Can corporate social responsibility disclosure alleviate asset price volatility? Evidence from China

Abstract

Using a textual analysis of corporate disclosure, this study explores how corporate social responsibility (CSR) disclosure affects asset price volatility. We find that CSR disclosure can significantly reduce asset price volatility. This finding is robust to alternative measures and different specifications by controlling for potential endogeneity. Further analysis shows that the negative relationship between CSR disclosure and return volatility is more pronounced for firms characterized by higher information asymmetry, pollution industries, and higher CSR performance. We demonstrate that a better CSR disclosure can reduce information asymmetry and increase investors’ information acquisitions. Overall, this study emphasizes the positive role of CSR disclosure in alleviating asset price volatility, which can provide practical implications for regulators and corporate CSR engagements by advocating CSR disclosure.