How does social trust affect corporate financial performance? The mediating role of corporate social responsibility

Prior studies assert that social trust may positively influence the economic performance of countries and firms (within those countries). This paper proposes a more nuanced mechanism whereby corporate social responsibility (CSR) mediates the relationship between country-level social trust and firm-level financial performance. Anchored in neo-institutional theory, we theorize that social trust instills norms of trustworthiness and willingness to trust others guiding individual and corporate behaviors. In order to comply with such norms and gain legitimacy, firms in high-trust society are more likely to commit to CSR activities that serve the interests of stakeholders. CSR activities, in turn, can positively influence financial performance by enabling firms to access stakeholders' resources and capabilities and to decrease transactions costs in the stakeholder relationships. We tested our theory by analyzing 9818 firm-year observations across 34 countries, during the 2006 to 2015 period. Our analysis shows the expected CSR mediation in the relationship between social trust and firm-level financial performance. Our findings are robust across different models addressing the concerns of endogeneity, alternative measures, and potential moderators.     

Less timely earnings announcements and voluntary disclosure

The release of earnings information has become less timely in recent years partly because firms increasingly disclose earnings concurrently with their periodic reports (e.g., 10-Ks, 10-Qs). We examine whether firms use voluntary disclosure to mitigate the negative economic consequences of less timely earnings announcements (EAs). We find that firms with less timely EAs are more likely to provide voluntary 8-K filings over the period leading to the EA. We also find that investors’ demand for timely information, the nature of earnings news and litigation risk affect the extent to which firms provide voluntary disclosure to compensate for less timely EAs. The negative effect of less timely EAs on information asymmetry is attenuated when firms provide voluntary 8-K filings prior to EAs. Overall, our findings suggest that firms voluntarily communicate with investors using voluntary disclosure when their EAs are less timely.     

Intelligence promotes cooperation in long-term interaction: experimental evidence in infinitely repeated public goods games

Journal of Economic Interaction and Coordination - A growing body of literature in experimental economics examines how cognitive ability affects cooperation in social dilemma settings. We...