Abstract
From a theoretical point of view, corporate social responsibility (CSR) disclosure actions have associated a large list of benefits as a result of the lower information asymmetry problems that provoke firms to enjoy better financial conditions and higher market value. However, empirically there is no unanimity in the academy about these positive impacts. In this paper, we consider that the possible discretionary decision that managers could have in the elaboration of CSR reporting implies distrust about the credibility and utility of sustainability information. In this regard, the presence of independence in boards and directors that ensure better control of management decision could moderate the relationship between the quality of CSR reports and their benefits. Independent directors, in their decision-making process, associate their personal image, reputation, and career with CSR disclosures. For an international sample of analysis, our empirical evidence supports the premise that the market only positively assesses the utility and comparability of corporate social responsibility information, giving firms a superior value when there is a complementary mechanism that guarantees information credibility.
Highlights
In recent years, firm transparency has been positioned as a relevant dimension within what is considered to be good corporate governance, having a positive impact on the market evaluation of organizations
A high percentage of independent directors on the board allows the market to positively assess corporate social responsibility (CSR) information by increasing the market’s confidence in it, which translates to firms benefitting from higher performance and a lower cost of capital and information asymmetry
Because independent directors ensure the consistency of the CSR information reported, as well as its credibility and reliability, we show that the quality—utility and comparability—of CSR disclosure reduces information asymmetry problems; it achieves a lower cost of capital with the increased presence of these directors
Summary
Firm transparency has been positioned as a relevant dimension within what is considered to be good corporate governance, having a positive impact on the market evaluation of organizations In this context, corporate social responsibility (CSR) reports—as voluntary documents aimed to disclose economic, social, and environmental information—have attracted considerable attention from researchers and academia (Wang et al, 2018; Gallego-Álvarez et al, 2018). Among the large number of past studies focused on CSR disclosure, several examined its consequences (e.g., Stevens et al, 2005; Li et al, 2013; Dhaliwal et al, 2011; Martínez-Ferrero and García-Sánchez, 2017; Wang et al, 2018). The literature does not provide unanimous results, and previous studies have documented that high-quality CSR is necessary in order to achieve better firm performance (Van Beurden and Gössling, 2008; Li et al, 2013)
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