Mandatory corporate social responsibility disclosure and dividend payouts: evidence from a quasi‐natural experiment

Abstract

Employing the enactment of a regulation that mandates a subset of firms to disclose their corporate social responsibility (CSR) activities as a quasi-natural experiment, we find that mandatory CSR disclosure reduces firms' dividend payouts significantly. Further analyses indicate that the negative relation is more pronounced for firms with weaker corporate governance mechanisms, where shareholders lack of effective tools to protect themselves against pressures from stakeholders, and a shift of relative power towards stakeholders is more likely to occur. Our paper provides a specific channel through which mandatory CSR disclosure benefits stakeholders at the expense of shareholders.

Environmental, social and governance (ESG) activity and firm performance: a review and consolidation

“…Many studies examine a range of CFP measures (operational, accounting and market) for their association with the ESGP measure of interest (e.g., all the meta‐analytical studies reviewed in this article include multiple CFP measures). From a disclosure perspective, the literature shows evidence of ESGP as reducing informational asymmetry between the firm and key stakeholders (Fombrun and Shanley, 1990; Aghion and Holden, 2011; Nguyen et al , 2018), as well as being directed to a more specific outcome, for example ESG disclosure and dividend payments (Cheung et al , 2018; Ni and Zhang, 2019). Although ESG disclosures may be a proxy for actual ESGP (Beck et al , 2018), pressure from stakeholder groups in and outside the firm shape financial decisions, with firm decision‐making taking into account how disclosure may favourably address stakeholder concerns (Coleman et al , 2010), raising risks of green‐ or white‐washing.…”

The IPO corporate social responsibility information disclosure: Does the stock market care?

“…They find that the stock market exhibits a favourable reaction to CSR measures by market‐oriented non‐SOEs but a neutral reaction to those by SOEs, which have substantial agency costs. Other studies find that a shift in relative power towards stakeholders is more likely after China's enforcement of mandatory CSR disclosure, and document that CSR activities have a negative impact on the stock prices of non‐state‐controlled listed firms (Hu et al ., ; Ni and Zhang, ).…”

Sixty years of Accounting & Finance: a bibliometric analysis of major research themes and contributions

“…We find an increasing research interest in the concepts of CSR (Al‐Hadi et al ., 2019; Ni and Zhang, 2019) and ESG (e.g., Daugaard, 2020; Ding et al ., 2020), as well as broader debates around the impacts of climate change, climate policy and global environmental change more generally. This shift towards sustainable finance is also visible in other Asia‐Pacific finance (and accounting) journals (e.g., Linnenluecke and Smith, 2019; Andrew and Baker, 2020) as well as in the literature more generally (Diaz‐Rainey and Tulloch, 2018).…”