Islamic religiosity, socially responsible investing decisions, and Corporate Social Responsibility assurance

This dissertation contributes to the literature on religiosity, corporate social responsibility (CSR),social and environmental accounting (SEA), socially responsible investing (SRI), and CSR assurance.Pakistan is selected as a proxy for Islamic countries, given that over 96.4% of the total population isMuslim, and Islam, the official religion specified in the Constitution, significantly influences thepersonal, social, and professional lives of its citizens. Specifically, this dissertation has two main aims.The first is to provide empirical evidence of the influence of Islamic religiosity on subjects' SRIdecisions based on social and environmental aspects of CSR. The second is to provide experimentalevidence of the influence of Islamic religiosity on subjects' SRI decisions based on whether CSRinformation is assured or not. These aims are achieved via the three studies that comprise thisdissertation. The objective of the first paper is to provide empirical evidence of the influence of Islamicreligiosity on subjects' SRI decisions to invest or divest for both short- and long-term gain in aprofitable firm which is alleged to employ child labour. The objective of the second paper is toinvestigate the influence of Islamic religiosity on business executives' investment and divestmentdecision-making with respect to a fictional firm faced with allegations of environmental misconductin Pakistan. The objective of the third paper is to provide between-subject experimental evidence ofthe influence of Islamic religiosity on subjects' SRI decisions in three situations, namely when theCSR information is assured by an assuror who is perceived to have high religious adherence, when theCSR information is assured by an assuror who is perceived to have low religious adherence, and whensuch information is not assured. This dissertation includes an introduction, three separate papers, anda conclusion. Summaries of the three papers are outlined as follows. The first paper is entitled, "The Influence of Islamic Religiosity on Socially Responsible Investing Decisions on Firms Alleged to Employ Child Labour". The context of firms' employment of child labour is selected because it has been identified as an important and controversial issue in many emerging countries, including Pakistan. Several recent studies have used archival databases and unidimensional measures to show the importance of religiosity in various accounting and auditing contexts. This paper extends this strand of research by measuring individual value-based religiosity and examining its influence on subjects' SRI decisions. Specifically, this paper uses the Muslim Religiosity-Personality Inventory (MRPI) framework developed by Krauss et al. (2005) to measure Islamic religiosity. MRPI is based on a theoretical framework which comprises the core internalized Islamic values (intrinsic) and external ritualistic behaviour (extrinsic) embedded in Islam and Islamic culture. Based on the MRPI framework, Islamic values are represented by Islamic worldview, and Islamic external ritualistic behaviours are represented by Islamic religious personality. Islamic worldview is particularly relevant to this research because it represents deeply held intrinsic, enduring, and stable values that are grounded in core Islamic principles, and evidence shows that Islamic worldview is more likely to influence subjects' decisions. A realistic scenario-based survey was administered to 127 professional accountants, and this survey was repeated with 164 business executives. These two groups were selected because they were experienced in using both financial and non-financial information, and the results are consistent for both samples. This paper provides empirical evidence that subjects who score higher (lower) on Islamic worldview are less (more) likely to invest, and more (less) likely to divest in a profitable firm that is alleged to employ child labour for both short- and long-term gain. The second paper is entitled, "Contextualizing Islamic Religiosity and Environmental Accounting in Pakistan". Examining religiosity is important, particularly in countries where religion pervades almost all domains. Prior studies have extensively examined environmental accounting, particularly in developed countries. However, in the unique context of developing countries, especially those with highly developed religious systems, environmental accounting and its implications require further examination. This paper extends the literature on Islamic accounting, CSR, and SEA by presenting empirical evidence on the impact of Islamic religiosity on business executives' investment and divestment decision-making with respect to a fictional firm faced with allegations of environmental misconduct in the Islamic context of Pakistan. Consistent with the first paper, this study also uses the MRPI framework developed by Krauss et al. (2005), which categorizes Islamic religiosity into Islamic worldview and Islamic religious personality, to measure Islamic religiosity. Islamic worldview is relevant to this study because it represents deeply held and intrinsic values that are grounded in core Islamic principles, and thus more likely to influence subjects' decisions. A realistic scenario-based survey using a sample of 176 junior business executives was conducted. The findings show that executives who place a higher (lower) value on Islamic worldview are less (more) likely to invest and more (less) likely to divest in a profitable firm that is alleged to have been involved in environmental misconduct. This study concludes that executives, guided by their religion, make investment and divestment decisions that transcend those of the supposed profit-maximizing and less religious person. The third paper is entitled, "Religion, Religiosity, Corporate Social Responsibility Assurance, and Socially Responsible Investment Decisions". This study contributes to the literature by examining the role of religion and intrinsic religiosity in the context of subjects' SRI decisions. The critical role of religion is operationalized in this paper via the concept of perceived religious adherence which refers to the extrinsic factors individuals demonstrate in complying with the beliefs and practices promulgated by their religion. Intrinsic religiosity, which reflects individuals' deeply held and enduring values, has a significant influence on values which in turn affect attitudes and behaviours. This study presents a between-subject experiment that investigates the influence of intrinsic Islamic religiosity on subjects' SRI decisions in three situations, namely when the CSR information, in the context of child labour, is assured by an assurer who has high religious adherence, when the information is assured by an assurer who has low religious adherence, and when such information is not assured. Pakistan, this study's proxy for Islamic countries, is selected because Islam is the official religion and is deeply embedded in the social, ethical, personal, and professional lives of its adherents. Consistent with Papers 1 and 2, this study also measures individual subjects' intrinsic Islamic religiosity values, known as Islamic worldview, by using the MRPI framework developed by Krausset al. (2005). The context of child labour is selected for examination because it has been identified as one of the most important human rights issues in many emerging countries, including Pakistan. The experiment was administered to 279 professional accountants and repeated with 286 junior business executives. These two groups were selected because of their expertise and experience in using both financial and non-financial information, and results are consistent for both samples. The findings show that subjects who score higher (lower) on intrinsic Islamic worldview are more (less) likely to invest in a firm where the CSR information is assured by the assurer who is perceived to be high on religious adherence. In contrast, in both situations, where the CSR information is assured by the assurer with low religious adherence, and where such information is not assured, subjects who score lower (higher)on intrinsic Islamic Worldview show more (less) willingness to invest. Additionally, the results suggest that subjects who score higher on intrinsic Islamic worldview demonstrate the most willingness to invest in a firm where the CSR information is assured by the assurer with high religious adherence. However, subjects who score lower on intrinsic Islamic worldview demonstrate the most willingness to invest in a firm where such information is assured by the assurer with low religious adherence. The practical implications of these three papers are as follows. The findings of the first paper may interest global agencies, governments, regulators, and firms in developing and implementing strategies to address challenges in improving and regulating CSR practices and enhancing SRI, particularly in Islamic countries. The findings also suggest that governments and regulators may collaborate with religious institutions and professional bodies to tackle deeply entrenched social practices. Specifically, companies in Islamic countries may involve professionals, particularly those who place a higher emphasis on intrinsic Islamic religiosity, in the complex process of developing strategies and policies to regulate CSR practices by considering specific religious contexts. The results may also be useful for global supply chains to realistically understand the drivers behind the employment of child labour and devise comprehensive and multi-pronged solutions to address this critical and controversial problem. The findings of the second paper have implications for global bodies in developing .......[See attached thesis files for full Abstract/Description text].