Mandatory Corporate Social Responsibility (CSR) Reporting and Financial Reporting Quality: Evidence from a Quasi-Natural Experiment

This study examines the impact of mandatory Corporate Social Responsibility (CSR) reporting on firms’ financial reporting quality using a quasi-natural experiment in China that mandates a subset of firms to report their CSR activities starting in 2008. We find that mandatory CSR disclosure firms con...

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Bibliographic Details
Authors: Wang, Xue (Author) ; Cao, Feng (Author) ; Ye, Kangtao (Author)
Format: Electronic Article
Language:English
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Published: Springer 2018
In: Journal of business ethics
Year: 2018, Volume: 152, Issue: 1, Pages: 253-274
Further subjects:B M14
B Corporate social responsibility
B CSR
B Information Asymmetry
B Earnings management
B M41
B G14
B G38
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Description
Summary:This study examines the impact of mandatory Corporate Social Responsibility (CSR) reporting on firms’ financial reporting quality using a quasi-natural experiment in China that mandates a subset of firms to report their CSR activities starting in 2008. We find that mandatory CSR disclosure firms constrain earnings management after the policy. The result is robust to a battery of sensitivity tests and more prominent for firms with lower analyst coverage. Further analyses reveal that upward earnings management by mandatory disclosure firms is more likely to be caught after the policy. The findings suggest that mandatory CSR disclosure mitigates information asymmetry by improving financial reporting quality.
ISSN:1573-0697
Contains:Enthalten in: Journal of business ethics
Persistent identifiers:DOI: 10.1007/s10551-016-3296-2