ABSTRACT This study examines how linking executive compensation to corporate social responsibility (CSR) metrics affects audit fees. The findings reveal that CSR‐linked compensation increases audit fees, a result consistent with agency theory which suggests that such contracts can exacerbate managerial opportunism. This research identifies potential underlying channels through which CSR‐linked compensation affects audit pricing. Furthermore, the positive relationship is strengthened for auditors with longer tenure or industry expertise but weakened for firms with higher institutional ownership. Overall, this work highlights increased audit fees as a significant cost of CSR‐linked compensation, revealing its dark side from a risk assessment perspective.

ABSTRACT We investigate how firms’ performance feedback influences their biodiversity disclosure practices. Our empirical results offer robust evidence of a positive relationship between the performance gap and the extent of biodiversity disclosure. This association remains consistent across various robustness checks. We demonstrate that managers utilise the performance gap as a strategic tool to enhance corporate image and secure stakeholder resources, which in turn leads to higher levels of disclosure. Furthermore, the effect is particularly salient in firms with strong internal controls and lower exposure to climate risk, those operating in highly polluting industries, and those located in regions characterised by high carbon emissions. Our study enriches the literature by highlighting the significance of corporate performance feedback in shaping disclosure strategies, fostering biodiversity‐related transparency, and advancing the agenda of sustainable development.

ABSTRACT Strengthening government accounting supervision is widely viewed as essential to modern governance and administrative capacity. Yet such interventions can entail real economic tradeoffs. Utilizing China's 2020 Regularized Government Accounting Supervision (RGAS) pilot policy as a quasi‐natural experiment, this study examines its impact on corporate innovation. Our findings indicate that firms in pilot regions experienced a significant decline in patent output compared to those in non‐pilot regions, with more pronounced effects among growth‐stage firms and those in non‐high‐tech industries. Mechanism analyses reveal that RGAS suppresses innovation primarily by reducing R&D investment and diminishing managerial optimism. Additional evidence suggests that firms’ adoption of artificial intelligence (AI) and higher analyst coverage can mitigate these adverse effects. These results highlight a potential trade‐off between regulatory oversight and innovative activities. The findings not only provide a significant addition to existing financial supervision theories in advanced economies, but also offer general insights for policymakers.

ABSTRACTBased on a sample of public firms domiciled in 41 countries around the world, we find that firms facing a higher level of environmental risk are more likely to adopt climate‐linked contracts with quantitative targets. We also find that firms adopting climate‐linked contracts are more likely to take real actions to address their concerns about environmental risks. Finally, we present evidence suggesting that environmentally sensitive firms with climate‐linked contracts, particularly those involving real actions implemented after the adoption of such contracts, tend to have high firm value. Taken together, our results support the conjecture that effective climate‐linked contracting has a real and substantive impact on managerial decision‐making, which in turn reduces firms’ environmental risks and increases their value.

ABSTRACTThe literature on voluntary disclosure primarily focuses on management forecasts. However, the determinants of narrative voluntary disclosures, such as letters to shareholders, have garnered limited scholarly attention. This paper examines the impact of social trust on firms’ decisions to issue letters to shareholders. We find that firms in regions with higher social trust are more inclined to issue such letters. This effect is more pronounced for firms exhibiting weaker institutional environments, less influence from Confucianism and lower firm‐level credibility. Furthermore, we identify the mechanism through which social trust facilitates the issuance of letters to shareholders: curbing corporate misconduct. Lastly, we present evidence indicating a favourable market reaction to the issuance of letters to shareholders. Overall, our findings suggest that social trust enhances the credibility of information, thereby encouraging greater voluntary narrative disclosures. This study contributes to prior work on the determinants of voluntary disclosures and the influence of social trust. Additionally, this research enhances our understanding of disclosure practices related to letters to shareholders and offers some insights for regulators on how to improve disclosure practices by strengthening informal institutions.

ABSTRACTThis study analyzes how compensation gaps influence corporate social responsibility (CSR) by focusing on the chief executive officer (CEO)–employee pay ratio. The empirical results reveal that companies with larger CEO–employee pay ratios exhibit worse CSR performance. In addition, this study demonstrates that the negative relationship between the CEO–worker compensation gap and CSR performance is moderated by board structure, institutional shareholdings, and managerial ability. The robustness of the main findings is guaranteed by addressing the endogeneity problem and using alternative measures. Collectively, these findings highlight the impact of the CEO–worker compensation gap on CSR and provide empirical evidence from the perspective of social welfare that can be used by researchers, regulators, and practitioners to evaluate pay gap regulations.