An expert at the Graduate School of Management at St. Petersburg State University (GSOM SPbU) found that the presence of foreign property registered in offshore zones negatively affects the disclosure of information on corporate social responsibility by Russian companies. Studies on the relationship between foreign ownership and the disclosure of corporate social responsibility (CSR) information in other countries showed the opposite result, but this discrepancy is explained by the specifics of the Russian market, where some investors are registered in offshore zones.
The purpose of the work of Associate Professor of the Department of Strategic and International Management, researcher at PricewaterhouseCoopers Center for CSR Yulia Aray and Associate Professor of the School of Accounting and Finance of the University of Vaasa (Finland) Tatiana Garanina was to confirm the hypotheses based on earlier researches about the positive relationship of foreign ownership, foreign board members and cross-listing to disclose information on corporate social responsibility in the annual reports of Russian companies.
Corporate social responsibility is the principles and actions of firms that go beyond the firm's interests and legal requirements and contribute to the creation of a public good.
Russian legislation does not require mandatory disclosure of CSR information in annual reports, but organizations can include it voluntarily, especially if they want to increase the loyalty of the international community, attract foreign investors, demonstrate a willingness to take into account the interests of different stakeholders, conduct socially responsible business and increase the legitimacy of their activities in international markets.
Earlier studies have shown that cross-listing of a company, that is presence securities on international stock exchanges, an international board of directors, and foreign ownership contribute to increased disclosure of CSR information in corporate annual reports.
Yulia Aray and Tatyana Garanina analyzed data from 223 public Russian companies for the period 2012–2015 and found out hat cross-listing and foreign board members increase CSR disclosure, while foreign ownership does not. Subsequent analysis demonstrated that foreign ownership of Russian companies is often registered in offshore zones and does not contribute to strengthening such a direction of long-term development of companies as CSR, since this aspect is underdeveloped in offshore zones in comparison with European countries and the United States.
“We recommend that Russian managers who seek greater transparency and sustainability of the company include representatives with experience in Europe and the United States on their boards of directors. Our research has shown that their experience has a positive effect on CSR disclosure. In addition, as part of the study, we found that information on CSR in the annual reports of companies with owners registered in Cyprus, Bermuda, Seychelles, Panama and other offshore territories is on average less disclosed. Perhaps, it makes sense for Russian companies to pay more attention to the origin of foreign ownership in order to improve competencies related to long-term development and transparency of activities,” said the author of the study, Yulia Aray.
Article Enhancing CSR disclosure through foreign ownership, foreign board members, and cross-listing: Does it work in Russian context?" published in Emerging Markets Review magazine with high citation rates — CiteScore 4.7, Impact Factor 3.092. The study is open for readers until December 25, 2020.