Does corporate social responsibility disclosure improve firm investment efficiency?

Abstract

Purpose The purpose of this paper is to investigate the impact of corporate social responsibility (CSR) disclosure on firm-level investment efficiency. Design/methodology/approach An econometric model is used to estimate the impact of CSR reporting on investment efficiency on a sample of listed Chinese firms during the period from 2010 to 2013. Financial reporting quality is included in the model as a control variable. Investment efficiency is estimated based on existing models. Two scenarios are identified: under-investment and over-investment. Findings The results provide evidence of a higher level of investment efficiency for CSR reporting firms than for non-reporting firms. This relationship is, however, more pronounced in the over-investment scenario than in the under-investment scenario. In addition, the association between CSR disclosure and investment efficiency is stronger for firms with lower financial reporting quality (FRQ). These findings support the hypothesis that CSR disclosure provides effective incremental information that contributes to reduce information asymmetry and promote investment efficiency. Originality/value This is the first paper that directly tests the association between CSR disclosure and firm-level investment efficiency. The results suggest that firms and investors should consider the effect of CSR disclosure on information asymmetry and its impact on the availability and cost of capital. This work also contributes to the understanding of the economic impacts of CSR disclosure and provides arguments for regulatory entities to enforce CSR disclosure.

Liquidity Moderating the Effect of Production Resources, Investment Decisions and Corporate Social Responsibility on Corporate Performance

“…Corporate social responsibility have an effect and significant on corporate performance (hypothesis 4 is accepted), Companies that are right in managing corporate social responsibility will have the opportunity to reduce other operational expenses that are greater than CSR realization such as lawsuits, strikes, company closures due to improper handling of waste so that ultimately it can maximize profit compared to companies that are not properly managing corporate social responsibility, they are unable to maximize profits because they will potentially incur greater costs as a result of the company's operations, this study supports previous research that has been done (Zhong and Gao 2017;Samet and Jarboui, 2017;Benlemlih and Bitar, 2018;Cook, et. al., 2018), and is in contrast to previous research (Vance, 1975).…”

“…Therefore, the hypothesis set is as follows: H3: Investment Decisions have a positive effect on Corporate Performance. CSR increases investment efficiency (Zhong and Gao 2017;Samet and Jarboui, 2017;Benlemlih and Bitar, 2018;Cook, et.al., 2018), on the other hand CSR is a source of conflict within the company (Kruger, 2015), CSR reduces intangible assets (Branco and Rodriguez, 2006), CSR increases company operational costs (McWilliams, 2006;Barnet, 2016), CSR influences investment and decreases firm value due to improper use of resources (Vance, 1975). CSR as a means of sharing companies with the corporate environment can reduce the conflict of interest of the company and its environment so that it can prevent or reduce the occurrence of the company's operating expenses, on the other side CSR increases the company's operational expenses and reduces profits or increases losses for the company thereby reducing the company's investment opportunities, CSR realization in manufacturing companies in Indonesia is still relatively low when compared to the operating expenses of companies that arise in the event of a conflict of interest such as a lawsuit.…”

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

“…The possibility that higher investment efficiency leading to voluntary CSR activities or voluntary CSR engagement serves to divert attention from managerial opportunism cannot be ruled out in a voluntary regime. Zhong and Gao (2017), using Chinese data, find that CSR disclosure is associated with less overinvestment; however, their results suffer from an alternative explanation that those CSR firms engaged less in overinvestment even before the CSR mandate. Capitalising on the mandate of CSR disclosure in China, we apply a difference‐in‐difference method, and find that the mandatory stand‐alone CSR reports are associated with a decrease in investment inefficiency, and that such effect is asymmetrical across under‐ and overinvestment.…”

أثر الإفصاح عن المخاطر على کفاءة الإستثمار: دلیل من مصر(باللغة الإنجلیزیة)

“…The study of (Dutta and Nezlobin, 2017) also shows an important relation between risk disclosure and investment efficiency, they indicate that investment efficiency improves in the precision of disclosure, especially when disclosure presents information about the future. (Zhong and Gao, 2017) find that the nature of voluntary disclosure, which contributes to decreasing information asymmetry between managers and investors leads to investment efficiency.…”