Corporate social responsibility and financial reporting quality: evidence from US firms

Abstract

Purpose This study aims to examine the relationship between corporate social responsibility (CSR) and measures of financial reporting quality. Design/methodology/approach The authors explore the link between CSR and several indicators of firms’ financial reporting quality. Estimation with firm and year fixed effects is based on a sample of US publicly traded firms covering the period from 1991 to 2018. Findings Empirical results demonstrate that firms with higher CSR scores are associated with higher accuracy of financial forecasts, fewer earnings surprises and greater coverage by financial analysts. This positive relationship is more profound for firms that face low agency concerns, firms that have a higher level of customer awareness, firms that have more long-term institutional ownership or firms that do not face financial constraints. Originality/value The study contributes to the ongoing debate on the value of CSR. The results support the stakeholder value maximization view of CSR and identify the impact of several factors on its relationship with the quality of financial reporting.

A Systematic Literature Review Unveiling the Nexus between CSR and Financing Constraints in Different Scenarios: Facilitating, Inhibiting or Moderating?

“…Sahut et al (2016) indicate that the determinant of CSR is the governance under financial constraints, firms with less financial constraints will increase their CSR. Chulkov and Wang (2023) find that firms which have fewer financial constraints will have better CSR performance and further enable firms to get more accurate financial forecasts and fewer earnings surprises. Cheng et al (2023) conclude that investments of venture capital firms help invested firms reduce financial constraints and finally increase invested firms' CSR performance.…”

“…In addition to the direct impact of financing constraints on CSR, it also has moderation effect on the relationship between CSR and other factors. The relationship between CSR and factors like financial performance, survival, risks, earning manipulation, political incentive, financial forecasts, disaster resilience, economic policy uncertainty are more pronounced in financially constrained firms (Chulkov and Wang, 2023;Malik et al, 2023;Fernandes et al, 2023;Yang et al, 2022;Nguyen and Nguyen, 2021;Choi et al, 2021;Park et al, 2020;Wang et al, 2020;Zhao et al, 2020).…”

“…find that political incentives have significant positive relationship on firms' CSR, and this relationship is more obvious in high financial constraint firms. Chulkov and Wang (2023) indicate that good CSR performance help firms to increase financial forecast accuracy, decrease earnings surprises and increase financial analysts' coverage, and these relationships are more significant for non-financial constraints firms. Malik et al (2023) show that the after the natural disaster happen, CSR increase firms' performance and this relationship is more obvious for low financial constraint firms.…”

Turnover by Non-CEO Executives in Top Management Teams and Escalation of Commitment

“…The fixed-effects specification is important in that it controls for differences across firms that may happen due to such factors as industry, company life cycle, and business strategy. Firm characteristics and changes over time are controlled with the inclusion of control variables suggested in the literature (Jenter and Kanaan 2015;Chulkov and Barron 2019;Chulkov and Wang 2023), as well as year dummy variables in each model.…”