When Does Corporate Social Responsibility Disclosure Affect Investment Efficiency? A New Answer to an Old Question

Abstract

Prior evidence that firm’s investment behavior is positively affected by its corporate social responsibility (CSR) disclosure, as one of the key CSR areas of the company, leaves unaddressed whether all kinds of disclosure have the same effect. Drawing on stakeholder theory, this study analyzes the issue in a more exhaustive way. A cross-sectional logistic regression model is used to test the hypothesized association, and the results imply that firms’ high (low)-quality disclosure regarding their engagement in CSR activities increases their chances of being from the investment-efficient (inefficient) group. The obtained results conclude that CSR reporting activity is not beneficial for companies unless a meaningful disclosure of sustainability information is made. Our results are robust to using alternative proxies for CSR disclosure quality. This study contributes to the scarce evidence on CSR reporting in Pakistan and provides a useful method for assessing quality of CSR reports.

Effect of Corporate Social Responsibility on Investment Efficiency of Quoted Oil and Gas Firms in Nigeria

“…IE of a company is its capacity to invest in all positive net present value (NPV) projects Anwar and Malik (2020). IE means those ventures with positive NPV where market frictions like unfriendly choice or agency costs are not present Ibrahim and Ibrahim (2021).…”

Corporate social responsibility disclosure and firm performance: Evidence from Vietnam

“…Agency theory is a management and economic theory summarizing the issues between principals and their agents. Social and environment information is a useful factor for agent in calculating debt contractual obligations, benefit for managers, cost of debt (Reverte, 2009), reduces information http://dx.doi.org/10.21511/imfi.19 (3).2022.05 asymmetry and increases capital market efficiency (Anwar & Malik, 2020).…”

“…Information on these activities provides further evidence on a firm's operations, labor productivity, financial efficiency and the firm's role in their industry (Buallay et A series of theoretical and empirical studies have been carried out to examine the relationship between CSR and a firm's activities. Agency theory explains the impact of CSR disclosure on information transparency and capital market efficiency (Anwar & Malik, 2020). Stakeholder theory specifies the importance of different stakeholders and the need for addressing their needs (Di Bella & Al-Fayoumi, 2016) through CSR activities.…”

Amplifying the Influence of CSR Disclosure on Investment Inefficiency by Choosing Woman Directors: Is it Effective?

“…This matter can be avoided by increasing the extent of the company's financial (Biddle et al, 2009) and non-financial disclosures, such as having good qualified financial and corporate social responsibility reports. Studies regarding the negative effect on corporate investment inefficiency have been carried out previously by Zhong and Gao (2017); Samet and Jarboui (2017); Benlemlih and Girerd-Potin (2017); Cook et al (2019), Anwar and Malik (2020); Ho et al (2022).…”

“…The latest records unveil how CSR disclosure predisposes investment efficiency for European companies. Anwar and Malik (2020) and Samet and Jarboui (2017) affirmed that companies that disclose high-quality CSR information result in information symmetry, reducing the risks of withholding information; this makes them less likely to make inefficient investments. More comprehensive disclosure, such as CSR disclosure, is proven to minimize information asymmetry, which in the end, can restrain management from making investments that can bring losses to shareholders.…”