Mandatory CSR disclosure, monitoring and investment efficiency: evidence from China

Abstract

This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms’ investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand‐alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control‐ownership wedge, state‐owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems.

Rethinking capital structure decision and corporate social responsibility in response to COVID‐19

“…It has been widely accepted that engagements in CSR increase shareholders’ welfare. Many research papers study the impact of CSR on firm value and argue that CSR can bring various advantages to firms (see Godfrey, 2005; Luo and Bhattacharya, 2006; Lins et al ., 2017; Liu and Tian, 2019; Chen et al ., 2020) and reduce firm risk (see Sharfman and Fernando, 2008; Jo and Na, 2012; Albuquerque et al ., 2018; Benlemlih et al ., 2018). CSR has also been proven to be a protective measure that reduces drops in stock prices during a crisis period and immunises stakeholders against other sources of risk (Albuquerque et al ., 2020; Ding et al ., 2020).…”

Do investors and analysts value strategic corporate social responsibility disclosures? Evidence from China

“…Recently, the increasing trends in CSR reporting have raised scholars' interests in what CSR disclosures stand for in the Chinese context (Du, 2015;Chen et al, 2018;Gong et al, 2018;Liu & Tian, 2019;Lu & Abeysekera, 2017;Parsa et al, 2020;Wang & Li, 2016). Using Chinese RKS data, Wang and Li (2016) provide Chinese enterprise evidence of positive market reaction to the first-time disclosure of CSR reports and further evidence that CSR initiators with high CSR reporting quality and perceived credibility have higher market valuations.…”

“…Using Chinese RKS data, Wang and Li (2016) provide Chinese enterprise evidence of positive market reaction to the first-time disclosure of CSR reports and further evidence that CSR initiators with high CSR reporting quality and perceived credibility have higher market valuations. Recent studies focusing on the mandatory CSR disclosure find that firms experience a decrease in profitability (Chen et al, 2018) and a decrease in investment inefficiency (Liu & Tian, 2019) subsequent to the CSR disclosure mandate. The concern of CSR reporting quality and credibility is particularly applicable in China, where some firms' CSR reporting practices may only respond to government signals rather than make substantive commitments (Marquis & Qian, 2013).…”

Bahasa IndonesiaManajemen Laba dan Perilaku Investasi: Apakah Framing Effect Diperhitungkan?

“…Dengan pelaporan yang sudah disesuaikan, terdapat kemungkinan proyeksi masa depan juga mengikuti pola yang terbentuk akibat praktik manajemen laba. Sehingga, pergerakan tingkat investasi tersebut akan konsisten, berjalan beriringan dengan laba yang dilaporkan, dan merepresentasikan signaling equilibrium (Liu & Tian, 2021). Praktik manajemen laba sebagai sebuah tindakan yang secara umum dipandang manipulatif mendorong manajemen untuk melangkah lebih agresif, dalam hal ini berkaitan dengan komitmen pada proyek investasi sumber daya agar bisa terbebas dari lubang yang mereka buat sendiri (Bazerman & Moore, 2013).…”