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

journal contribution
posted on 2021-03-01, 00:00 authored by Li LiuLi Liu, G G Tian
This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms' investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand-alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control-ownership wedge, state-owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems.

History

Journal

Accounting and finance

Volume

61

Pagination

595 - 644

Publisher

John Wiley & Sons

Location

Chichester, Eng.

ISSN

0810-5391

eISSN

1467-629X

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article