Quality of Corporate Social Responsibility Disclosure and Cost of Equity Capital

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This article explores the relationship between the quality of corporate social responsibility (CSR) disclosure and the cost of equity capital by analyzing the financial data and CSR reports of A-share listed firms in China from 2008 to 2014. It is shown that the quality of CSR disclosure is negatively related to cost of equity capital of the listed firms. This negative correlation proves to be more prominent among firms of environmentally-sensitive industries. Taking the ownership of the listed firms into consideration, it is further confirmed that the negative relationship between the CSR disclosure and the cost of equity capital is of higher significance for state-owned enterprises (SOEs). Our findings also empirically demonstrate that the quality of CSR disclosure is more negatively related to the cost of equity capital among large listed firms than smaller ones.