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Ass. Lect. Abeer Abdel-karem Ibrahim Srour :: Theses : |
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| Title | Accounting Reflections of Corporate Social Responsibility on the Cost of Capital – An Experimental Study in-Light-of Egyption’s Index for Corporate Responsibility |
| Type | PhD |
| Supervisors | Abo-Hebia;Hamed Tolba Mohammed |
| Year | 2018 |
| Abstract | The corporate finance decision usually refers to the optimal funding structure which is the funding mix, which minimizes the cost of capital, reduces risks to corporate and maximize the wealth of investors the cost of capital is defined as the discount rate used by investors in discounting future cash flows to reach the current share price, depending on this. The decision to determine the cost of capital considered the most important decisions as they aim to choose the optimal financing structure to maximize the value of the corporate by achieving the minimum cost of capital as the lower the cost of capital, the higher the value of the corporate. The cost of capital is one of the key factors in determining the present value and affects the value of the corporate. The present value is directly attributable to the value of corporate because all investments that have a positive net present value increase the value of the corporate, whereas investments with a negative present value decrease the value of the corporate, i.e., the lower the present value rate (the discount rate, i.e., the cost of capital), the net present value increased, which means increasing the value of the company and its financial capacity. In view of the increasing concentration around the world in recent years about corporate social responsibility activities, and companies also Companies are willing to issue corporate social responsibility reports, and social responsibility activities have become an integral part of corporate business strategy. As part of its advertising campaign to attract the attention of customers and consumers. It also became the basis for the registration of companies in the Egyptian stock exchange to have a management of social responsibility. The Egyptian Stock Exchange, in collaboration with the Directors' Center and Standard & Poor's, has built a corporate responsibility index that includes companies that meet the requirements of environmental issues, social responsibility issues and governance. This increased interest in social responsibility will have an impact on many factors. One of these factors is the cost of corporate capital. Research problem: Accounting for social responsibility considers one of the important issues that have a great attention in the recent years as a result of the steady increase in size and capabilities of corporates and their wide financial, economic and social effects, also, increased awareness and attention to the culture of social responsibility practices in recent decades encourage academics and senior executives to devote time and effort to social responsibility strategies. According to a study conducted for the views of senior executives from Asia and the Pacific in 2010, 98% of the 766 CEOs announced that CSR will be important or very important for the success and sustainability of their companies in the future. In Egypt, spending a lot of effort on corporate social responsibility disclosure, especially after the launch of the Egyptian index of corporate responsibility which provides information on the environmental, social and governance performance of companies. The performance of companies is no longer limited to, financial economic performance, but the social performance of the companies is one of its objectives as an economic unit because of its positive indicator about the reputation and thus achieving sustainability through implementation of policies that achieve economic and social balance. Today, companies are required to disclose their CSR performance in addition to their accounting disclosures, and there are several CSR guidelines, including ISO guidelines for which CSR practices should be through (ISO26000), As well as the specifications set by the International Social Responsibility Organization (SA 8000), an international guide to social responsibility. The Egyptian Stock Exchange, in cooperation with the Board of Directors, Standard & Poor's, and Chrysell, launched the Corporate Responsibility Index (CSR) which the listed companies are evaluated annually and the 100 most active companies in the Egyptian market are ranked according to their performance in the areas of society, A company listed on the stock exchange in terms of liquidity and activity in the framework of respect for the four rules of social responsibility (respect for the rights of the environment, respect for human rights, respect for workers and anti-corruption). The Egyptian index of social responsibility is the first of its kind in the Arab region and the second in the world. The evaluation is carried out in two phases. The first is the collection of information from the companies, including the information they submit through the websites or through the annual reports, the second phase included all the information available on corporate disclosure and governance. In the current financial crisis, the prices of securities not stable which leading to higher risk and thus prompting investors to demand a higher risk premium. So, the cost of capital increases, this happen beside the difficulty of obtaining financing, which may affect the sustainability of the company. The relationship between social responsibility disclosure and the cost of capital is one of the relations that has not received adequate attention of researchers despite its importance, but there are some attempts. Such as Dhaliwal, et al (2011), which examined the relationship of voluntary, non-financial disclosure to corporate social responsibility at capital cost, and found that companies that disclose their social activities have lower capital costs. And (El Ghoul et et al., 2011) study, which took place in the American environment and the polluting sector of companies such as nuclear power and smoke companies, it concluded that these companies have a high capital cost and that disclosure of social responsibility will enhance the value of these companies by reducing their cost of capital. But the accounting literature included many studies that dealt with the relationship between accounting disclosure and the cost of capital, but the results were mixed, which made the nature of this relationship is questioned. There are several studies such as Botosan (2006), have supported an inverse relationship between accounting disclosure and cost of capital. The higher the level of disclosure, the lower the cost of capital. Also, (Leuz and Schrand, 2009), a study which analyzed the relationship between cost of capital and accounting disclosure in-light-of the crisis of transparency resulting from the collapse of Enron, and concluded that the crisis of transparency could be decreased by improving the size and quality of disclosure which can affect the cost of capital. So, the basic problem of research represented in the next main questions: Is there a significant correlation between accounting for corporate social responsibility and cost of capital in-light-of the Egyptian corporate responsibility index? From this main question, a series of sub-questions arise as followed: 1- What is the adequacy of standards and guidelines for corporate social responsibility accounting? 2- Are the Egyptian corporate social index's items sufficient to show that the listed companies are socially responsible? 3- Is there a relationship between the level of corporate social responsibility disclosure and the cost of capital in the Egypt and what is the nature of this relationship, if any? |
| Keywords | |
| University | benha |
| Country | Egypt |
| Full Paper | - |
| Title | Accounting Reflections of Corporate Social Responsibility on the Cost of Capital -An "Experimental Study in-Light-of Egyptian’s Index for Corporate Responsibility" |
| Type | PhD |
| Supervisors | Dr.Hamed Tolba |
| Year | 2018 |
| Abstract | The relationship between corporate social responsibility and cost of capital in light of the Egyptian index by identifying the cost of capital, the relationship between them, and finally, proposed accounting framework for the implications of social responsibility on cost of capital. To achieve this, the chapter is divided into the following: -The concept of cost of capital and the relationship between accounting for corporate social responsibility and sources of financing, then how to measure the cost of capital, the researcher concluded that: a. The cost of capital is the minimum return expected by suppliers. The sources of corporate finance are either financing by equity or debts or both. b. There was an inconsistency in the results of studies that dealt with the relationship between corporate social responsibility and the cost of capital by debts. Some studies have shown a weak correlation between corporate social responsibility and cost of capital. Other studies have shown an inverse relationship between CSR and the cost of capital by debts. What the researcher found in this study was that the companies in the study mostly reach the cost of capital by debts to the lowest limit, but in many companies up to zero, which proves that the higher the level of corporate social responsibility the lower the cost of capital by debts. c. There is also an inconsistency in the results of the relationship between the accounting of social responsibility and the cost of capital with equity. Some results showed an inverse relationship, (the higher the level of CSR performance, the lower the cost of capital with equity). Some studies proved an unstable relationship and the reason of that could be the Understanding and awareness of investors in some countries. d. There are several models for measuring the cost of capital. However, the most widely used model by researchers and financial Egypt and worldwide is the capital asset pricing model. This is what the researcher depends on in the applied study to investigate the relationship between CSR and cost capital 3/2 Accounting for Corporate Social Responsibility (CSR) and its impact on the cost of capital in terms of the motives of company’s interest in the cost of capital, and how accounting for corporate social responsibility can affect the cost of capital. The researcher concluded that, a. Companies that have CSR in their strategy will have lower restrictions on the cost of their capital because it increases the level of disclosure of companies and therefore, these companies have a higher confidence than others. b. Companies with a high level of social responsibility have lower restrictions on their capital cost due to the low asymmetry of information resulting from the reduction of the Company's expected risks. c. corporate social responsibility has an impact on the cost of the company's capital as it leads to further accounting disclosure, reducing information asymmetry among stakeholders, and reducing the cost of capital with debts and equity 3/3 The proposed framework, the objective of it, the dimensions of measuring and evaluating the performance of corporate social responsibility and its impact on the cost of capital, finally general guidelines for the application of the framework. The researcher concluded that: a. Most companies in their disclosure rely on one of the three variables of the index, (governance) and ignoring the other two variables, where the index is calculated on the overall performance only. b. There is a shortage in the composition of the Egyptian index of corporate responsibility, and the researcher concluded that the restructuring of the index will have a positive impact on reducing the cost of the company's capital. c. Putting some solutions that can be applied to avoid the shortage of the Egyptian index of corporate responsibility and make it more useful such as: A) Restructuring the index by adding financial measures along with quantitative measures for greater efficiency and effectiveness. In addition, putting a minimum limit that companies must achieve in each of the three variables, and when companies break this limit in one of the variables, it will have been excluded from the index. B) keep the index on the current structure with the addition of points expressed financial disclosure and identification of mandatory items to be disclosed in each of the three variables and considered it a mandatory disclosure. C) The index should be divided into two separate indexes: a governance index and environmental and social responsibility D) The relative weight of financial and quantitative measures is 50% as it is, since social responsibility includes both English Summary Summary 13 13 environmental issues and social responsibility issues, as well as having one screen inside the stock exchange. Chapter four [4]: Tackled conducting a test study to identify: First: The impact of corporate social responsibility on the cost of capital by applying to the companies of the Egyptian index of corporate responsibility with its three variables, second: Application of the proposed model which is reached to in the theoretical part and the applied study. To achieve this the chapter is divided into: 4/1 Applied study on the Egyptian environment, the objectives of the study were based on (the objectives of the study, the development of hypotheses, measuring the variables, the sample and the period of the study, the sources of data, and the statistical methods used). Finally, the researcher concluded that: a. Accepting the first hypothesis and its sub hypothesis; There is a significant relationship between CSR with its variables (environmental issues and social responsibility issues), in terms of the Egyptian index of corporate responsibility and the cost of capital. (The researcher’s point of view). b. Accepting the second hypotheses and its sub hypothesis; There is a significant relationship between CSR with its variables (environmental issues, social responsibility issues and governance), in terms of the Egyptian index of corporate responsibility and the cost of capital. (Some researchers’ point of view). 4/2 Examining the proposed framework and to achieve this, the experimental study contains (The objectives of the proposed framework - the objective of the experimental study - the study hypotheses- measuring the variables of the study- sample and period of study- and finally the models of the study hypotheses) and the researcher concluded that: 1. Accepting the main hypothesis of the proposed framework; The disclosure of corporate social responsibility (CSR) information ("environmental issues"-"social responsibility issues", "governance") leads to lower cost of capital compared to the current situation in the Egyptian environment. |
| Keywords | Csr - Cost of Capital |
| University | benha unv. |
| Country | Egypt |
| Full Paper | download paper |
