely observed attribute studied. In this regards, there is an absence of CSR
14,2 literature with regards to the influence of female directors in Arab and Muslim
countries, especially in Jordan. Despite this, Jordanian women lead other Arabic women
in terms of literacy rates and are classified amongst the top five in the Middle East and
North Africa (MENA) countries (World Bank, 2005). There are many legal frameworks
that support and ensure the women’s equality and rights in Jordan. For example, the
284 Jordanian Constitution of 1952 states that all “Jordanians shall be equal before the law.
There shall be no discrimination between them as regards their rights and duties on
grounds of race, language or religion”. The Labour Law defines a worker/labourer/
employee as “each person, male or female, who performs a job in return for wages”.
Despite the achievements of Jordanian women in many areas, they still face obstacles
in the labour market, such as wage differences, unemployment and underemployment
rate, when compared to men. For example, men earn 23 per cent more than women in
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management positions (UNDP, 2011). Another obstacle facing women is unemployment

and underemployment levels. The female unemployment rate as of 2010 was 25 per cent
compared to the male unemployment rate of 10.7 per cent (DOS, 2011). Moreover,
underemployment in Jordan is a major problem that affects Jordanian women.
According to the World Bank, the average female wage earner in Jordan is likely to have
12.3 years of education, compared to 9.3 years for a man holding a similar job. Therefore,
it is timely to highlight the importance of female member on the board in Jordan and the
role of woman directors in improving CSR and reducing gender bias, as female directors
tend to appoint more women to senior management positions. In addition, they prefer to
attract valuable female employees (Brammer et al., 2009).

3.1 Gender diversity

An important issue of board diversity on which studies have been carried out previously
is the representation of women on the board. Gender diversity is part of the broader
concept of board diversity (Carter et al., 2003). It refers to the presence of female directors
in corporate boards of directors.
Previous studies have suggested that the presence of women directors on the board
increases the level of charitable giving (Coffey and Wang, 1998; Wang and Coffey, 1992;
Williams, 2003) and increases the board’s attention to the CSR issue (Ayuso and
Argandona, 2007). This is because women have good social sensibility (Burgess and
Tharenou, 2002) and show a more favourable attitude towards ethical behaviour than
men (Luthar et al., 1997). Moreover, women are more willing to give in a crisis, and they
tend to view charitable giving as a means to help society (Williams, 2003). Miller and
Triana (2009) argued that female directors could enhance a firm’s reputation through
CSR and corporate charitable giving as a signal to stakeholders. Bear et al. (2010) found
that CSR mediated the relationship between the number of women on the board and
corporate reputation. Women directors bring diverse perspectives, experiences
and working styles to the board (Daily and Dalton, 2003), which, in turn, enhance board
discussions, and consequently, improve decision-making (Carter et al., 2003). Such
decisions may improve CSR, as they tend to be less business-oriented and more sensitive
to CSR issues and the welfare of diverse stakeholders (Wang and Coffey, 1992).
The majority of studies also revealed a positive relationship between the number of
women on the board and CSR. Barako and Brown (2008) reported that increased female
representation on the board significantly and positively influenced CSR in Kenyan
 banks. Similarly, Bear et al. (2010) found a positive relationship between the number of Board
women on the board and CSR. Meanwhile, Wang and Coffey (1992) also found that diversity
female directors had a positive and significant relationship with the firm’s charitable
contribution. These findings were supported by Williams (2003), who found that firms
with more women serving on the board equated to greater charitable giving, in contrast
to firms who had a lower number of women on the board. In Bangladesh, Khan (2010)
found no significant relationship between female representation on the board and CSR 285
reporting.
Unlike developed countries, such as Norway, which required listed companies to
have at least 40 per cent female directors, no government policy has been adopted to
appoint a specific percentage of females on the board of directors in Jordan. Therefore, it
is hypothesized that:
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H1. There is a positive relationship between the proportion of female directors and
the level of CSR disclosure.

3.2 Independent directors

Independent directors play an important role in monitoring the behaviour of top
management (Fama and Jensen, 1983). Beside the monitoring function, they have ability
to discharge their duties in protecting the interests of minority shareholders and
investors (Annuar and Abdul Rashid, 2015). Independent directors are more effective
than non-independent directors because they are able to conduct their duties on behalf of
the shareholders, and less likely to be manipulated by the CEO (Webb, 2004). Therefore,
a higher proportion of independent directors will improve the voluntary disclosure
because independent directors reduce the costs of voluntary information, as they are
independent of the daily business operations of the firm (Rouf, 2011). Independent
directors provide resources, information, skill and legitimacy to the board (Hillman et al.,
2000), which, in turn, will enhance the board’s decisions and add value to both the firm
and the community. Therefore, they will be more concerned with the various
stakeholders, and tend to be more sensitive to society’s needs (Ibrahim et al., 2003). Fama
and Jensen (1983) argued that independent directors are motivated to increase the
disclosure to outside investors to enhance a firm’s image. Lim et al. (2007) suggested that
independent directors would provide more voluntary disclosures to reduce the
information asymmetry between shareholders and managers, to reduce litigation risk
and to protect their reputation. In addition, a higher proportion of outsider directors on
corporate boards also enhances the comprehensiveness and quality of disclosures (Lim
et al., 2008), and this improves CSR (Carter and Vos, 2005; Jo and Harjoto, 2011; Rouf,
2011; Khan et al., 2012). Said et al. (2009) argued that CSR should be disclosed, as good
news will reflect the good reputation of a company.
Previous studies have shown different results. Jo and Harjoto (2011) found that the
proportion of independent directors had the most significant and positive corporate
governance mechanism, which affected the firm’s decision to engage in CSR. Similarly,
Mohamed and Faouzi (2014) found that a larger number of independent directors led to
an increased level of voluntary environment disclosure in Tunis companies. Htay et al.
(2012) found a positive relationship between the proportion of independent directors on
the board and CSR disclosure in Malaysian banks. However, Said et al. (2009), Lim et al.
(2008) and Abdul Razak and Mustapha (2013) failed to find an association between
independent directors and CSR disclosure in Malaysian companies.
 JFRA In Jordan, the corporate governance code for companies listed on the ASE requires
14,2 that at least one-third of the board members consist of independent directors. A positive
relationship between independent directors and the CSR level was found in previous
studies. Consequently, this study expects a positive association between independent
directors and the CSR level. Therefore, it is hypothesized that:
H2. There is a positive relationship between the proportion of independent directors
286 and the level of CSR disclosure.

3.3 Nationality diversity

Several governance guidelines support the appointment of different nationalities on the
board of directors to reflect the nationality diversity of their customers, employees and
stakeholders. Companies with foreign directors tend to disclose more CSR information.
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This is because the appointment of foreign directors improves the quality of the
decision-making in the board. Ruigrok et al. (2007) argued that foreign directors bring
diverse opinions and perspectives, such as language, religion, life experiences, culture,
behaviour and norms of the country or region, which in turn, enhance the
decision-making process. Ayuso and Argandona (2007) claimed that the knowledge
brought by foreign directors helps improve the decisions of a firm’s strategy, such as
supporting CSR reporting strategies. Moreover, some researchers suggest that most
foreign directors are usually outsiders and more independent (Masulis et al., 2010).
Therefore, a high level of disclosure and transparency are expected, as they possess a
wide range of international network connections with stakeholders.
Previous studies that investigated the nationality of directors with CSR show mixed
results. Barako and Brown (2008) found no association between foreign directors on the
board and CSR reporting in Kenyan banks. Meanwhile, Khan (2010) found a positive
relationship between foreign directors and the level of voluntary CSR reporting in
Bangladeshi banks. Therefore, the following hypothesis is tested:
H3. There is a positive relationship between the proportion of foreign nationals on
the board and the level of CSR disclosure.

3.4 Age diversity

Age diversity is another important characteristic of board diversity. Sonnenfeld (2002)
argued that age can be seen as an asset to the board and is considered as part of human
capital, because age can reflect experience and risk-taking (Darmadi, 2011). However, in
today’s corporate world, most members of the board are old, and the representation of
young directors is very limited (Gilpatrick, 2000). Appointing young directors may
bring different perspectives and ideas to the firm. Ness et al. (2010) argued that younger
board members are more innovative and have a higher ability to process new ideas.
Moreover, they are positively related to strategic change and more willing to participate
in the monitoring process (Darmadi, 2011). This will lead to enhanced board
performance and decision-making. Young directors give more attention and are
concerned about stakeholders (Webb, 2004), environmental issues (Klineberg et al.,
1998) and CSR issues (Post et al., 2011).
The issue of the age of directors has not been investigated thoroughly, and there are
a limited number of studies that have examined the relationship between the age of
directors and CSR. However, Post et al. (2011) found that social and environmental
 disclosure was higher with boards containing young directors. These results are Board
consistent with Webb (2004), who concluded that socially responsible (SR) companies diversity
have more young directors than non-socially SR firms. Based on prior findings, young
board members may have a significant positive impact on CSR. This leads to the
following hypothesis:
H4. There is a positive relationship between the proportion of young directors and
the level of CSR disclosure. 287
4. Methodology
4.1 Sample and data collection
The population of the study consists of all companies listed on the first and second
markets of the ASE. The sample for this study is drawn from companies listed on the
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ASE for the period between 2007 and 2011 selected from various industries, namely,
financial, services and industrial. The reason for the inclusion of the financial sector in
the sample is because of the importance of this sector in the Jordanian economy, which
ranked first among other sectors in terms of trade volume and the number of traded
shares with 67 per cent (Amman Stock Exchange, 2013). In addition, including
companies from the finance sector will allow the study to cover a broad range of
business activities to provide more comprehensive exploration and analysis of CSR
practices in Jordan. This is based on the view that regulations related to corporate
governance and CSR in ASE is for all listed companies regardless of industry.
A total of 106 companies were excluded because of unpublished annual reports or
missing data. Data for 2009 were excluded in this study because a number of changes
were made in the regulations in that year. The final sample consisted of a total of 117
companies, and they were randomly selected using the stratified random sampling
method. The sample represents 46 per cent of the entire population. The data were
collected from the annual reports of Jordanian companies. An annual report is the most
important source of CSR (Lim et al., 2008), and a high level of credibility, accessibility
and availability (Tilt, 1994; Adams et al., 1998). In Jordan, annual reports are widely used
as a main data source for CSR (Abu-Baker, 2000).

4.2 Measurement of variables

Content analysis was used in this study to determine the CSR disclosure. The process of
determining and selecting the categories of CSR is an essential stage in the content
analysis method (Milne and Adler, 1999). The CSR checklist contains 36 items that
covered five themes, namely, Islamic CSR, community involvement, employee
information, environmental and product or service information. The items were selected
based on previous studies (Hackston and Milne, 1996; Abu-Baker, 2000; Ahmad et al.,
2003; Haniffa and Cooke, 2005; Said et al., 2009), and their applicability to the Jordanian
business environment.
To assess for reliability and validity, the study applies a number of procedures and
analyses. First, to ensure content validity of CSR items, a panel of expert judges was
identified and selected based on their knowledge. Two academics who have experience
in conducting studies in CSR and one auditor with expertise in Jordanian companies and
a member of the Jordanian Association of Certified Public Accountants were asked to
check the CSR disclosure items to ensure that the items are representative of disclosure
practices for Jordanian companies. Resulting from this revision, a number of items were
 JFRA added to the checklist such as “awards for environmental protection” while “recycling”
14,2 was omitted from the list, as it is not relevant in Jordan.
Second, Cronbach’s alpha test was used to assess the internal consistency of CSR
disclosure. Internal consistency refers to the degree to which the items in a test measure
the same construct (Khan et al. (2012). The Cronbach’s alpha coefficient ranges between
0 and 1. The closer Cronbach’s alpha values is to one, the greater the internal consistency
288 and reliability (Sekaran, 2003). A Cronbach’s coefficient with the values of 0.60 to 0.70 is
considered acceptable (Hair et al., 2010). The Cronbach’s coefficient alpha in this study
for the five themes is 0.72. This indicates good internal consistency.
A dichotomous procedure is applied to determine the CSR disclosure index, whereby
a score of “1” is given if an item is disclosed, and “0” if not. The CSR disclosure for a
company score is calculated as a ratio of the actual score awarded for the company to the
maximum possible disclosure score (Haniffa and Cooke, 2005; Ghazali, 2007; Barako and
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Brown, 2008; Said et al., 2009; Khan, 2010). The number of disclosure items in this study
is 36, representing the maximum disclosure score, as illustrated in the following
formula:

Total items disclosure by company (i)

CSRDL ⫽
Total maximum disclosure score (36)

The board diversity variables examined in this study are: independent directors, age of
directors, nationality of directors and gender diversity. Table I presents the definition
and measurement of these variables.

5. Data analysis
This study used panel data analysis to test the hypotheses and to investigate the
influence of board diversity characteristics on the level of CSR disclosure, after
controlling for the effect of profitability. Profitability is considered the most important
corporate variable that explains CSR disclosures. A number of studies conducted in
Jordan (Suwaidan et al., 2004; Al-Hamadeen and Badran, 2014) show that profitability is
positively and significantly associated with CSR disclosure, while other corporate
variables such as industry type had no impact on CSR disclosure (Ismail and Ibrahim,
2008; Al-Hamadeen and Badran, 2014). The regression model in this study is as follows:

CSRDLit ⫽ ␤0 ⫹ ␤1 GENDit ⫹ ␤2 INDit ⫹ ␤3 NATit ⫹ ␤4 AGEit ⫹ ␤5 PROit ⫹ ␧it

Variable Definition Measurement

GEND Gender diversity Ratio of women directors to total number of

directors on the board
IND Independent directors Ratio of the number of independent directors to
the total number of directors
NAT Nationality of directors Ratio of non-Jordanian directors to total number
Table I. of directors on the board
Measurement of AGE Age of directors Ratio of young board of directors (younger than
independent 40 years) to total number of directors on the board
variables PRO Profitability Return on assets
 Where Board
CSRDL ⫽ Corporate social responsibility disclosure level diversity
GEND ⫽ Women directors
IND ⫽ Independent directors
NAT ⫽ Non-Jordanian directors
AGE ⫽ Age of young directors
PRO ⫽ Profitability based on return on assets 289
␤0 – ␤4 ⫽ Regression coefficient
␧ ⫽ Error term
t ⫽ Represents time dimension (year)
i ⫽ Represents cross-section dimension (firm)
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6. Results and analysis

Table II provides descriptive statistics for the dependent and independent variables.
The average level of CSR disclosure measured by the disclosure index is about 30 per
cent. This means that companies in Jordan disclose about 11 out of 36 items, which
represent 30 per cent of the total items. This result is acceptable when compared to other
studies, such as Ghazali (2007), who found that CSR disclosure is 25.5 per cent in
Malaysia. Barako and Brown (2008) found that Kenyan banks, on average, disclosed 15
per cent of the items. The result also indicated that almost all Jordanian companies in the
sample disclosed some form of CSR information in their annual reports. In comparison
to previous studies conducted in Jordan, this study shows a higher percentage of
companies disclosing CSR in their annual reports. Al-Khadash (2003) found that 74 per
cent of Jordanian companies have some form of social and environmental disclosure in
their annual reports. Ismail and Ibrahim (2008) found that 85 per cent of Jordanian
companies disclose some sort of social and environmental information. Table II also
shows that the minimum disclosure index obtained is zero, while the maximum is 88 per
cent.
The results also provide evidence that CSR disclosure increases over the study
period. The average level of CSR increased from 24, 27, 33 and 34 per cent in 2007, 2008,
2010 and 2011 respectively, as shown in Table III. Such an increasing trend over time
could be because companies in Jordan have complied with the corporate governance
code. This is clear when CSR disclosures in 2007 and 2008 (before implementation of the
code) are compared with those in 2010 and 2011 (after implementation of the code).
In terms of CSR categories, Table IV shows that the employee information theme is
the most disclosed theme (35.5 per cent), and this is so because the law requires such

Variable N Mean Minimum Maximum SD Skewness Kurtosis

CSRDL 468 0.30 0 0.88 0.16864 0.529 ⫺0.714

GEND 468 0.02773 0 0.60 0.069381 3.538 16.322
AGE 468 0.13723 0 0.83 0.165419 1.523 2.617
IND 468 0.07786 0 0.84 0.138342 2.006 4.359 Table II.
NAT 468 0.10977 0 1.00 0.182284 1.803 2.887 Descriptive statistics
PRO 468 1.40599 ⫺0.79 0.43 10.27175 ⫺1.366 1.303 of variables
 JFRA disclosure. The second category is community involvement, with 34 per cent, followed
14,2 by product or service information, with an average of 33.9 per cent. Environmental
disclosure is 18.9 per cent, and Islamic CSR had the lowest disclosure among the
companies, with 0.057 per cent, with only one company disclosing some information.
Only Jordan Islamic Bank disclosed some information related to this theme, even though
these items play a significant role in achieving social and economic development in
290 Jordan (Al-Aqaileh, 2008). A possible explanation for the unexpected result is because
the items included in this theme (zakat, waqf and Qard al Hassan) are voluntary in
Jordan. For example, no law requires companies to pay zakat (tithe), and the
management is not responsible or authorized to pay Zakat, even in Islamic banks.
Unlike Saudi Arabia and Malaysia which have shari’ah-compliant companies, Jordan
has yet to classify companies as such. Anuar et al. (2009) found no significant differences
between Muslim and non-Muslim in the shari’ah-compliant companies regarding the
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level of disclosure. They suggested that directors in the listed companies seem to be
secular rather than religious, and may be more concerned about financial goal as the
main driver of disclosure.
The descriptive statistics for independent variables are seen in Table II. The table
shows that the average female board member is 2.7 per cent, with a minimum value of
zero and a maximum value of 60 per cent. The findings indicate that 28 out of 117
companies have at least one women member on the board, representing 23 per cent of all
companies. This is low compared to other countries. For example, 90 per cent of Fortune
500 companies had at least one woman on the board (Bear et al., 2010). In Norway,
Thomsen et al. (2009) reported that the average number of female seats on the board was
39.07 per cent in 2007. In terms of age diversity, the mean of the young directors is 13 per
cent, indicating that the majority of board members are not young. The mean of
independent directors is 7.7 per cent. This means that the percentage of independent
directors to the total number of directors is relatively low, and companies in general did
not comply with the corporate governance code, which requires that at least one-third of
the board members must be independent. The findings also indicate that 11 per cent of
the directors are foreign.

Year N Mean Minimum Maximum SD

2007 117 0.2478 0.00 0.62 0.14954

Table III. 2008 117 0.2719 0.06 0.88 1,7481
Descriptive statistics 2010 117 0.3363 0.11 0.72 0.16479
of CSR level over 2011 117 0.3434 0.08 0.66 0.16628
years Total 117 0.30 0.00 0.88 0.16864

Categories N Minimum Maximum Mean SD

Islamic CSR 468 0.00 0.67 0.0057 0.06144

Table IV. Community involvement 468 0.00 1.00 0.3403 0.32761
Descriptive statistics Environmental 468 0.00 1.00 0.1893 0.22128
of total CSR Employee information 468 0.00 1.00 0.3553 0.16493
categories Product or service information 468 0.00 1.00 0.3397 0.29158
 A number of tests were undertaken to test the assumptions of ordinary least squares Board
(OLS). The values of skewness and kurtosis in Table II indicate that the data were not diversity
normally distributed, and, consequently, it was transformed using the normal score to
deal with the problems of non-normality (Haniffa and Cooke, 2005). The
multicollinearity problem was also checked by using variance inflation factor (VIF) and
tolerance (TOL). If the VIF value exceeds 10 and the TOL value is less than 0.10, this
indicates a potential problem of multicollinearity (Field, 2005). Table V shows the result 291
of VIF and TOL, and multicollinearity is not a problem in this study
Table VI show the results of the panel data regression analysis for three estimation
models: pooled OLS, fixed-effects model (FEM) and random-effects model (REM). R2
values for the three methods, pooled OLS, FEM and REM, are 0.47, 0.36 and 0.44,
respectively. The results of the three models are similar, whereby all variables are
statistically significant with CSR at 1 per cent.
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To identify the best and appropriate model for the data analysis, Breusch–Pagan–
Lagrange multiplier (LM) and Hausman tests were conducted. Table VI show a
significant p-value of the LM test (probability ⬎ chi2 ⫽ 0.000). Therefore, the null
hypothesis is rejected. Thus, the random effects model is more appropriate than the
pooled OLS model. Table VI also shows the result of the Hausman test (probability ⬎
chi2 ⫽ 0.0000), whereby the result is significant; therefore, the null hypothesis is
rejected. This indicates that FEM is more appropriate in this study.
Heteroscedasticity and autocorrelation tests were also undertaken to ensure that the
data were sufficient and the results are not misleading (Baltagi, 2005). The robust
standard errors were used to deal with heteroscedasticity and autocorrelation problems.
Table VII presents the FEM analysis after correcting for heteroscedasticity and
autocorrelation.
The results show that overall the regression model is statistically significant (p ⫽
0.000). The results also provide evidence that female representation on the board has a
significant positive association with CSR disclosure at 1 per cent level (p ⫽ 0.000),
indicating that Jordanian companies with a higher number of women directors disclose
more CSR information. This result supports H1, and is consistent with the findings of
Barako and Brown (2008), Bear et al. (2010), Bernardi and Threadgill (2010), Post et al.
(2011) and Feijoo et al. (2012), who found a positive relationship between female
representation on the board and CSR disclosure. The result is also in line with the
resource dependence theory, where female directors are viewed as an important
resource for the firm because they provide valuable resources to the firm by bringing
new perspectives and insights to the boardroom (Siciliano, 1996). This also enhances the
quality of decision-making (Walt and Ingley 2003; Carter et al., 2003; Burgess and
Tharenou, 2002).

Variable VIF Tolerance

Gender diversity (GEND) 1.04 0.960

Independent directors (IND) 1.09 0.917
Nationality of directors (NAT) 1.10 0.904
Age of directors (AGE) 1.02 0.974 Table V.
Mean VIF 1.06 Tolerance and VIF
 JFRA Pooled OLS FE model RE model
14,2 p p p
Variable Coefficient (Significance) Coefficient (Significance) Coefficient (Significance)

GEND 0.1835883 0.000 0.3055022 0.000 0.2680977 0.000

IND 0.7275792 0.000 0.4043742 0.000 0.5474822 0.000
NAT 0.2130956 0.000 0.2044025 0.001 0.2387066 0.000
292 AGE 0.0863063 0.027 0.2801949 0.000 0.1905628 0.000
PRO 0.0719977 0.035 ⫺0.0447689 0.211 0.0030002 0.927
Constant ⫺0.0848695 0.012 ⫺0.0790651 0.001 ⫺0.0848281 0.116
Table VI. No. of observations 468 468 468
Regression result of R2 0.47 0.36 0.44
relationship between F-statistic 83.79 40.53 73.46
board diversity and p-value (F) 0.0000 0.0000 0.0000
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the level of CSR LM test 167.90 (0.0000)

disclosure Hausman test 48.35 (0.0000)

The presence of independent directors is found to have a very significant positive

relationship with the level of CSR disclosure at 1 per cent level (p ⫽ 0.000). This finding
supports H2, which states that there is a positive relationship between the proportion of
independent directors and the level of CSR. The result is consistent with the findings of
Htay et al. (2012), Jo and Harjoto (2011) and Mohamed and Faouzi (2014), whereby a
significant positive relationship between independent directors and CSR were reported.
This could be because independent directors in Jordan are more effective in monitoring,
as the code of corporate governance under Chapter two, Article 1 (B) ensures the
independence of the board.
Table VII also shows that foreign nationals on the board have a significant positive
association with CSR disclosures (p ⫽ 0.008), supporting H3. This finding is in line with
the resource dependence theory, which suggests that foreign directors as outside
directors provide more input and resources, such as diverse opinions, language, religion,
life experiences, culture, behaviour and norms, which in turn, enhance the
decision-making (Ruigrok et al., 2007) and improve the decisions of a firm’s strategy,
such as supporting CSR reporting strategies (Ayuso and Argandona, 2007). This result
is consistent with Khan (2010), who found a positive relationship between foreign
directors and the level of voluntary CSR reporting.

Variable Coefficient Robust SE t p-value

GEND 0.3055022 0.0744486 4.10 0.000

IND 0.4043742 0.062556 6.46 0.000
NAT 0.2044025 0.0759199 2.69 0.008
AGE 0.2801949 0.0564696 4.96 0.000
PRO ⫺0.0447689 0.0311499 ⫺1.44 0.153
Constant ⫺0.0790651 0.0074908 ⫺10.56 0.000
Table VII. No. of observations 468
Fixed effect analysis R2 0.36
results with robust F-value 38.33
standard error p-value (probability ⬎ F) 0.0000
 H4 states that there is a positive relationship between young board members and CSR Board
disclosure. Table VII show that the p value indicates a significant positive association diversity
(at 1 per cent level) between young directors and the level of CSR reporting. Thus, H4 is
accepted. This result is consistent with the study conducted by Post et al. (2011), who
found a positive relationship between young directors and the social and environmental
disclosures. The result also supports the resource dependence theory, which suggests
that young directors provide the board with different perspectives, skills and insights, 293
which enhance firms’ creativity and problem-solving capabilities, leading to enhanced
board performance and decision-making (Ness et al., 2010).
As for the control variable, the results show no statistically significant relationship
between profitability and the level of CSR disclosure (p ⫽ 0.153). This finding is
consistent with previous studies by Al-Khadash (2003), Sartawi et al. (2014) and Haddad
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et al. (2015), who found no significant association between the level of disclosures and
profitability in Jordan.

7. Conclusion
This study empirically examines the relationship between board diversity
characteristics and the level of CSR disclosures in the annual reports of Jordanian listed
companies. The study contributes to the existing literature of CSR disclosure by
introducing new variables (i.e. female board members).
Overall, the results show an improvement in the level of CSR disclosures by
Jordanian companies. Companies disclose more information related to employees, while
no attention was paid to Islamic CSR information. The results provide strong evidence
that board diversity characteristics play an important role in determining the level of
CSR discourse. All board diversity variables, namely, independent directors, foreign
board members and woman directors, were found to have a positive and significant
impact to explain the level of CSR disclosure in Jordan. This implies that companies with
a higher proportion of board diversity are more likely to have a higher level of CSR
disclosure.
The findings are important to policymakers in Jordan. They should implement
quotas for women in the boardroom, and adopting such a policy will increase the
participation of women in the decision-making process of the companies and reduce
gender bias, as discrimination against women in the workplace exists in Jordan.
As in any other study, this study is subject to a number of limitations that need to be
considered. First, this study examined only companies listed in the ASE. Therefore, the
generalization of the results might be limited merely to listed companies, and cannot be
generalized to non-listed companies. Second, the study only investigated a few board
diversity variables. Future studies may include other variables such as ownership
structure and cultural factors.

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Corresponding author
Mustafa Mohd Hanefah can be contacted at: MUSTAFA.HANEFAH@GMAIL.COM

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