Abstract
China Securities Regulatory Commission (CRSC) requires listed companies to issue CSR report mandatorily from 2008. To examine the effect of mandatory CSR disclosure, we adopt the PSM-DID introduced by the mandatory requirements. We find that mandatory disclosure reduces stock return and increases stock volatility. We further investigate the insurance effect of CSR. After the requirement changes, firms are more regulates its behavior by reducing violation cost in the stock market and increasing environmental protection expenditure, especially in State-Owned Enterprises. It indicates that Insurance Effect of CSR can serve a good role in building a social and environmentally friendly society despite mandatory CSR disclosure hampers its financial performance.Keywords: Corporate social responsibility; Insurance effect; Mandatory disclosure.JEL Classifications: G14; G18; G38; L78DOI: https://doi.org/10.32479/ijefi.10657
Highlights
An increasing popularity of ESG investment and attention to environment has triggered a trend toward demanding firms to disclose their corporate social responsibility (CSR) activities
We examine the impact of mandatory CSR disclosure on individual stock abnormal return and volatility, as well as its insurance effect
We examine the impact of the mandatory CSR disclosure in China starting from 2008
Summary
An increasing popularity of ESG investment and attention to environment has triggered a trend toward demanding firms to disclose their corporate social responsibility (CSR) activities. CSR encompass a variety of issues, such as environmental protection, positive relationship with employees; mutual benefit from communities and so on. The Insurance Effect of CSR refers to the social compensation from CSR devotion. The insurance effect is popular in academic area. Lins et al (2017) finds that high-level CSR firms in developed economy are more likely to survive from financial crisis. Xu et al (2020) find that companies can be saved from negative shocks. The insurance effect and its mechanism in emerging economy is still unknown
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