Corporate social responsibility and COVID‐19: Prior reporting experience and assurance

Abstract

The novel COVID‐19 has created an exogenous shock to capital markets and, hence, an ideal opportunity for researchers to assess whether CSR‐related activities provide an insurance‐like mechanism to protect firms against the shock. Using a large sample of 4361 firms domiciled in 40 countries, we investigate the roles of CSR reporting and assurance in the negative consequences of COVID‐19 on firm value. The results confirm that prior CSR reporting experience buffers firms against the adverse effects of the health crisis. The results also support that not only does the assurance on CSR reports create a buffering effect against the health crisis, but it also intensifies the buffering effects of prior CSR reporting experience against the pandemic. Moreover, using difference‐in‐difference method for testing the link between CSR reporting and firm value, we show that the positive association of reporting and assurance with firm value is more pronounced during the pandemic as compared with the years preceding it. The results of this study are robust to various analyses. Replicating the analyses to the context of the global financial crisis, we find that prior CSR reporting experience and assurance provide similar buffering effects when a market is exposed to various exogenous shocks. The results also hold for the mandatory disclosure regimes. By distinguishing first and subsequent reports and assurance, we show that, unlike subsequent CSR reports and assurance, the initial ones cannot mitigate the negative effects of the crisis on firm value, indicating that stakeholders take into account longer‐term CSR reporting experiences. Aside from reporting and assurance aspects of CSR, we analyze the role of CSR report's quality and accuracy and show that the adoption of Global Reporting Initiatives (GRI) frameworks can enhance socially responsible firms' resilience against systematic shocks.

Did Corporate Social Responsibility Vaccinate Corporations Against COVID-19?

“…As can be seen, the r-squared of column (4), which includes CSR performance, COVID-19, and their interaction simultaneously, is greater than those of columns 1–3, showing that the interaction effect makes a difference to the model. The positive coefficient of CSR_ESG in the first column shows that increasing CSR performance by one standard deviation (0.201) is associated with an 8.7 (0.201 × 0.434) percentage point increase in Tobin’s Q , confirming that CSR performance is positively related to CFP, which in turn reconfirms previous studies (see, Helmig et al, 2016 ; Poursoleyman et al, 2022 ; Vishwanathan et al, 2020 ; Voegtlin & Greenwood, 2016 ; Wang et al, 2016 ). Columns (3) and (4) also show a positive coefficient for CSR_ESG , while a bit less strong than column (1) due to the inclusion of COVID-19 and their interaction effects, respectively.…”

“…Turning next to control variables, Assets loads negatively and significantly, representing that the higher levels of firms size are associated with lower CFP or firm value, which is consistent with the previous studies (Gala & Julio, 2016 ). Leverage also shows that it is negatively related to Tobin’s Q which is congruent with Huang et al ( 2020 ) and Poursoleyman et al ( 2020 , 2022 ) who reveal that a higher level of financial leverage leads to lower levels of CFP. Regarding Age , we can see a positive coefficient for this variable which endorses Huang et al ( 2020 ), who provide statistical evidence that firm age is inversely related to declines in closing prices.…”

“…Financial leverage is also widely considered one of the determinants of CFP (Ramli et al, 2019 ). Previous literature proves that financial leverage is negatively related to firm performance through increasing financial constraints and decreasing future investment (Poursoleyman et al, 2020 , 2022 ). Thus, we expect financial leverage to have a negative correlation with CFP.…”

“…Poursoleyman et al ( 2022 ) investigate the buffering roles of prior CSR reporting and assurance using an international sample; however, our main focus is on the role of CSR performance. Since literature differentiates between CSR reporting initiatives and CSR performance and believes that they contain different information (Derchi et al, 2021 ; Nazari et al, 2017 ; Thorne et al, 2017 ) and suggests two opposing signs for the link between these two (see, Brooks & Oikonomou, 2018 ; Clarkson et al, 2008 ), our study differs from Poursoleyman et al ( 2022 ). Aside from the sample size and period, our paper contributes to this line in other ways.…”

Women and CSR budgeting and spending: Does ownership enhance their CSR role?

“…Strategically, researchers have reported that CSR is a distinct practice that can be used as a strategic policy to yield short‐ and long‐run advantages (Bruna & Nicolò, 2020; Carroll, 2021). Growing research on CSR describes how CSR initiatives protect firms during economic downturns (e.g., the 2008 financial crisis and COVID‐19) because stakeholders support these firms during that time (Cornea et al, 2021; Lins et al, 2017; Poursoleyman et al, 2022; Qiu et al, 2021), and a large number of studies have discovered drivers that make firms more socially responsible (Bear et al, 2010; Jia et al, 2022; Lee et al, 2013; Ma et al, 2020; Seckin‐Halac et al, 2021; Walls et al, 2012).…”