Corporate social responsibility committees and the use of corporate social responsibility assurance services

This study examines whether corporate social responsibility (CSR) committees associate with the external assurance of CSR reports. Specifically, we consider the presence and effectiveness of CSR committees. Using a sample of Australian firms over the period 2004–2016, we show the mere presence of a CSR committee is not related to the external assurance of CSR. However, CSR committee effectiveness is positively related. In addition, firms with higher CSR committee effectiveness are more likely to seek external assurance provided by the Big4 accountancy firms and acquire financial audit and CSR assurance services from the same provider. Taken together, CSR committee effectiveness plays an active role in CSR assurance services. Our results are particularly relevant to those with interests in understanding the demand and choice of external CSR assurance services, as well as the impact of corporate governance mechanisms on these services.     

Corporate social responsibility and financial fraud: evidence from China

This paper investigates the impact of corporate social responsibility (CSR) on corporate financial fraud in China. We find that CSR scores are negatively associated with fraudulent financial activities, suggesting that CSR firms are less likely to engage in financial fraud. The results also indicate that the negative relation is more significant for CSR performance than CSR disclosure. Additionally, we demonstrate that the negative effect of CSR is more pronounced for firms with voluntary CSR practices, continuous CSR engagements, financial pressure and internal control weaknesses. Overall, we find that CSR is an ethical behaviour that reduces financial misconduct.     

Accounting conservatism and corporate social responsibility

We examine the association between accounting conservatism, expressed in the form of asymmetric timeliness of recognition of economic gains and losses, and corporate social responsibility (CSR). We provide evidence that, under unfavorable macroeconomic conditions and financial constraints, as well as increased levels of outside pressure from debtholders and equity holders, catering for capital providers through conservative reporting becomes a managerial priority over engagement in CSR. Our results overall indicate that, for our whole sample period (starting in the early 2000s), higher levels of conservatism are negatively associated with a CSR orientation shown by firms; however, our analysis also indicates a significant reversing trend regarding the effect of conservatism on CSR, coinciding with the post-financial-crisis period. The findings are robust to a number of specifications and tests, including the use of an instrumental variable approach explicitly addressing endogeneity biases related to reverse causality concerns. Our study suggests that, under monitoring pressure from financial stakeholders, firms prioritize commitment to accounting conservatism over the needs of non-financial stakeholders and other interest groups.     

Corporate social responsibility culture and international M&As

We examine the role of corporate culture in M&As by utilizing a unique corporate social responsibility (CSR) dataset, providing in-depth information on multiple dimensions of organizational culture in 22 developed markets. In accordance with the prediction of the culture clash theory, a wider divergence between the CSR corporate cultures of the acquiring and target firms is associated with lower acquirer announcement and long-run returns as well as synergistic gains for the combined firm. Cultural misalignment also increases the time required to finalise a deal, reduces the likelihood of deal completion and the percentage of stock payment. Our results are robust to alternative explanations (e.g., similarities in national culture, acquirer CSR performance, institutional configurations), different regression specifications, and additional cultural misalignment measures. Our findings highlight the importance of the need for a deeper understanding of the role of CSR for the target selection process, integration planning, and financing choice of M&As to corporations and their investors.     

Corporate social responsibility and the assessment by auditors of the risk of material misstatement

This paper investigates whether, and how, firms’ corporate social responsibility (CSR) performance influences the auditor's assessment of the risk of material misstatement, whether due to fraud or error, at the financial statement level by analysing their pricing decision (i.e., audit fees). Using a panel data set of 12,330 firms from 28 countries over the period 2003–2012 and different measures of CSR performance, we find a U‐shaped relationship between firms’ CSR performance and audit fees. This result suggests that there is an optimal level of CSR performance that minimizes the auditor's assessment of the risk of material misstatement, which in turn lowers the need for greater auditor effort; that is why auditors charge firms significantly less when their CSR performance is at the optimal level. Finally, we also show that the optimal level of CSR performance varies with the degree of environmental dynamism, ownership concentration and leverage.     

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.     

Corporate social responsibility and corporate tax avoidance: The channel effect of consumer awareness

This paper investigates the relationship between corporate social responsibility (CSR) and corporate tax avoidance and the impact of consumer awareness on the constructs. We show that consumer awareness has the effect of decreasing the positive relation between CSR ratings and tax avoidance levels. Our findings are robust to various measures of our constructs. Collectively, the findings of this study lend credence to the risk-management view of CSR and demonstrate that consumer awareness acts as a behavioral intervention and governance mechanism to help mitigate corporate hypocrisy.     

The institutionalisation of corporate social responsibility reporting

This study examines corporate social responsibility reporting (CSRR) structures through a comparison of the disclosures in two countries with different social issues. The analysis is guided by a focus on the legitimisation offered by isomorphism. We compare the 2007 annual report and website (including standalone report) CSRR of a matched sample of 18 Australian and 18 South African mining companies. Among the 30 comparisons of disclosure patterns, 29 show no difference. We also provide examples of specific disclosures that show a remarkable level of similarity in CSRR and in the CSRR management structures adopted in the two countries. Our findings show similar overall patterns of CSRR in diverse settings, while differences in CSRR content at a more detailed level remain. For example, companies refer to the applicable national regulations and rules; as well as to their specific local communities. These findings provide evidence that the same reporting templates are used in CSRR globally. There is evidence to suggest that CSRR is institutionalised through professionalization and other means, suggesting a need to interpret CSRR characteristics and patterns as a reflection of global CSRR templates. Management intent or company-specific characteristics, such as social and environmental performance, do not necessarily drive CSRR patterns.     

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.     

Determinants of corporate social responsibility disclosures: Evidence from India

Over the last few decades, a number of studies, mostly in the western countries, have investigated the nature and frequency of corporate social responsibility disclosures, their patterns and trends, and their general relationships with corporate size and profitability. This study seeks to extend the knowledge regarding the relationship between a number of financial and non-financial corporate characteristics and the level of social responsibility disclosures based on an extensive sample of top Indian companies. Corporate size and industry category are found to correlate with the corporate social disclosures of the companies and the corporate reputation as recognised through awards and social ratings has also been observed to be a significant factor that influences the social disclosures made by the Indian companies.     

Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment

Approaching the institutional environment through its regulative component, we distinguish between shareholder‐oriented and stakeholder‐oriented countries. Identifying first this classification with the distinction between common law versus civil law countries and using a large sample of 5,716 firm‐year observations that represents 1,169 individual firms in 25 countries between 2001 and 2011, we show that Corporate Social Responsibility (CSR) significantly reduces firms’ idiosyncratic risk in civil law countries but not in common law countries. Using then a more direct classification based on shareholder and employee protection scores, our findings suggest that CSR negatively affects firms’ idiosyncratic and systematic risks only in less shareholder‐oriented and more stakeholder‐oriented countries, respectively. These findings are similar in the different components of CSR with two notable exceptions: a high score in corporate governance reduces firm risk only in common law countries, and community involvement increases idiosyncratic risk in more shareholder‐oriented and less stakeholder‐oriented countries, respectively. Taken together, our results strongly support the view that the relationship between CSR and financial risk is moderated by the institutional context of the firm.     

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.     

The voice of minority shareholders: Online voting and corporate social responsibility

In 2014, the Shenzhen Stock Exchange introduced “Rules for the Implementation of Online Voting” to standardize the implementation of online voting for its listed companies. Using this event as an exogenous shock, we design a difference-in-differences model to show that minority shareholders’ participation in online voting improves firms’ corporate social responsibility performance. We reveal that this improvement is achieved through minority shareholders’ positive influence on firms’ internal control and transparency and is more pronounced for private firms and firms with lower levels of profitability and less external monitoring. Accordingly, since the standardization of online voting, minority shareholders have played an important role in corporate governance and have a positive influence on firms’ sustainable development.     

The impact of corporate social responsibility on the cost of bank loans

This study examines the link between corporate social responsibility (CSR) and bank debt. Our focus on banks exploits their specialized role as delegated monitors of the firm. Using a sample of 3996 loans to US firms, we find that firms with social responsibility concerns pay between 7 and 18 basis points more than firms that are more responsible. Lenders are more sensitive to CSR concerns in the absence of security. We document a mixed reaction to discretionary CSR investments. Low-quality borrowers that engage in discretionary CSR spending face higher loan spreads and shorter maturities, but lenders are indifferent to CSR investments by high-quality borrowers.     

Corporate social responsibility and stakeholder value maximization: Evidence from mergers

Using a large sample of mergers in the US, we examine whether corporate social responsibility (CSR) creates value for acquiring firms' shareholders. We find that compared with low CSR acquirers, high CSR acquirers realize higher merger announcement returns, higher announcement returns on the value-weighted portfolio of the acquirer and the target, and larger increases in post-merger long-term operating performance. They also realize positive long-term stock returns, suggesting that the market does not fully value the benefits of CSR immediately. In addition, we find that mergers by high CSR acquirers take less time to complete and are less likely to fail than mergers by low CSR acquirers. These results suggest that acquirers' social performance is an important determinant of merger performance and the probability of its completion, and they support the stakeholder value maximization view of stakeholder theory.     

Excess insider control and corporate social responsibility: Evidence from dual-class firms

We investigate the corporate social responsibility (CSR) performance of firms with a dual-class share structure. Dual-class firms, which represent a fast-growing segment of the U.S. capital market, violate the "one share, one vote" principle by giving corporate insiders control in excess of their economic interest in the firm. We observe a negative association of excess insider control and firms’ CSR performance, primarily with respect to the community- and employee-related dimensions of CSR. Extended analyses reveal that this negative association is mitigated by high financial resource availability. Consistent with a trade-off between corporate spending on CSR or on benefits for insiders, we also observe a negative association between CSR performance and executive pay in dual-class firms. Taken together, these extended analyses are consistent with self-interested behavior of entrenched insiders who, unless resources are abundant, appear to reduce CSR activities to maintain resources available for their personal benefit. While the exposure to risks engendered by a dual-class equity structure may be reflected in the share price, our findings draw attention to an externality: diminished CSR performance affects not just shareholders, but all stakeholders.     

Related party transactions and firm value: The moderating role of corporate social responsibility reporting

This study investigates the influence of related party transactions (RPTs) on firm value. Further, it examines whether a firm’s corporate social responsibility (CSR) reporting reflects its corporate values and ethical concerns, therefore mitigating the value-destroying effects of RPTs. Based on 274 observations from publicly listed firms in Indonesia, our results show that RPTs (i.e., related party sales) are negatively related to firm value. Further, we find that in the presence of better CSR reporting, the relationship between RPTs and firm value becomes more positive. This is in line with the view that CSR reporting, which reflects firms’ ethical concerns, may serve as a mechanism against managers’ opportunism. However, we find that related party payables have a positive relationship with firm value. Further investigation reveals that, although certain RPTs show a short-term, value-enhancing effect, these transactions seem to result in subsequent tunneling activities, suggesting managerial opportunism in the long term.     

Public family businesses and corporate social responsibility assurance: The role of mimetic pressures

Extant research focuses on firms’ voluntary demand for corporate social responsibility assurance (CSRA) and highlights the roles of country- and industry-level factors on firms’ CSRA decisions. We use different types of agency problems to explain their CSRA decisions at the firm level and explain why over time public family businesses (PFBs) vary in their resistance to the mimetic pressures from earlier CSRA adopters in the same sector. We analyze a sample of firms listed on the Taiwan Stock Exchange and Taipei Exchange firms during 2014–2017 and find that the likelihood of acquiring CSRA is lower in PFBs than in non-family firms. Furthermore, we find that the industry-level mimetic pressures weaken the negative association between the likelihood of acquiring CSRA and PFBs with less severe central agency problems. However, PFBs with severer central agency problems are still unwilling to acquire CSRA even under the pressure from peer CSRA adopters.     

从境外交易所经验看我国企业社会责任的推进和发展

在企业社会责任的推进和发展过程中,境外交易所通过发布企业社会责任指南及报告要求,直接或间接发布企业社会责任指数,以及建立精英板块提升溢价等途径,开展了卓有成效的工作。但是,其中揭示出的问题也值得思考,如公司化交易所能否中立行使监管者职责,企业上市地具有可替代性,以及企业社会责任报告质量受质疑等。综观我国企业社会责任的开展情况及其问题,在借鉴境外经验的基础上,本文就推进企业社会责任披露、企业社会责任投资,以及形成各方协同努力的社会责任运作体系等方面提出政策建议。     

Corporate social responsibility assurance and reporting quality: Evidence from restatements

Previous research has shown that obtaining independent assurance of corporate social responsibility (CSR) reporting has capital market benefits and that these benefits are amplified when accountants provide the assurance. Yet, little is known about whether and the manner in which CSR assurance improves the quality of CSR reporting, and whether accounting providers improve reporting quality to a greater extent than non-accounting providers. This study uses the unique setting of CSR restatements to examine these issues. We present theoretical and empirical evidence supporting a competitive advantage of using accounting firms as assurance providers as they not only identify inaccuracies in previous reports earlier than non-accounting providers, but also prevent future reporting inaccuracies. CSR assurance, from either type of provider, also leads to improved reporting definitions, scopes, and methodologies that require restatements for comparability. Results also indicate that CSR reporting frameworks (e.g., GRI) are not a substitute for obtaining CSR assurance as the latter has incremental benefits over GRI usage in terms of identifying errors and reporting improvements. These results have implications for public policy makers considering the merits of mandating CSR assurance and for organizations assessing the relative benefits and costs of preparing GRI-based CSR reports, obtaining CSR assurance, and choosing between accounting vs. non-accounting CSR assurance providers.