Abstract
We examine the relationship between corporate social responsibility (CSR) disclosure and firm value in China. Using a sample of listed companies on the Shanghai Stock Exchange from 2008 to 2012, we find that market value of a firm is higher when a company makes a lower level of CSR disclosure. Other things being equal, this relationship becomes positive when the CSR disclosure is moderated with the institutional ownership. With regard to the CSR disclosure, we found consistent results with respect to the little evidence that the amount of CSR disclosure is significantly associated with market value among those companies who chose to provide CSR disclosures. Taken together, these results indicate that the decision to disclose or not to disclose CSR information is value relevant to the level of institutional investors. These findings are important as they have made an attempt to resolve the earlier contradictory findings with respect to the relationship between market value and CSR disclosure. Furthermore, it has highlighted the value relevance of CSR disclosure regarding the type of shareholders/institutional investors.
Highlights
A firm may disclose discretionary information to reduce the firm’s cost of capital (Cormier et al (2011) [1]; Dhaliwal et al [2]) and/or increase firm value (Margolis et al [3]; Cho et al (2013) [4]; De Klerk et al (2015) [5])
The coefficients on InstSH are significant at 1%, and the coefficient on the InstSH * DCSR interaction variable is significant at 5%, supporting H2, which posited that institutional shareholding would strengthen the corporate social responsibility (CSR) disclosure firm value relationship
We examined the prevalence of CSR disclosures in China and the potential relationship between CSR information disclosure and the market value of the Chinese listed firms
Summary
A firm may disclose discretionary information to reduce the firm’s cost of capital (Cormier et al (2011) [1]; Dhaliwal et al [2]) and/or increase firm value (Margolis et al [3]; Cho et al (2013) [4]; De Klerk et al (2015) [5]). De Villiers and van Staden (2015) [5], de Klerk and de Villiers (2012) [26], and Gray et al (2001) [27] argue that institutional and cultural difference among countries can influence the link between CSR disclosure and firm performance These conflicting perspectives and inconsistent findings underline important research gaps (Isaksson and Woodside 2016) [28]. In a recent multilevel review of literature, Jamali and Karam (2018) [29] have argued that CSR in the developing economies is locally embedded and governed by formal and informal actors. Using a sample of the Chinese listed firms from 2008 to 2012, we found that market value of the firm is lower when a company discloses CSR information than when a company does make such disclosures Notwithstanding, this relationship becomes opposite when more of the shares of the firms are owned by institutional investors. It is imperative to mention that in recent times institutional shareholding has become more prevalent in China (Jiang and Kim 2015) [48], and institutional investors may have more concern about CSR disclosures than other types of investors (Wang and Chen 2017) [8]
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