III. Data and Methodology
1. Data Description
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III. Data and Methodology
The Research method is divided into three parts: 1. DATA Description; 2. Measurement of Variables; and 3. Empirical Model Setting.
1. Data Description
In the research, the database used is “TSE/OTC Adjusted Price (Daily)- Excluding Right and Dividend” from Taiwan Economic Journal (TEJ). This database only incorporates the data of the companies that are now listing, namely the data of the companies that have already delisted is excluded.
The list of companies that shall submit CSR report Year 2014 and the previous CSR reports of corporations are collected at Market Observation Post System (MOPS) of TWSE.
1.1 Sample Selection
According to the database of TEJ, the population of part 1 includes 787 observations of all listed companies in Taiwan Stock Exchange from March 11, 2014 to August 21, 2015.14 The population of part 2 is almost the same as that of part 1, except that since the companies of Group 4B do not file their CSR reports, there is no base date of them. Therefore, Group 4B is unqualified for the research of part 2. In part 2, the number of samples is 259.
1.2 Sample Period Selection
There are two parts of observed period adopted in this study. The first part of the period
14 TDR and F-shares are not included. The company that has terminated listing before April 20, 2017 is not included as well.
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of observation is determined by 180 transaction days before and after the release of the new regulations, which falls on November 26, 2014.15 The hypothesis of this setting of the period is that investors will care only about whether a company files its CSR report instead of the content inside. On the contrary, the other part of the period of observation is calculated depending on each company’s filing day of the CSR reports of year 2014. The total observation period will be 180 days before and after the filing day.16
In the study of Waddock and Graves (1997), corporates social performance (CSP) is proved to be positively related to prior financial performance and positively associated with future financial performance. Hence both before and after 180 days of the reference dates are selected in this study.
1.3 Population Classification
These corporations are divided into four groups. As mentioned in the introduction, all the listed companies are divided into “compulsory group” and “noncompulsory group” at the beginning. Afterwards, each group is split into “voluntary group” and “non-voluntary group.”
The “voluntary group” under “compulsory group” is Group 1: Forerunners, namely
“voluntary before compulsory.” The “non-voluntary group” under “compulsory group” is Group 2: Rule-Followers, namely “non-voluntary before compulsory.” The “voluntary group”
under “noncompulsory group” is Group 3, namely “voluntary before the rules.” The
“non-voluntary group” under “noncompulsory group” is Group 4, namely “non-voluntary before the rules.” In Group 3, it can be split into Group 3A: Saints, the company voluntary before and after the release of new regulations, and Group 3B: Fake Saints, the company
15 November 26, 2014 is counted in the later period.
16 The filing day of each company is counted in the later period.
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only voluntary before the rules. It is noteworthy that the numbers of this group are quite few;
from a statistical point of view, insufficient sample size can lead to an increase in statistical inference uncertainty; therefore it will not be discussed in the following. Group 4 can also be divided into Group 4A: Rule-Surfers, the company voluntary only after the release of new regulations, and Group 4B: Rebels, namely non-voluntary before and after the rules. The conditions of each group are mentioned as follows.
Group 1: Forerunners—Voluntary before compulsory
This group includes the company voluntary to disclose CSR reports already before the law and is obligated after the law. In the sample, the company has filed CSR report of year 2013.17 There are 163 companies are obligated to prepare and file CSR reports of 2014.
Among them, there are 67 companies that have already filed CSR reports of year 2013. As a result, there are 67 companies in Group 1.
Group 2: Rule-Followers—Non-voluntary before compulsory
This group includes the company which does not disclose CSR report before the law and is obligated after the law. The number will be 163 of the total compelled listed companies deducts 67 of Group 1. Therefore, there are 96 companies in Group 2.
In Group 2, it is noteworthy that under the rules, few companies perform even better as predicted. Some companies file not only CSR reports of year 2014, but also prepare the previous year(s) of CSR reports. Some even provide English version of CSR reports although it is not necessary. This is consistent with the results of the research which Kagan and
17 Even the CSR report is filed after the release date of new regulations, the company that filed CSR report of year 2013 is counted as voluntary.
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Thornton (2003) conducted that companies have the tendency to go “beyond compliance”
with tightening regulatory requirements.
Group 3A: Saints—Voluntary before and after the release of new regulations
This group includes the one voluntary to disclose CSR report already before the law and is not obligated after the law. The total companies filing CSR report of year 2013 are 125.
The total companies of Group 1 are 67. Still, two firms are excluded since they do not have enough transaction days to observe. Thus, the companies of firms in Group 3A are 57.18
Group 4A: Rule-Surfers—Voluntary only after the release of new regulations
Group 4A incorporates the one voluntary to disclose CSR report after the release of the rules but is not obligated after the law. The total companies filing CSR report of year 2014 are 252. After excluding the compulsory companies, namely Group 1 and Group 2, and the companies that have already been voluntary before the release of new regulations, namely the companies in Group 3A, the companies of Group 4A are 39.19
Group 4B: Rebels—Non-voluntary before and after the rules
The group is inclusive of the one which does not disclose CSR report before or after the law nor is obligated after the law. The total number of listed companies excluding the firms which have filed CSR reports of year 2013 or 2014 will be the total number of this group.
That is, all listed companies deduct those of Group 1, Group 2, Group 3A, and Group 4A.
18 Firm 2029, 2062, 2369, 3266, 3669, 4119, 4919, 4960, 6166, 8271, and 9911 filed CSR report of year 2013 but did not file CSR report of year 2014. They are still counted in Group 3A.
19 The companies which have already suspended or have not listed in the observed period are not included. In Group 3A, there are 11 companies did not file CSR report of year 2014.
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Nevertheless, few companies who suspend listing during this period are removed from the observed objects. Therefore, there are 528 firms in Group 4B.
Table 2 Categories of population and numbers of each category
Categories Numbers of firms
All listed companies 787
Group1 67
Group2 96
Group3A 57
Group4A 39
Group4B 528
Source: This study and Taiwan Economic Journal (TEJ) database