How does mandatory CSR reporting affect supply chain? A new perspective from suppliers

Exploiting a quasi-natural experiment which mandates a subset of Chinese listed firms to report corporate social responsibility (CSR) activities, this paper examines how mandatory CSR disclosure affects suppliers' willingness to extend trade credit. We document that mandatory CSR disclosure firms suffer a significant shrinking in the volume of trade credit, which is driven by the supply side instead of the demand side. Further mechanism analyses reveal that both financial condition deterioration and interest conflicts contribute to adverse policy effects. These two factors negatively impact the credit quality of mandatory firms and then weaken credit quality after the mandate subsequently undermines suppliers' willingness to lend. Additionally, the negative association between mandatory CSR disclosure and trade credit is mainly concentrated on highly policy-exposed corporates, that is, state-owned enterprises (SOEs) and high-polluting firms. Our work innovatively evaluates CSR effects from the perspective of suppliers, which provides a new insight into CSR management along the supply chain for academics and practitioners.     

Mandatory CSR disclosure,monitoring and investment efficiency: evidence from China

This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms’ investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand‐alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control‐ownership wedge, state‐owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems.     

Mandatory CSR disclosure and analyst forecast properties: Evidence from a quasi-natural experiment in China

Based on a quasi-natural experiment that mandates a subset of listed firms to issue standalone corporate social responsibility (CSR) reports, we examine whether mandatory CSR disclosure improves analysts’ information environment. We focus on two properties of analysts’ earnings forecasts: forecast error and forecast dispersion. We find that the mandatory issuance of standalone CSR reports is related to less forecast error and less dispersed forecasts, and the effect varies with the firm-level information environment and province-level marketization. Additional tests show that the improvement in forecast properties is mainly driven by CSR reports that i) are of high quality and ii) contain more long-term-oriented information than other CSR reports. Our findings provide evidence that mandatory CSR disclosure plays an important informational role for financial analysts.     

Does Corporate Social Responsibility (CSR) Create Shareholder Value? Evidence from the Indian Companies Act 2013

In 2013, a new law required Indian firms, which satisfy certain profitability, net worth, and size thresholds, to spend at least 2% of their net income on corporate social responsibility (CSR). We exploit this regulatory change to isolate the shareholder value implications of CSR activities. Using an event study approach coupled with a regression discontinuity design, we find that the law, on average, caused a 4.1% drop in the stock price of firms forced to spend money on CSR. However, firms that spend more on advertising are not negatively affected by the mandatory CSR rule. These results suggest that firms voluntarily choose CSR to maximize shareholder value. Therefore, forcing a firm to spend on CSR is likely to be sub‐optimal for the firm with a consequent negative impact on shareholder value.     

The real effects of stock prices: learning,disclosure and corporate social responsibility

This paper develops a tractable model to study the impact of corporate social responsibility (CSR) on real decisions (i.e., production and disclosure decisions) of a firm which can learn from the stock price. Firms with high CSR disclose more precise information, improving the stock liquidity and price efficiency, which also benefit liquidity traders and consumers. Interventions by regulators in firms’ disclosure decisions, such as mandatory disclosure, can improve social welfare, but their effectiveness depends on the degree of CSR. We also discuss the implications of learning from the price.     

Corporate Social Responsibility,Institutional Environments,and Tax Avoidance: Evidence from a Subnational Comparison in China

We examine the association between mandatory corporate social responsibility (CSR) disclosure and economic contribution (tax payments) in China, where we expect this association to be affected by a region's institutional attributes. Exploiting a dataset that shows cross-regional variations in institutions, we find that in regions with lower institutional quality, firms claiming to be socially responsible actually avoid taxes, whereas CSR disclosure in other regions is more aligned with the social responsibility aspect of tax compliance. Our study contributes to the literature by demonstrating that in the absence of proper institutions, CSR disclosure is likely to remain a form of window dressing.     

Mandatory corporate social responsibility disclosure and dividend payouts: evidence from a quasi‐natural experiment

Employing the enactment of a regulation that mandates a subset of firms to disclose their corporate social responsibility (CSR) activities as a quasi‐natural experiment, we find that mandatory CSR disclosure reduces firms’ dividend payouts significantly. Further analyses indicate that the negative relation is more pronounced for firms with weaker corporate governance mechanisms, where shareholders lack of effective tools to protect themselves against pressures from stakeholders, and a shift of relative power towards stakeholders is more likely to occur. Our paper provides a specific channel through which mandatory CSR disclosure benefits stakeholders at the expense of shareholders.     

Determinants of corporate social disclosure: Empirical evidence from Bangladesh

We explore the potential firm and industry characteristics that determine the corporate social responsibility (CSR) disclosure practises by Bangladeshi listed firms. We use a CSR disclosure checklist to measure the extent of CSR disclosure in the annual reports and a multiple regression analysis to examine the determinants of CSR disclosure. Our study finds that CSR disclosure has positive and significant relationships with export-oriented sector, firm size and types of industries. We also find a negative relationship between CSR disclosure and family ownership. The overall findings of our study provide empirical evidence which suggests that a number of firm and industry characteristics are important determinants of the extent of CSR disclosures in a developing country like Bangladesh. Our findings can help the policy makers to adopt necessary regulatory reform to improve the CSR practises and enhance organisational legitimacy.     

Mandatory disclosure and learning from external market participants: Evidence from the JOBS act

This paper examines whether mandatory disclosure affects the extent to which firms learn from external market participants. Conventional wisdom suggests that mandatory disclosure should increase the total amount of information in financial markets. However, disclosure can also reduce investors' incentives to acquire and produce information. Using the JOBS Act to identify variations in disclosure requirements, this paper finds that firms with reduced disclosure requirements attract more informed investors and learn more from financial markets than those with stricter disclosure requirements. This learning is concentrated among firms that attract sophisticated investors, particularly those with industry expertise, and weakens once firms are forced to disclose more information. Overall, the results suggest that one benefit from regulators’ recent efforts to reduce U.S. firm disclosure requirements is an increase in firm learning.     

Informative or distracting: CSR disclosure of peer firms and analyst forecast accuracy

We investigate the relationship between the CSR disclosure of peer firms and the analyst forecast accuracy of the focal firm. We find a negative association between peer CSR disclosure and analyst forecast error of the focal firm, indicating that peer CSR disclosure is informative. This negative association is more pronounced when the information environment of the focal firm is worse, when the correlation in fundamentals between the focal firm and its peers is higher, when the business of the focal firm is less complex, when the focal firm has more expert analyst coverage, when the focal firm's financial performance is more sensitive to CSR engagement, or when the quality of peer CSR disclosure is higher. Overall, we show that peer CSR disclosure conveys value-relevant information about the focal firm. Our study enriches the literature on both analyst forecasts and peer information, and we also provide important implications for practitioners in understanding the role of CSR disclosure in capital markets.