EFFECT OF SOCIAL RESPONSIBILITY ACCOUNTING ON FIRMS PERFORMANCE: A STUDY OF SELECTED MANUFACTURING FIRMS (CHAPTER 1,2,3)

CHAPTER ONE
INTRODUCTION

1.1 Background of the Study

There have been many attempts to experiment with accounting statements that reflect economic, social issues; however their take-up has been slow or non-existent. Outside of the Value Added Statement, the accounting profession has not supported any of these developments (Bebbington et al., 2001). Gore (2006) identified two explanatory factors to explain why accounting bodies have not initiated change in this area. First, he found that the separation of financial and management accounting bodies meant that many accounting bodies did not feel that these issues (characterized as management accounting issues) were within their mandate. Secondly, he suggested that they first had to meet the industry demand, and as such industry interest would drive the accounting profession’s interest.

Social accounting for instance provides guidelines and tools to collect, analyse and monitor financial, social data (and thus guide behavior). Although accounting as a professional field has a lengthy history dating back to at least the mid-nineteenth century (Tinker, 1985), social responsibility accounting and reporting is more recent and burgeoned during the early 1970s (Mathews, 2007).

1.2 Statement of Research Problem

Several studies have been carried out in the area of social responsibility accounting and its impact on the firm’s financial performance. Most organizations are beginning to spend big portions of their earnings on social actions and this is slowly leading them towards accounting and having an effect on their financial performance (Porter et al., 2006).

Many researchers have since the latter half of 1990s been interested in researching various social accounting issues. Gray et al (1997) in their paper ‘Struggling with the praxis of social accounting’, attempted to form a basis for the emergence of social accounting standards. Adams (1999) surveyed UK companies and concluded that corporate and environmental reporting is still, at best, a marginal activity in practice. Gordon (2000) examined the use of accounting to create environmental and social visibilities, and facilitate disclosure and debate. Deegan (2002) considered the desire to legitimize organization operations as one of the many possible motivations for social responsibility accounting (Kalunda, 2007).

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