Corporate social responsibility and tax aggressiveness: An empirical analysis

This study examines the association between corporate social responsibility (CSR) and corporate tax aggressiveness. Based on a sample of 408 publicly listed Australian corporations for the 2008/2009 financial year, our regression results show that the higher the level of CSR disclosure of a corporation, the lower is the level of corporate tax aggressiveness. We find a negative and statistically significant association between CSR disclosure and tax aggressiveness which holds across a number of different regression model specifications, thus more socially responsible corporations are likely to be less tax aggressive in nature. Finally, the regression results from our additional analysis indicate that the social investment commitment and corporate and CSR strategy (including the ethics and business conduct) of a corporation are important elements of CSR activities that have a negative impact on tax aggressiveness.     

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.     

Corporate social responsibility reporting in financial institutions: Evidence from Euronext

The legitimacy, the identity and the social impact of financial institutions go beyond the generation of revenues for providers of capital, through financial intermediation. Financial institutions bear significant corporate social responsibility (CSR). We produce measures of CSR disclosure and explore the determinants of CSR disclosure practices in a cross section of financial institutions. Working with financial companies whose stocks are listed in the Euronext stock exchange, we find that the extent of disclosure of CSR practices is greater in large companies and also in companies of greater financial leverage. Therefore, increased corporate visibility and financial risk increase stakeholder demand for transparency on the social impact of financial institutions and their CSR practices.     

Voluntary CSR disclosure,institutional environment,and independent audit demand

Using a sample of A-share listed companies on the Shanghai and Shenzhen Stock Exchanges, this study examines the impact of voluntary corporate social responsibility (CSR) disclosure on independent audit demand in different institutional environments. The sample covers the 2008–2016 period and excludes firms that are required to disclose CSR information. The findings show that compared with companies that choose to not disclose such information, companies that voluntarily disclose CSR information prefer to employ “small” accounting firms for auditing services, although the auditing fees are much higher. However, as the institutional environment improves, this preference is weakened. Further analyses show that this preference is stronger in enterprises where CSR disclosure is driven by strong political motivations and managerial self-interest motivations. Legitimate motivations and economic motivations do not significantly impact the preference for “small” audit firms. Furthermore, this preference is more obvious in enterprises with poor operational performance and low information disclosure quality, and it increases as CSR disclosure level decreases. The study enriches our understanding of the economic consequences of voluntary CSR disclosure and the factors that influence independent audit demand. The results also have implications for the construction and regulation of China’s system for supervising CSR information disclosure in the transitional phase.     

Corporate social responsibility,country-level predispositions,and the consequences of choosing a level of disclosure

We study the different levels of corporate social responsibility (CSR) disclosures of the largest European firms. We find that firms are more predisposed to disclose more CSR information in countries with better investor protection, higher levels of democracy, more effective government services, higher quality regulations, more press freedom, and a lower commitment to environmental policies. Our analysis of the association of different levels of CSR disclosure with share prices indicates that a high level of CSR disclosure is associated with higher share prices, whereas a low level of CSR disclosure in sensitive industries is associated with lower share prices (compared to no disclosure). These results are also present when we analyse changes in CSR disclosure and are robust to the inclusion of an accounting quality measure in our model. The overall effect of the association of higher levels of CSR disclosure with higher share prices is stronger in countries with more democracy, more government effectiveness, better regulatory quality, and more press freedom. Therefore, market participants find CSR disclosures more informative in countries where investors are in a better position to voice their concerns and where there is better regulation and more effective government implementation of regulations.     

Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency

We examine the benefits associated with corporate social responsibility (CSR) disclosure in an international setting covering 31 countries. Using variables such as the legal status of labor protection, CSR disclosure requirements, and public awareness of and attitudes toward CSR issues, we divide countries into more and less stakeholder-oriented groups. We find a negative association between CSR disclosure and the cost of equity capital; this relationship is more pronounced in stakeholder-oriented countries. We also find evidence that financial and CSR disclosures act as substitutes for each other in reducing the cost of equity capital. This study furthers our understanding of CSR disclosure and its consequences.     

Strange bedfellows? Voluntary corporate social responsibility disclosure and politics

We show a reliable association between voluntary corporate social responsibility (CSR) disclosure and company political interests, which we proxy by company employees’ contributions to political action committees and statewide voting in presidential elections. This relation is most pronounced for the contributions of Democratic employees at companies in states that vote for the Democratic presidential candidate. We also show a positive association between corporate political contributions and excess stock returns. A portfolio strategy of investing based on company size, CSR disclosure intensity and corporate political contributions produces a significant positive mean excess stock return of 4.5 per cent over 3 months following CSR disclosure.     

Tax avoidance,tax management and corporate social responsibility

This study examines the effect of three measures of corporate social responsibility (CSR) — corporate governance, community and diversity on tax avoidance in firms that use auditor‐provided tax services. This is one of the first studies, to our knowledge, to empirically relate tax avoidance, tax management and CSR literature. By separating the strengths and concerns for each CSR measure, we are able to analyze the effects of a firm's negative and positive social actions on tax avoidance. We find that the interaction of community concerns with tax management fees positively affects both GAAP and Cash ETR, while the interaction of corporate governance strengths and diversity concerns with tax management fees negatively affects Cash ETR. Our results are similar when we use Excess ETR that is not explained by firm specifics. We find additional evidence that CSR affects tax avoidance when we divide firms into portfolios based on CSR levels. Our findings suggest that future studies on tax avoidance and tax management should incorporate CSR.     

Analyst coverage,corporate social responsibility,and firm value: Evidence from China

This paper examines how analyst coverage affects firms' engagement in corporate social responsibility (CSR). Using data on Chinese listed companies from 2010 to 2017, we find that (1) analyst coverage significantly enhances CSR engagement; (2) ownership structure, political connection, corporate governance, and media coverage moderate that association; (3) a plausible mechanism is that analyst coverage increases CSR by increasing site visits from institutional investors and improving firms' internal controls. In addition, the interaction between analyst coverage and CSR engagement has an economically sizeable incremental effect on firm value. Overall, our findings indicate that financial analysts play a critical external monitoring and informational role for organizations.     

The IPO corporate social responsibility information disclosure: Does the stock market care?

We create textual information indices using corporate social responsibility (CSR) information extracted from IPO prospectuses in China. We use the indices to measure the issuers’ corporate social performance (CSP) and corporate environmental performance (CEP) and assess how the stock market reacts. We find that CSP disclosure is significantly related to the post‐market performance of the firm. Specifically, better CSP disclosure is correlated with higher post‐IPO listing holding period returns among firms that do not disclose donations or environmental expenditures, although the association does not hold for firms that make donations and environmental expenditures. In addition, institutional investors seem to care more about the CEP information for a firm than the CSP information.     

Do Financial Markets Care about Corporate Social Responsibility Disclosure? Further Evidence from China

Corporations increasingly define their corporate social responsibility (CSR) activities as a part of their business. However, is this trend beneficial to investors? Based on an event study methodology and a sample of Chinese listed companies, we extend the literature on voluntary disclosure by exploring the role of CSR disclosure in reducing stock market information asymmetry, as proxied by share price volatility and liquidity. Our results show that the share price volatility after CSR disclosure is lower than before CSR disclosure; however, the trend is that it decreases first and then increases for three months following disclosure. Stock liquidity also significantly improves after CSR disclosure; however, it increases first and then decreases. Additionally, by dividing CSR disclosure into economic (hard) disclosure and generic (soft) disclosure, we find that the reduction in information asymmetry is higher for hard disclosure than soft disclosure, suggesting that although CSR disclosure does indeed have an impact on investors’ behaviour in China, an economic‐based disclosure contributes more substantially. Finally, to better understand the characteristics of the Chinese financial market, we also explore the role of marketisation with results that show that the effect in reducing information asymmetry is greater for companies located in a region with a higher degree of marketisation.     

Corporate social responsibility and corruption risk: A global perspective

This paper extends our knowledge on corporate corruption risk by examining whether and to what extent corporate social responsibility (CSR) affects firm-level corruption risk. Using a cross-country sample of major multinational firms, we find that firm-level CSR mitigates corruption risk. On closer examination, we find that the relationship between CSR and corruption risk is mediated by country-level variables such as institutional quality, protection of minority shareholders’ rights, stock market development and freedom of the press. Further, we find that in emerging countries, CSR mitigates corruption risk only when the country-level institutional quality is high and citizens enjoy press freedom. Our findings suggest that both formal institutions and the quality of civil society influence the effect of CSR on corruption risk. Our results remain robust to controls for endogeneity and potential sample selection bias.     

The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China

We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO₂ emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.     

Determinants and consequences of voluntary corporate social responsibility disclosure: Evidence from private firms

We examine whether and how private firms differ from public firms in determining corporate social responsibility (CSR) disclosure policies. We document that private firms are less likely to issue CSR reports compared with their public peers. Adopting a bivariate probit model that accommodates partial observability, we find that the effect is mainly driven by a supply-side force rather than a demand-side force. From a debtholder-oriented perspective, while public firms enjoy more favorable credit ratings and a lower cost of debt due to CSR disclosure, private firms do not reap similar benefits from CSR disclosure. Corporate governance and CSR assurance alleviate debtholders' concern on private firms’ engagements in CSR.     

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.     

Corporate giving and the case of tax avoidance

Prior studies suggest that the association between corporate social responsibility (CSR) and tax avoidance is nuanced. Corporate giving, a CSR strength, is a discretionary activity primarily driven by management values. We propose that corporate giving promotes community-mindedness. Paying a fair share of tax is consistent with this value. We hypothesize that corporate giving and tax avoidance are negatively associated. Our findings support this hypothesis, suggesting that firms that generously contribute to charitable causes are less aggressive in avoiding tax. The association holds when tax avoidance is measured over a multi-year period, is more pronounced in a good economy, and is evident among highly profitable firms, firms subject to low political costs, and domestic firms.     

A Textual Analysis of US Corporate Social Responsibility Reports

We employ computer-based textual analysis to examine disclosure patterns for a sample of US corporate social responsibility (CSR) reports from the period 2002–2016. Starting from 466 features commonly used in computational linguistics, our results show that the linguistics or disclosure patterns in CSR reports can be used to accurately predict the actual CSR performance type of CSR reporters. Specifically, we find that the two most commonly used disclosure characteristics, number of words and number of sentences, alone can be used to predict reporting firms’ CSR performance type with 81% accuracy. The accuracy of prediction increases to 96% when the top 50 linguistics features most relevant to firms’ CSR performance are included in the prediction model. In addition, we find that the linguistic features of CSR disclosure identified by our study are incrementally value relevant to investors even after controlling for the actual CSR performance score from the professional CSR rating agencies. This finding suggests that the linguistic features of CSR disclosure can be an important venue for capital market participants in evaluating firms’ CSR performance type, especially when professional CSR performance ratings are not available.     

Corporate Social Responsibility,Tax Aggressiveness,and Firm Market Value

This paper examines the relationship of corporate social responsibility (CSR), tax aggressiveness, and firm market value. An economic model has been developed to show that profit‐maximization firms are willing to incur additional costs in CSR, such as paying more taxes, as long as they can differentiate their products from non‐CSR firms, and that socially conscious consumers will buy products from CSR firms at prices higher than those of non‐CSR firms. The empirical study in this paper indicates that the higher the CSR ranking of a firm, the less likely a firm is to engage in tax aggressiveness. It also indicates that a reputation of higher CSR will enhance firm market value. Using Canadian companies listed in the S&P/TSX 60 index, I find that both firms’ five‐year effective tax rates and annual effective tax rates are positively associated with their overall CSR scores as well as with their social scores. Firms’ five‐year effective tax rates are also positively associated with their governance index. I also find that firms’ overall CSR ranking and governance scores are positively associated with their market 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.     

Discussion of ‘Strange bedfellows? Voluntary CSR disclosure and politics’

This article discusses the paper by Griffin and Sun (2013). Griffin and Sun (2013) investigate (i) the association between the company individuals and stakeholders political interests and the intensity of voluntary corporate social responsibility (CSR) disclosures, and (ii) investors response to these CSR disclosures. This discussion focuses on issues relating to five key areas of Griffin and Sun (2013), namely, the relationship between political interests and CSR disclosure intensity, the relationship between political interests and investors reactions to CSR disclosure, the political interest proxies employed, sample selection and the empirical analyses.