Asymmetric Information and Corporate Social Responsibility

Lopatta, Kerstin; Buchholz, Frerich; Kaspereit, Thomas

doi:10.2139/ssrn.1995534

Cited by 34 publications

(54 citation statements)

References 10 publications

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“…On its own, business self-regulation may result in substantial information asymmetries (Hess, 2007), making it impossible for stakeholders to determine whether managers are really acting in their best interest or not. As a result, stakeholders may undervalue some responsible actions and overvalue irresponsible ones (Lopatta et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison

et al. 2019

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The article examines the effects of non-financial disclosure (NFD) on corporate social responsibility (CSR). We conceptualise trade-offs between two ideal types (government regulation and business self-regulation) in relation to CSR. Whereas self-regulation is associated with greater flexibility for businesses to develop best practices, it can also lead to complacency if firms feel no external pressure to engage with CSR. In contrast, government regulation is associated with greater stringency around minimum standards, but can also result in rigidity owing to a 'one size fits all' approach. Given these potential trade-offs, we ask how mandatory non-financial disclosure has been shaping CSR practices and examine its potential effectiveness as a regulatory instrument. Our analysis of 24 OECD countries using the Asset4 database shows that firms in countries that require non-financial disclosure adopt significantly more CSR activities. However, we also find that NFD regulation does not lead to lower levels of corporate irresponsibility. Furthermore, our analysis demonstrates that, over time, the variation in CSR activities declines as firms adopt increasingly similar practices. Our study thereby contributes to understanding the impact of government regulation on CSR at firm level. We also discuss the limits of mandatory NFD in addressing regulatory trade-offs between stringency and flexibility in the field of corporate social responsibility.

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Section: Introductionmentioning

confidence: 99%

Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison

et al. 2019

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“…In fact, the key secret behind the above findings may be that willingness to disclose sustainability and other voluntary information inspires transparency, thereby reducing the tendency to manipulate EM (Bozzolan et al, 2015). Moreover, SD could be used as a tool that mitigates the information asymmetry problem and thereby intensifies the value of the firm (Lopatta et al, 2016). Theoretically, firms do have the incentive to disclose value relevant information to their investors (Lennox and Park, 2006;Dhaliwal et al, 2012).…”

Section: Sustainability Disclosurementioning

confidence: 98%

“…Moreover, positive CSR ratings tend to create positive circumstances for entities, economically, socially and politically (Healy and Palepu, 2001), because, with the formation of a better image, they can gain easier access to capital markets and attract more potential investors (Riahi- Belkaoui, 1976 as cited in Riahi-Belkaoui, 2015). Besides, SD being an integral part of a firm's voluntary disclosure activities, it becomes a vital resource of addressing the informational asymmetry issues (Fuhrmann et al, 2016;Lopatta et al, 2016). These favorable manifestations of corporate responsibility as perceived by the company's customers and stakeholders may affect their actions positively in regard to the earnings and the determination of stock returns (Belkaoui and Karpik, 1989).…”

Section: Sustainability Disclosurementioning

confidence: 99%

Sustainability disclosure and earnings informativeness: evidence from Sri Lanka

Swarnapali

2019

AJAR

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Purpose The purpose of this paper is to investigate whether the communication that takes place through the sustainability disclosure (SD) route has an effect on earnings informativeness (EI) of firms in an emerging market. Design/methodology/approach The sample consists of companies listed on the Colombo Stock Exchange in Sri Lanka, where SD is a new phenomenon and a voluntary reporting initiative. Regression analysis is executed on the panel data to achieve the study objective. Findings The result reveals a positive association between SD and EI. Sustainability reports may provide useful information that supplements merely financial data, aiding the stakeholders to interpret the financial reporting better. The finding premises that SD enhances EI, communicating value relevant information to capital market participants. Practical implications SD does much to reduce capital market participants’ uncertainties, thereby aiding them to assess financial information better. Social implications The findings of the study confirm earlier research findings that indicate a positive association between SD and EI, suggesting that capital market participants are gradually becoming aware of the value relevance of sustainability reports. Originality/value This is the first study investigating SD and EI association that is specific to the Sri Lankan context. Owing to the sparse studies done on the SD and EI association, this study should contribute significantly to the existing literature by broadening the geographical coverage.

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“…The second stream of literature concerns the relationship between CSR activities and the performance of the firm in the financial market as well as the impact of CSR activities on disclosure policies and real decision‐making. Many empirical analyses focus on the impact of CSR on different aspects of firm performance, such as the cost of capital (Dhaliwal et al ., ), stock liquidity (Kim et al ., ), information asymmetry (Lopatta et al ., ; Benlemlih and Bitar, ) and financial market performance (Gregory et al ., ).…”

Section: Related Literaturementioning

confidence: 99%

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

Zhao

2019

Accounting & Finance

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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.

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Asymmetric Information and Corporate Social Responsibility

Cited by 34 publications

References 10 publications

Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison

Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison

Sustainability disclosure and earnings informativeness: evidence from Sri Lanka

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

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