Corporate Social Responsibility and Capital Allocation Efficiency

Bhandari, Avishek; Javakhadze, David

doi:10.2139/ssrn.3054236

Cited by 41 publications

(66 citation statements)

References 63 publications

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“…Therefore, we perform an instrumental variable estimation procedure consisting of two‐stage least square regressions to alleviate the endogeneity concerns driven by such potentially, if unobservable, omitted variables and selection bias. We follow Attig et al (), Bhandari and Javakhadze (), and Benlemlih and Bitar () and use the initial level of a firm's CSR score ( CSR ) as our instrumental variable. In the first stage, we regress CSRP ( CSRA ) on instrument CSR and control variables from Models and .…”

Section: Resultsmentioning

confidence: 99%

“…Numerous studies have examined the real effects of CSR performance. For example, CSR has been observed to be conducive in reducing the cost of capital and insider trading (El Ghoul, Guedhami, Kwok, & Mishra, ; Gao, Lisic, & Zhang, ; Ge & Liu, ; Goss & Roberts, ), increasing credit ratings and optimal levels of risk taking (Attig, El Ghoul, Guedhami, & Suh, ; Drago, Carnevale, & Gallo, ; Harjoto & Laksmana, ) and affecting investment efficiency and tax aggressiveness (Benlemlih & Bitar, ; Bhandari & Javakhadze, ; Davis, Guenther, Krull, & Williams, ; Hoi, Wu, & Zhang, ; Lanis & Richardson, ). However, only a few studies have explored the role of CSR from the perspective of reporting quality.…”

Section: Introductionmentioning

confidence: 99%

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Corporate social responsibility and financial statement comparability: Evidence from China

Wang

Zhang

2020

Corp Soc Responsibility Env

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This study examines the association between corporate social responsibility (CSR) performance and financial statement comparability. We use a sample of 7,462 firmyear observations from firms listed on China's stock exchanges from 2007 to 2016 and find that to some extent, firms with more positive CSR performance exhibit higher financial statement comparability, supporting the notion that managers have ethical concerns for stakeholder engagement. By contrast, firms with inferior adverse CSR performance exhibit significantly much lower financial statement comparability.Results are robust to alternative variable measurements and tests for endogeneity.Findings also suggest that CSR performance can be indicative of managerial opportunistic behaviours and the compliance incentive to follow accounting standards. K E Y W O R D S corporate social responsibility, financial disclosure quality, financial statement comparability, managerial opportunistic behaviour, stakeholder engagement

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Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Corporate social responsibility and financial statement comparability: Evidence from China

Wang

Zhang

2020

Corp Soc Responsibility Env

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“…In terms of some of the most recent studies, Jain et al () provide empirical evidence that short sellers target firms with lower ESG scores, on the understanding that higher firm performance is commonly associated with lower values of the composite ESG scores. Finally, Bhandari and Javakhadze (), using an unbalanced panel of U.S. firms covering the period 1992–2014, provide empirical evidence that firms' CSR policies reduce accounting and stock‐based performance. Moreover, their empirical evidence indicates that CSR practices impact on firms' allocation efficiencies, which, in turn, reflect negatively on firms' future performance levels.…”

Section: A Brief Review Of the Related Literaturementioning

confidence: 99%

“…Based on this intuitive and well‐constructed proposition, several studies have sought to address and review empirical dimensions of the “doing well by doing good” hypothesis. Mixed results have emerged from recent studies including among others Dowell, Hart, & Yeung, ; Margolis & Walsh, ; Shen & Chang, ; Gillan, Hartzell, Koch, & Starks, ; Mǎnescu, ; Ameer & Othman, ; Dimson, Karakas, & Li, ; Wu & Shen, ; Di Giuli & Kostovetsky, ; Fatemi, Fooladi, & Tehranian, ; Jain, Jain, & Rezaee, ; and Bhandari & Javakhadze, . These studies investigate the effect of corporate decisions regarding the adoption of CSR, and often ESG policies in particular, to some dimension of firm performance.…”

Section: Introductionmentioning

confidence: 99%

Does doing “good” always translate into doing “well”? An eco‐efficiency perspective

et al. 2019

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Does doing "good" always translate into doing "well"? Debate over the "value" of corporate social responsibility is high on the agenda of corporate finance research.Deeper understanding is required on managers' incentives to pursue and implement corporate social responsibility related strategies, as is more thorough comprehension of the effect of these strategies to firms' performance levels as well as shareholder and wider stakeholder valuations of the firm. This paper provides a new lens by approaching the subject from a different methodological paradigm, grounded in the performance benchmarking methods more commonly applied in operational research.In so doing, we provide novel evidence of the effect of corporate choices on environmental, social, and governance (ESG) strategic investment compliance (i.e., doing good) to firms' eco-efficiency levels (doing well). In brief, our empirical findings suggest that ESG and firm's eco-performance are nonlinearly related. Specifically, advanced ESG policies and disclosure levels are associated with a positive affect to firms' eco-efficiency levels, but only up to a point, after which the effect becomes "neutral," that is, ESG demonstrates a visible pattern of diminishing marginal returns.Thus, we may humbly conclude that a firm may "do well" by doing good, but it is not clear they should ever expect to "do great" just by "doing good." The threshold at which this "neutrality" appears varies systematically with the characteristics of the sector in which the firm is operating, as well as dimensions of board diversity. Finally, it is evident that ESG implementation choices can be a source of managerial agency problems.

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“…In contrast, the overinvestment perspective regards social responsibility as a corporate excessive investment behavior that will increase the risk of the enterprise and damage its value. For example, Bhandari and Javakhadze [41] find that CSR investment consumes resources needed for projects that can increase corporate value, thus reducing the efficiency of corporate investment, increasing the agency cost of the company, and ultimately damaging shareholder value. Hemingway and Maclagan [14] hold the view that personal factors of management may influence decision-making related to social responsibility.…”

Section: The Economic Consequences Of Csrmentioning

confidence: 99%

Does CSR affect the cost of equity capital: Empirical evidence from the targeted poverty alleviation of listed companies in China

Xie

Zhou

et al. 2020

PLoS ONE

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Social responsibility fulfillment helps modern enterprises achieve sustainable development. Based on empirical data on China's A-share listed companies in 2013-2016, this paper examines the impact of corporate social responsibility performance on a company's financing costs from the perspective of targeted poverty alleviation. Specifically, we find that enterprises' engagement in poverty alleviation social responsibility helps to reduce the cost of equity capital. The result is robust to using alternative indicators of the cost of equity capital, propensity score matching method, change model and sample removed financial sector. Furthermore, we find that the negative relationship between enterprises' engagement in poverty relief and the cost of equity capital is mainly concentrated in private enterprises and in the central and eastern regions of China. Moreover, the negative relationship mainly exists after China's listed companies were forced to disclose information on poverty alleviation. This paper also finds that institutional investors' shareholding plays a partial mediating role in this reduction effect and that enterprises' poverty alleviation efforts help companies improve their financial performance and firm value. This study enriches the relevant literature on corporate social responsibility and the cost of equity capital and has reference value for corporate sustainable development. It also provides a theoretical basis for corporate poverty alleviation work in developing countries and the economic results of CSR. OPEN ACCESS Citation: Yi Y, Xie B, Zhou L, Wei Y (2020) Does CSR affect the cost of equity capital: Empirical evidence from the targeted poverty alleviation of listed companies in China. PLoS ONE 15(2): e0227952. https://doi.org/10.

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Corporate Social Responsibility and Capital Allocation Efficiency

Cited by 41 publications

References 63 publications

Corporate social responsibility and financial statement comparability: Evidence from China

Corporate social responsibility and financial statement comparability: Evidence from China

Does doing “good” always translate into doing “well”? An eco‐efficiency perspective

Does CSR affect the cost of equity capital: Empirical evidence from the targeted poverty alleviation of listed companies in China

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