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This chapter focuses on a detailed discussion of the factors that affect CSR disclosure in Saudi Arabia listed companies. The chapter explains the application of CSR in different contexts based on the findings made from the information retrieved from various articles in regard to the topic of study. The purpose of this chapter is to explain how the model specification and hypotheses were being developed and tested. This chapter will discuss the signs and the directions of relations among variables.

Section 3.1 specifies CSR as determined by a set of variables modeled as a system of simultaneous equation. This study uses existing literature to select and define variables in this system. This section continues by stating the hypothesis regarding the signs of the coefficient. Section 3.2 presents the model that will be used, setting out the variables that will be employed in the present study. Finally, this chapter also describes the sample selection process and the method of analysis employed.

This study main objective is to investigate the factors that affect CSRD in Saudi Arabia companies’ listed on Tadawul. The study focuses on several articles that involve the use of CSR in different firms in diverse regions and countries across the world. The research is aimed at establishing the variables of CSR in their use at different organizations that they are commonly utilized. Acknowledging the impact that CSR has on both large firms and SMEs, it is essential to probe on the benefits, as well as shortcoming associated with the corporate responsibility.

Find information about legitimacy theory and stakeholder theory and put here.

In order to achieve the stated objective, this study will test the relationship between the dependent variable and various independent variables. The dependent variable for this study is corporate social responsibility disclosure (CSRD). The analysis of CSRD is made using equal-weighted index, that is, a scoring system which assigns a point for each CSR theme pertaining to any of the categories considered. Disclosure scores for each company are added and not weighted, because it is assumed that each item, of disclosure is equally important (Branco & Rodrigues, 2008). Several empirical studies in the area were of great utility in developing the CSRD index used (Adams et al, 1998; Gray et al, 1995; Hackson & Milne, 1996; Branco & Rodrigues, 2008). CSRD refers in this study is the disclosure in the following four categories:- environmental, human resources, product and consumers and community involvement.

Explain here what each categories mean- environmental, human resources, product and consumers and community involvement.

The data for the independent variables are extracted from the companies’ 2013 annual reports. Several score sheets are used to measure each of the independent variables according to its scale of measurements (nominal, ordinal, interval and ratio). Following in the same line as Branco & Rodrigues (2008), this study will use the same factors or determinants variables. The independent variables used in this study will be company size, consumer proximity, environmental sensitivity, profitability and leverage, which will be further discuss in the following section.

Based on the literature review done in chapter 2, the following conceptual framework was developed to suit the study as per figure 1 below. This study use CSRD as the dependent variable. There are five independent variables, which are predicted to have an associated with the dependent variable. Basically this study will show whether there is a relationship between independent variables and dependent variables

Figure 1: Conceptual framework

IV

DV

Environmental sensitivity

Profitability

Leverage

Size

Consumer Proximity

CSRD

3.1.1 Size ( explain what this mean, get from all the article its definition and how to measure it)

Thus, the study suggests the following hypothesis:

H1: There is a (positive or negative depend on your article) relationship between company size and CSRD.

3.1.2 Consumer proximity (( explain what this mean, get from all the article its definition and how to measure it)

Thus, the study suggests the following hypothesis:

H2: There is a (positive or negative depend on your article) relationship between consumer proximity and CSRD.

3.1.3 Environmental sensitivity (( explain what this mean, get from all the article its definition and how to measure it)

Thus, the study suggests the following hypothesis:

H3: There is a (positive or negative depend on your article) relationship between environmental sensitivity and CSRD.

3.1.4 Profitability (( explain what this mean, get from all the article its definition and how to measure it)

Thus, the study suggests the following hypothesis:

H4: There is a (positive or negative depend on your article) relationship between profitability and CSRD.

3.1.5 leverage (( explain what this mean, get from all the article its definition and how to measure it)

Thus, the study suggests the following hypothesis:

H2: There is a (positive or negative depend on your article) relationship between leverage and CSRD.

This study will use a content analysis approach to examine the information cited byall traded companies listed on Tadawul in 2013. Content analysis has been defined as a systematic applicable technique for compressing many word of text into fewer content categories based on explicit rule of coding (Gao, 1996). Content analysis enable researcher to go through large volume of data with relative ease in a systematic fashion (Gao. 1996). Content analysis allows inference to be made which can then be corroborated using other methods of data collection. This study uses a content analysis to collect information for dependent variable and independent variables by checking each annual report of listed companies. This study use the simplest form of content analysis by detecting the presence or absence of information.

Data is collected for 2013 as it is the most recent years for which company annual reports are available. The sample is used for two reasons (1) consistent with prior studies that assumed listed companies are more likely to have resources to adopt CSR and failure to do so is more likely reflect the result of a deliberate choice (2) Saudi listed companies make the most important contributions to the Saudi Arabian economy.

The data for this research is secondary in nature and obtained from company online annual reports. Since this study is related to CSR disclosure, only companies that report CSR activities in their annual report will be selected as the population of the study. Companies without information of CSR activities in the annual report will not be taken into consideration. Table 1 shows the breakdown of the sample with the final sample selection. A total of ???? ( based on your excel data collection, how many company information you found) datasets were collected during February 26, 2015 until ?????? (give specific date from when you collect the data) from ?? ( how many companies) companies.

3.2.2 TEST PROCEDURE

To test the hypothesis, a model is developed for a regression analysis on the relationship between dependent variable and the independent variables. Multiple regression analysis is used because regression analysis represents a well-established and robust statistical tool for investigating the significance and extent of any relationship or association between a variable of interest and other explanatory variables. The regression model is utilized to find out the results of this study and this is in tandem with the previous study (Arussi, et al. 2009)

A formal regression equation used to test the hypotheses is

CSRD = β0+ β1size+ β2proximity+ β3sensitivity+ β4profitability+ β5leverage+Ɛ

Where

CSRD = Total disclosure score in four categories

Size = number of total asset

Proximity = consumer proximity is a binary measure of high profile and low profile.

Sensitivity = environmental sensitivity is a binary measure of more sensitive and less sensitive.

Profitability = percentage of return on asset (ROA)

Leverage = percentage of total asset over total debt

Ɛ = error term

This chapter discusses the dependent and independent variables used in the model for this study of CSRD .This chapter concludes with the research methodology employed in this study.