| CSR Report Equals to CSR Substance? Corporate Social Responsibility Disclosure, Information Asymmetry and Firm-idiosyncratic Risk in China |
Received:October 15, 2017 Revised:October 15, 2017 |
Key Words: corporate social responsibility, CSR substance, firm-idiosyncratic risk, information asymmetry |
| Author Name | Affiliation | | Haijian Liu* | Nanjing University | | Yixue Wu | Nanjing University |
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Abstract: |
| Chinese corporate social responsibility (CSR) report face a provocative debate over whether CSR information is substantial. Based on undeveloped Chinese CSR laws and regulations, along with information asymmetry, this study (1) uses the signal mechanism to explain and test the impact of CSR on firm-idiosyncratic risk and (2) discusses the role of four factors (ownership of firms, regulated industries, CEO duality and largest shareholder’s shareholding ratio) in explaining this impact among different firms from governmental constraint aspect and self-motivation aspect respectively. We show that CSR is indeed capable of lowering firm-idiosyncratic risk by allowing investors to perceive the substance of their CSR initiatives. In addition, firms in regulated industries derive more risk-reduction benefits from CSR disclosure than firms not in regulated industries. While this risk-reduction benefits from CSR might be weakened if firms with CEO duality or with higher largest shareholder’s shareholding ratio. Our study contributes to the literature on Chinese CSR research, application of FF4 model to Chinese firm-idiosyncratic risk, and a new pointcut to study influencing factors of relationship between Chinese CSR and financial performance. We also propose some practical suggestions. |
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