Corporate Social Responsibility in Saudi Arabia: Perception, Disclosure, and Impact on Firm Performance

Abstract

The study aims to explore the perceptions of Corporate Social Responsibility (CSR) practices by managers in Saudi Arabia, examine the extent to which Saudi companies disclose their CSR activities and assess the relationship between Corporate Social Responsibility Disclosure (CSRD) and financial performance in Saudi-listed businesses. To overcome potential bias, both primary and secondary data collection processes were used to provide a rounded view of the topic from multiple viewpoints. The development of the Corporate Social Responsibility Index (CSRDI) has been central to understanding current CSR within Saudi businesses. Using a sample of 108 businesses listed on the Tadawul Exchange in Saudi Arabia, questionnaire results showed a poor performance within Saudi businesses regarding CSRD. Saudi businesses themselves viewed CSRD as a ‘thankless task’ given the inability to monetarize CSRD to improve financial performance and returns within the business. However, regression analysis contradicts this assumption made by business managers, suggesting that financial performance (using Return on Asset (ROA), Return on Equity (ROE) Earning Per Share (EPS)and Tobin-Q as proxies) is positively related to the CSRD Index. This relationship needs to be communicated with businesses in Saudi Arabia to reeducate management that contrary to their beliefs, CSRD can be monetarized to achieve a greater financial return, benefitting the business as well as key managers such as the government and shareholders. Results also indicate that greater education in CSR in general is needed within the wider Saudi Arabian community to increase pressure on businesses to change in line with international peers. However, weaknesses in the managers' environment, and their desire to themselves pay for more CSR being undertaken and disclosed within businesses limit the potential to broaden the CSR agenda within Saudi Arabia. The desire of Saudi consumers to change business practices in a way similar to the consumer activism seen in the USA or Europe for instance is an area which requires further academic attention and study