Mandatory <scp>CSR</scp> disclosure and firm investment behavior: Evidence from a <scp>quasi‐natural</scp> experiment in China

Makosa, Lewis; Yang, Jinkun; Sitsha, Lovemore; Jachi, Moses

doi:10.1002/jcaf.22467

Cited by 18 publications

(22 citation statements)

References 29 publications

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“…The results of Models (1) and (2) show that overall ESG and both FRQ measures are positively and significantly associated with investment efficiency, confirming that companies with higher levels of ESG disclosure and higher-quality financial reporting have a more efficient investment strategy. These results corroborate agency theory predictions and the findings of Bushman and Smith (2001), McNichols and Stubben (2008), Biddle et al (2009), Gomariz and Ballesta (2014) and Makosa et al (2020), indicating that reducing data uncertainty and information asymmetry would mitigate agency costs and enhance companies’ investment decisions. Consequently, more extensive ESG disclosure and higher-quality financial reporting strengthen companies’ commitments not only to shareholders but also to the whole community and prompt companies to improve their investment efficiency.…”

Section: Resultssupporting

confidence: 88%

“…In the analysis of the impact of information asymmetry on investment efficiency, there are two possible effects that should be considered: the resource crowding-out effect (Biddle et al , 2009) and the information communication effect (Makosa et al , 2020). In the former, data uncertainty might be the reason for organizational issues that could limit companies’ funds and lead to underinvestment.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Although this study is similar to previous studies on the potential impacts of non-financial disclosure and FRQ on investment efficiency, it contributes to the existing literature – particularly to filling the gap in ESG disclosure research – in several ways. First, by considering overall ESG disclosure – that is, comprehensive non-financial disclosure, including environmental, social and governance information, and not just CSR – this study goes further than previous studies that only investigated the potential impact of CSR disclosure on investment efficiency (Leuz and Verrecchia, 2000; Bushman and Smith, 2001; Healy and Palepu, 2001; Hope and Thomas, 2008; Biddle et al , 2009; Chen et al , 2011; Gomariz and Ballesta, 2014; Makosa et al , 2020). Second, this study focuses on the specific potential impact of ESG disclosure on investment efficiency, while previous studies investigated other impacts, such as on the costs of capital and debt (Ellili, 2020; Raimo et al , 2021), as well as on financial performance (Farooq, 2015; Atan et al , 2016; Kengkathran, 2019; Albitar et al , 2020).…”

Section: Introductionmentioning

confidence: 99%

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Impact of ESG disclosure and financial reporting quality on investment efficiency

Ellili

2022

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Purpose This study aims to examine the impacts of environmental, social and governance (ESG) disclosure and financial reporting quality (FRQ) on investment efficiency. Design/methodology/approach Several econometric models have been applied to estimate the impacts of ESG disclosure and FRQ on investment efficiency, using the United Arab Emirates (UAE) as a sample in 2010–2019. Estimations considered subsamples of underinvestment, overinvestment and low and high FRQ values. Findings Empirical results show a positive relationship between ESG disclosure, FRQ and investment efficiency, and that this relationship is more important in the underinvestment and high FRQ sub-samples. Results suggest that ESG disclosure improves transparency, mitigates information asymmetry and enhances investment efficiency. Research limitations/implications The findings could help UAE regulators incorporate ESG information into reporting and implement effective mechanisms to increase the extent of ESG information to improve investment efficiency. This study only examined UAE traded companies. Future research should investigate other factors influencing investment efficiency and conduct comparative studies across Gulf Cooperation Council countries. Social implications This study reveals the significant positive impact of ESG disclosure and FRQ on investment efficiency. These findings will help companies optimize their ESG information disclosure, improve the quality of their financial reports and comply with ESG standards. The study aims to develop knowledge that will not only benefit companies regarding the potential impact of ESG disclosure but also help national and international society create a better social environment and reduce climate change. Originality/value To the best of the authors’ knowledge, this study is the first to examine the relationship between ESG disclosure, FRQ and corporate investment efficiency. The research contributes to understanding the financial impacts of ESG disclosure and FRQ and supports regulators’ efforts to enforce ESG disclosure and improve FRQ.

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Section: Resultssupporting

confidence: 88%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Impact of ESG disclosure and financial reporting quality on investment efficiency

Ellili

2022

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“…Therefore, using the above literature, we use the corruption perception index (CPI) to capture any rent‐seeking behavior that may occur. We include the variable of size (Size) to control for firm size and measure it as the natural logarithm of total assets (e.g., Makosa et al, 2020; Sun et al, 2021). We include the foreign sales variable (ForeignSales) to capture firms' revenue realized from exports.…”

Section: Methodsmentioning

confidence: 99%

Economic sanctions and shared supply chains: A firm‐level study of the contagion effects of smart sanctions on the performance of nontargeted firms

Sun

Makosa

Yang

et al. 2022

European Management Review

Self Cite

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We examine the effects of targeted economic sanctions on the performance of nontargeted firms sharing a common supply chain with targeted firms. We build on sanctions literature and contagion theory to develop a conceptual model that encapsulates the nexus between targeted sanctions, supply chains, and firm performance. Drawing on data from Zimbabwe, we find that nontargeted firms in the same supply chain as sanctioned firms perform poorly compared with other non‐sanctioned firms, signaling the effects of contagion. The mediation test indicates that economic sanctions reduce the performance of nontargeted supply chain member firms through reducing sales and increasing the cost of products, showing significant mediating effects. We also show that exports greatly affect nontargeted firms that depend heavily on targeted firms, whereas imports have a relatively low impact. The results of this study extend previous research on the adverse consequences of economic sanctions and supply chain networks and provide important guiding significance for firm managers, investors and policymakers on how to respond to smart sanctions.

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“…Other studies find that CSR reporting regulations affect internal decision-making and resource allocations of affected firms (Makosa et al, 2020;Allman and Won, 2021;Liu and Tian, 2021;Lemma et al, 2019). For example, She (2021) exploits CSR disclosure mandate in California which requires firms disclose how they address slavery and human trafficking from their supply chains.…”

Section: Real Effects Of Csr Reporting Regulationsmentioning

confidence: 99%

Consequences of CSR reporting regulations worldwide: a review and research agenda

Haji

Coram

Troshani

2022

AAAJ

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PurposeThis study reviews research that examines economic and behavioural consequences of CSR reporting regulations. Specifically, the authors evaluate the impact of CSR reporting regulations on (1) reporting quality, (2) capital-markets and (3) firm behaviour.Design/methodology/approachThe authors first describe the stated objectives and enforcement level of CSR reporting regulations around the world. Second, the authors review over 130 archival studies in accounting, finance, economics, law and management that examine consequences of the regulations.FindingsThe stated objectives and enforcement of CSR reporting regulations vary considerably across countries. Empirical research finds no significant changes in reporting quality and generally concludes that CSR reporting continues to be ceremonial rather than substantive after the regulations – consistent with corporate legitimation and “greenwashing” views. In contrast, growing evidence shows both positive and negative capital-market and real effects of the regulations. Overall, the findings from this review indicate that, on balance, there remains a significant number of questions on the net effects of CSR reporting regulations.Originality/valueThe authors offer a comprehensive review of the literature examining consequences of CSR reporting regulations. The authors identify apparent tensions in studies assessing different outcomes after the regulations: between symbolic reporting and positive capital-market outcomes; between profitability and CSR; and between CSR and the welfare of non-shareholder groups. Additionally, we highlight differences in the scope and stated objectives of CSR regulations across countries, with the regulations often reflecting socio-economic development and national interests of implementing countries. Collectively, our review indicates that institutional details are crucial when considering the design or consequences of CSR reporting regulations and/or standards.

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Mandatory CSR disclosure and firm investment behavior: Evidence from a quasi‐natural experiment in China

Cited by 18 publications

References 29 publications

Impact of ESG disclosure and financial reporting quality on investment efficiency

Impact of ESG disclosure and financial reporting quality on investment efficiency

Economic sanctions and shared supply chains: A firm‐level study of the contagion effects of smart sanctions on the performance of nontargeted firms

Consequences of CSR reporting regulations worldwide: a review and research agenda

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