This approach has been adopted by several researchers

commonly utilised. This approach has been adopted by several researchers in which an item
scores one if it is disclosed and zero if it is not disclosed (Abdurouf, 2011; Haji, 2013; Aribi
and Gao, 2010; Anwar et al., 2010).
Following prior research (e.g., Botosan, 2004; Jonas and Blanchet, 2000; Beest et al.,
2009; Chakroun et al. 2014), this study develops a disclosure index to measure the level of
CSR quality based on the qualitative characteristics of accounting information suggested in the
conceptual frameworks of the International Financial Reporting Standards (IFRS) (2010A).
This allows for the evaluation of the qualitative characteristics of financial information by
weighted measure as provided in earlier studies (Beest et al., 2009; Chakroun & Hussainey,
2014). The study adopted the four qualitative characteristics of CSR information: “ relevan ce,”
“faithful representation,” “understandability” and “comparability
1
” to assess the CSR
disclosure quality in Annual Reports. The reliability and validity of our disclosure scores are
checked by comparing the correlation between the scores produced by the first author with
those produced by the second author for a sample of annual reports.
Measuring Firm Value
This study used three measurements of firm value. These are Tobin’s Q ratio, market
capitalization and return on assets (ROA). Although there is no agreement in the literature
1 Definition of each characteristic is included in Appendix 2.

9
about an ideal measure for firm value (Mangena et al., 2012; Albassam, 2014), these measures
are used extensively in prior studies. The standardization of this type of measure would be
helpful to develop comparability with other studies (Munisi and Randoy, 2013).
Our first measure of firm value is the natural logarithm of a company’s Tobin’s Q ratio
at the end of the fiscal year. Tobin’s Q = [(total debt + market value of equity) / book value of
total assets]. The second measure is the market capitalization (Uyar and Kilic, 2012). Market
capitalization is measured as the market value of common equity at the end of a company’s
year of operations. The third measure is the return on assets (ROA) that determines a
company’s net income in relation to its total assets.
5. REGRESSION MODEL
To test the hypotheses (H1, H2), we control for corporate governance variables and
firm characteristics. In particular, we consider the following variables: Board size, independent
directors, governmental ownership, managerial ownership, CEO duality, frequency of Board
meetings, audit committee size, remuneration committee size, liquidity, leverage, dividends,
asset growth and capital expenditure. In addition, the year and industry fixed effects were also
included to control for the year and industry effect. Equation 1 examines the value relevance
of CSR disclosure quantity while equation 2 examines the value relevance of CSR disclosure
quality.