Mandatory corporate social responsibility disclosure and firm innovation: Evidence from a quasi-natural experiment

Abstract

In this paper, I focus on whether government regulations on CSR disclosure can encourage firms’ sustainable growth, innovation in particular. Employing the enactment of a regulation that mandates a subset of firms to disclose their corporate social responsibility (CSR) activities in China as a quasi-natural experiment, I find that mandatory CSR disclosure encourages firm innovation. This positive relation is more pronounced for firms that are ex-ante less transparent. My findings indicate that although social responsible oriented mandatory information disclosure may bring about short-term costs, it can be beneficial to firms’ long-term prospects thorough facilitating patenting activities.