The growing significance of corporate social responsibility (CSR) disclosures can be evident from the emphasis of recent regulatory changes regarding clarity and completeness of disclosure. This study aims to analyze the relationship between CSR performance and the readability of CSR disclosures among the NIFTY 50 companies through the lens of institutional theory. Furthermore, it aims to examine whether regulatory frameworks, such as business responsibility and sustainability report (BRSR), strengthen or weaken the relationship between CSR performance and the readability of CSR disclosures.
Using a manually extracted sample of 341 annual reports of NIFTY 50 companies listed on the National Stock Exchange of India, this study adopts an aggregated and disaggregated dimension of the environmental, social and governance (ESG) databases from the Bloomberg terminal as a proxy of CSR performance and the Bog index as a measure of readability. This study draws on institutional theory to demonstrate a shift from mimetic to coercive isomorphism in CSR disclosure practices under evolving regulatory regimes in India.
The findings show that firms with higher CSR performance are likely to have greater readability in CSR disclosure. The social dimension has a significant positive effect on readability. However, the moderating effect of the BRSR framework on the relationship between CSR performance and readability of CSR disclosure is negative. The result obtained is robust to endogeneity, as confirmed with the 2SRI.
The findings of this study highlight the need for regulators to promote the use of plain language in public disclosure reports. Greater readability associated with plain language increases transparency, builds trust and ensures greater comprehension of CSR communication among stakeholders.
The social implications of this study call for improving the readability of CSR reports and reducing information asymmetry, thus strengthening legitimacy among shareholders. Moreover, the findings signal to regulators the need to oversee narrative disclosure practices, especially for the social dimension, to ensure a clearer and more objective understanding of reports among many stakeholders.
This study explores the relationship between CSR performance and readability of CSR disclosure in India, where CSR has evolved from philanthropy to a strategic business imperative. This study answers the question of whether the relationship between CSR performance and readability of CSR disclosure changes after the implementation of mandatory reporting frameworks.
