A Study On Readability Of Corporate Social Responsibility Report Based On Impression Management Perspective

It has been ten years since china joined World Trade Organization. Over the ten years, not just the commercial environment, but business ethics has changed a lot. The enterprises without clear social values got lost in the competitive society. The outbreak of a series of incidents which have bad influence is challenging the bottom line of public. It is also a crushing blow to those companies whose scandals were exposed. Thus the importance of corporate social responsibility has been put forward more and more often. Whether the corporation will take social responsibility has become test for their conscience.The understanding of corporate social responsibility for public has developed into a new level. The corporate social responsibility was defined as the responsibility for the management to earn most profit and create the economic value, through which can the management meet the demands of the stockholders. With the discontent from public, the traditional concept of corporate social responsibility was forced to change, the public requests that the corporation should take the responsibility of protecting environment and safeguarding the rights and interests of employee. If the corporations are too concerned with profit, then what will happen is the disorder of society, which will damage the interests of others, that means unfairness to the public. So what corporate social responsibility means now is corporate initiative to assess and take responsibility for the company’s effects on the environment and impact on social welfare. This term is referred to as corporate citizenship and can involve incurring short term costs that do not provide immediate financial benefit to the company, but instead promote positive social and environmental change. The companies have also realized that taking social responsibility is not in conflict with obtaining the commercial profit. The corporations can bring themselves praise from public if they take their responsibility. There is better chance of communicating clearly and honestly with public if the management can prepare a report for corporate social responsibility. Therefore, the companies began to compile the report to disclose the information about corporate social responsibility.There is no single, universally accepted definition of corporate social responsibility report. The GRI guideline defines CSR reporting as the practice of measuring, disclosing and being accountable to internal and external stakeholders for organizational performance toward the goal of sustainable development. More and more companies have realized the importance of preparing the CSR reporting. There is no uniform standard because we still at the beginning stage, so CSR reporting has not realized its value. The management always lists the effort for environment protection and social service, rather than to disclose the adverse information and what is still to be reinforced. Managers may want to strategically hide adverse information through less transparent disclosure. The strategic reporting and incomplete revelation is what we called impression management. Impression management refers to the activity of controlling information in order to steer others’ opinions in the service of personal or social goals. It is a term used in social psychology which describes the process by which people try to influence how others perceive or think of them. Through impression management, people try to shape an audience’s impressions of a person, object or idea. As a typical impression management process within a business, manipulating the readability is often used by managers to regulate and control information in their interaction with general public. The aim is to give them the most favorable impression about corporate social responsibility.Readability is defined as a quality of writing (print or handwriting) that can be easily read, the quality of written language that makes it easy to read and understand. When we say an article has high readability, we are saying it is easy to read and comprehend, that means the article appeals to the readers and the readers have the intention to finish reading. Firms with good performance tend to enhance the readability of CSR reporting for the purpose of clarifying their efforts on performing duties about corporate social responsibility. The managers have incentives to obfuscate information when firm’s performance is poor because the market may react with a delayed incorporation of the information contained in complicated disclosures. So, how does the impression management influence the readability of social responsibility report? Whether there is striking difference on readability of CSR reporting between firms with good performance and firms with poor performance? These issues have a deep need to explore.This paper is divided into the following parts to study the problems above:The first chapter is mainly to introduce research background, purpose and method, to display main content and the frame of this paper, and to point out the main contribution.The second chapter is literature review and present status of development on CSR reporting in china. When reviewing the literature, the author finds studies abroad are relatively mature, while domestic researches are almost based on the annual reports. Researches rarely refer to the social responsibility reports, especially the readability study of corporate social responsibility reports. Then the author focuses on the development of CSR reporting in china, whose feature can be summarized as follow:the developing history is short but developing speed is fast. There are still a number of problems on the quality of CSR reporting remain to be solved. What makes uneven distribution of CSR reporting is that financial institutions and state-owned enterprise publish overwhelming majority of CSR reporting.The third chapter is theoretical analysis and hypotheses. In this chapter the author firstly gives the definition of readability. Readability is an element of the effective communication of accounting information. Put simply, if a user of accounting information cannot read and comprehend the content of the documents they are provided, a shared understanding between users and author cannot be achieved. Then the author points out how the issue about readability of CSR reporting is put forward. Managers make many decisions motivated, at least partly, by a desire to make it more difficult for investors to uncover information that the managers do not want uncovered, as it would affect the firms’stock prices. Therefore, by increasing the processing cost of adverse information, managers hope that it is not reflected in stock prices or in prices with a delay. Then the author puts forward the techniques to measure the readability of CSR reporting. There are two measures of readability:the formula method and the method of measuring readability without formula, and it is the formula method which is always used in the research. The most popular statistic used to measure the readability is Flesch Reading Ease formula. Through the reviewing of literature the author finds that it is the length of CSR reporting and the number of word per sentence which affect the readability most. So the author proposes the hypotheses as follow:the length of CSR reporting prepared by firms with good performance are longer than that of firms with poor performance, the number of word per sentence of CSR reporting prepared by firms with poor performance is more than those of firms with good performance.The fourth chapter focuses on the design of study. Firstly the author introduced how to sample. When sampling, the author picks fifty firms with best performance and fifty firms with poorest performance in stock market of Shanghai and Shenzhen. Then the author picks EPS as the variable measuring firm performance, because as a relative value, EPS eliminates the influence of factor of scale, which is what makes EPS the best variable measuring firm performance.The fifth chapter is the empirical results and interpretation. In this chapter the author carries on the empirical study on difference of length and number of word per sentence between firms with good performance and firms with poor performance. And the empirical results prove the accuracy of hypotheses.The sixth chapter of this paper is case study. The author takes Guangxi Liugong Machinery limited Company and Xinjinag Guannong Fruit&Antler group limited liability Company as the case. Through comparing CSR reporting prepared by the two companies, the author proved the hypotheses above.The seventh chapter of this paper summarizes research conclusion and puts forward policy recommendations.This paper contributes to the literature in the following ways. Firstly, this is sample study to examine the cross-sectional variation in CSR reporting readability, which enriches the literature about study on readability. Secondly, this paper puts the issue of readability to administration to establish policies for standardizing compiling of CSR reporting. What’s more, this paper can remind the investors to pay attention to impression management used by managers and make the right choice.