CSR Disclosures: Predispositions and Consequences

Abstract

Corporate social responsibility (CSR) disclosures are becoming more prevalent among firms. We investigate the predisposition of firms to disclose CSR information and find that firms are likely to disclose more in countries with: better investor protection, higher levels of democracy, more effective government services, higher quality regulations, more press freedom, and a lower commitment to environmental policies. We also find that CSR disclosures are associated with higher share prices. In addition, we find this relationship to be stronger in countries with more democracy, more government effectiveness, better regulatory quality, and more press freedom. These results imply that market participants find CSR disclosures more informative in countries where investors are in a better position to voice their concerns (through democratic mechanisms and through the media), and where opportunities to voice concerns have resulted in better regulation and more effective government implementation of regulations.