Corporate Social Responsibility and Insider Trading: Evidence from China

Abstract

Corporate Social Responsibility (CSR) is the obligation of a company to pursue long-term goals, and is an important part of a sustainable society. It is related not only to the survival and sustainable development of the company, but also to the expectations of the public. CSR is an important way for companies to disclose non-financial information. Information disclosure can alleviate information asymmetry effectively, improve the quality of internal control, and affect the occurrence of insider trading. However, the existing research has paid less attention to the impact of non-financial information on CSR and insider trading, as well as the impact of the corporate nature and disclosure motivation on this relationship. This paper takes China’s 2011–2016 Shanghai and Shenzhen A-share listed companies as a sample to study the relationship between CSR and insider trading. The results show the following. (1) CSR and insider trading have a significant negative correlation. (2) From the perspective of the nature of the enterprise, the CSR of non-state-owned enterprises can significantly suppress the occurrence of insider trading, while the relationship is not significant for state-owned enterprises. (3) From the perspective of disclosure motivation, voluntary disclosure can significantly suppress the occurrence of insider trading. However, mandatory disclosure and semi-mandatory disclosure are not significant. The research in this paper is of great significance to encourage enterprises to fulfill their social responsibilities and improve the supervision of illegal insider trading.

Corporate Social Responsibility Information Disclosure and Corporate Fraud—“Risk Reduction” Effect or “Window Dressing” Effect?

“…With reference to the relevant literature, we conduct the following screening and pretreatments. (1) In order to ensure that the financial data of each corporate is available and reliable, we eliminate the stock, bank and financial institution corporates of the financial industry [35]. (2) We remove the samples of ST stocks and the delisted stocks which are financially abnormal and are easily get into business distress.…”

“…(3) We delete the firm-year observation which has a lot of missing values to maintain the integrity and consistency of the whole sample [36]. (4) Considering to alleviate the interference of the extreme outliers on parameter estimation, we conduct the tailing adjustment (Winsorize) on the continuous variables at two-way 1% quantiles, respectively, to replace the extreme values and get the 1th and 99th percentiles of the variables [35]. Finally, we manually match the company with CSR disclosure data from CSMAR and corporate financial data from the iFind database.…”

“…Finally, with reference to the relevant study [2,35,40,41] for robustness testing, Runling Global Rating Data (RKS) is used to measure the quality of the corporate social responsibility information disclosure. RKS manages a score system for the different aspects of CSR from the perspective of all stakeholders.…”

“…During the hypothesis testing process, in order to highlight the importance of the publication of social responsibility reports by listed companies, we define the CSR disclosure as (0,1) dummy variables for an empirical analysis. Referring to the existing research on corporate social responsibility, most scholars use the Corporate Social Responsibility Rating Score (RKS) given by a third-party organization (Runling Global) as a proxy variable to measure the quality of social responsibility information disclosure of listed companies [2,33,35,36,40,41]. To ensure the full reliability of our research results, we combine the 2009-2016 corporate social responsibility score to examine the quality of information disclosure as a supplement to the previous conclusions.…”

Is the Social Responsibility Information Disclosed by the Companies really Valuable?—Evidence from Chinese Stock Price Synchronicity

“…Afterwards, scholars focused on the economic consequences of CSR, mainly involving the impact of CSR on stock price performance [14,15], corporate performance and value [16][17][18][19], earnings management, and so on. In addition, a few studies have examined the impact of CSR on analysts' earnings forecasts [11], stock price crash risk [5,20,21], stock price synchronicity [22], and insider trading [23,24]. Although various aspects of research are involved, there is a lack of in-depth and detailed discussion on CSR.…”