Higher Corporate Social Responsibility Performance Research Articles

Impact of target firm’s social performance on acquisition premiums

This study investigates whether a target firm’s corporate social responsibility (CSR) influences the acquisition premium paid by an acquirer. Using the US public mergers and acquisitions (M&A) deals, this study finds that acquisition premium increases as targets’ perceived CSR quality increases, an effect incremental to previously documented drivers of such premiums. Additional findings reveal that the positive association between targets’ CSR quality and acquisition premiums is stronger for large targets and acquirers with high CSR performance. The study also documents that targets’ environmental performance has the strongest effects on acquisition premiums compared to other dimensions of CSR such as community, employees, diversity, or product. This study contributes to the literature by documenting the value of CSR in an unconventional manner using evidence from the M&A market. The findings are robust after controlling for the target-specific, acquirer-specific, deal-specific, and macro-economic variables and by using different proxies for CSR and acquisition premiums.

Corporate social responsibility and firm-level systematic risk: The moderating effect of economic policy uncertainty

This paper investigates the relationship between corporate social responsibility (CSR) performance, firm-level systematic risk, and variations in economic policy uncertainty (EPU) levels. We examine a dataset of Chinese listed firms, finding that higher CSR performance should reduce firms' systematic risk during periods with relatively high levels of EPU. Furthermore, better satisfaction of primary and secondary stakeholders can help firms reduce systematic risk and increase performance when EPU is high. This evidence supports the implication of stakeholder theory that CSR investment can create substantial relational wealth essential to firms' risk management. Our results also imply that the CSR-systematic risk relationship can be positive when EPU is relatively low. Our findings indicate that the risk-mitigation benefits of CSR are state-contingent and can be better realized during downturns.

Are country-level political uncertainty and power distance important to the CSR-audit report lag nexus? Evidence from the GCC region

ABSTRACT This study examines the effect of corporate social responsibility (CSR) performance on audit report lag and whether political uncertainty and power distance levels impact such association. We find that audit report lag is significantly lower for firms with a high CSR performance. We further find that the impact is evident only for large firms and those whose financial reports are audited by highquality auditors. However, our analysis suggests that political uncertainty and power distance intensity do not moderate the association between CSR performance and audit report lag. Our results remain robust after excluding some control variables, addressing the endogeneity issues, and using alternative audit report lag measures. This study contributes to audit delay literature by recognising CSR practices as a determinant of audit report lag in the GCC setting. The findings of this study carry valuable practical implications for regulatory bodies, policymakers, investors, and managers in the GCC region.

Can CSR mitigate negative regional public sentiment? Evidence from major violent crimes in China

In the information age, major negative events can spread quickly and affect investors' perceptions and decisions. Using data on major violent crime events in China, we investigate the role of corporate social responsibility (CSR) in mitigating negative regional public sentiment. We find that firms with high CSR performance have better stock returns on event days. We also find that investors react more positively to firms engaging in technical CSR activities (those targeting a firm's primary stakeholders) than to those engaging in institutional CSR activities (those serving the public). Moreover, this effect is more pronounced in firms with better internal control and higher information transparency. This study documents the positive role of CSR in securing firm value in the face of negative public sentiment.

Independent directors' ownership and CSR performance: the moderating roles of factors impacting directors' attention

PurposeThis study aims to examine the impact of independent directors' ownership on corporate social responsibility (CSR) performance. In line with the stakeholder-agency paradigm's prediction, the authors propose that higher independent directors' ownership is associated with higher CSR performance. By drawing on the attention-based view, the authors further examine firm-level conditions that impact the situated attention of independent directors holding high equity ownership as they are active agents.Design/methodology/approachThe authors collected data covering the years 2009–2013 for firms listed in the S&P 500 index. The authors tested the hypotheses using firm fixed-effects models.FindingsThe results show that higher independent directors' ownership is associated with higher CSR performance. Prior firm performance and available slack resources are found to have diverse impacts on the association between independent directors holding high equity ownership and CSR performance.Originality/valueThis study highlights the importance of examining the performance-based incentives of independent directors on firms' CSR performance. This study also provides a better understanding of factors impacting independent directors' situated attention as boundary conditions.

Effect of Corporate Social Responsibility on Portfolio Performance: Evidence From Turkey

This study investigates the performance of corporate social responsibility (CSR) portfolios based on ESG scores of stocks traded in Borsa Istanbul (BIST). It also evaluates the performance of a trading strategy that represents buying portfolios that include companies with high CSR performance and selling portfolios comprising companies with low CSR performance. Therefore, two portfolios with high and low CSR performance were formed from stocks traded in Borsa Istanbul. These portfolios’ performances were compared from July 2010 to June 2020. The findings show that the alpha coefficient of the portfolio containing stocks of companies with high CSR performance is generally positive and significant. Thus, companies’ past CSR performances provide valuable information for investors. Additionally, based on this, investors can achieve a superior performance against the market. However, the alpha of the difference portfolio, which shows the difference between the two portfolios’ performance, is, in most cases, insignificant. This suggests that there is no proof that the portfolio comprising companies with high CSR performance is superior to the portfolio including companies with low CSR performance. These findings are supported by additional testing. Consequently, our result provides supporting evidence for the “no effect” hypothesis.

Does Earnings Quality Influence Corporate Social Responsibility Performance? Empirical Evidence of the Causal Link

The study examines the causal links between earnings quality and corporate social responsibility (CSR) performance using a large sample of United States (US) firms from 1992 to 2013. We first find that the association between earnings quality and CSR performance is positive and significant. We then test the flow of causality using Granger's (1969) lead–lag analysis to determine whether changes in earnings quality cause changes in CSR performance or vice versa. Our findings show that changes in earnings quality cause changes in a firm's CSR performance but not vice versa. Further analysis shows that earnings quality reduces the cost of equity capital for firms with higher CSR performance. These findings suggest that one plausible means by which firms with higher earnings quality can maintain better CSR performance is to reduce their cost of equity capital.

Corporate Social Responsibility and Tax Avoidance: Evidence from the 2018 Tax Reform in Taiwan

This paper examines the relation between corporate social responsibility (CSR) performance and corporate tax avoidance in the context of Taiwan’s change from an imputation to classical tax system in 2018. Using a sample of 1,277 listed firms from 2015 to 2020, I determine that, after 2018, firms engage in tax avoidance to a greater extent. Furthermore, firms that perform well in CSR are less likely to engage in tax avoidance. After the 2018 legislative change, firms with high CSR performance are less likely to engage in tax avoidance to a greater extent. These results are consistent with the stakeholder theory and withstand a battery of robustness checks.

Les firmes socialement responsables sont-elles plus difficiles à arbitrer ?

We examine how corporate social responsibility (CSR) affects limits to arbitrage. Using a sample of S&P 500 firms from 2002 to 2020, our findings indicate that firms with high CSR performance are associated with a higher degree of limits to arbitrage. Those findings are confirmed when using only social and environmental dimensions, and when testing the relationship between CSR and each limits-to-arbitrage component separately. Our findings hold when using an alternative measure of limits to arbitrage and are robust to endogeneity checks. Our study suggests that CSR makes arbitrage activity harder and riskier, thereby leading to mispricing.

Determinants of corporate social responsibility performance in emerging markets: An international orientation perspective

AbstractFor emerging market multinational enterprises (EMNEs), corporate social responsibility (CSR) is a foreign business practice. Because EMNEs are late movers in the international market, their attempts to engage in sustainable development and to improve CSR performance (CSP) are hindered by their limited relevant knowledge and resources. Few studies have investigated how EMNEs achieve high CSP. In this study, a sample of 177 Taiwanese companies in Taiwan listed on the Taiwan Stock Exchange from 2013 to 2015 was examined. Data were collected from the Taiwan Economic Journal database. The effects of international orientation on the level of internationalization, market entry in advanced economies, and adherence to international CSR principles on the CSP of these EMNEs were investigated. The results revealed that higher levels of internationalization, greater market entry in advanced economies, and adherence to international CSR principles are positively related to CSP. In addition, a higher level of internationalization enhances the relationship between adherence to international CSR principles and CSP.

Corporate social responsibility report readability, credit ratings and cost of borrowing

PurposeThis study aims to investigate how credit rating agencies and banks, important credit market participants, incorporate corporate social responsibility (CSR)-related information in their assessment of firm’s creditworthiness.Design/methodology/approachThe authors collect stand-alone CSR reports published by Fortune 500 companies from 2002 to 2014 and use file size as a readability measure to investigate the impact of stand-alone CSR reports’ readability on firms’ credit ratings and cost of borrowing.FindingsThe authors find that firms with higher CSR report readability enjoy higher credit ratings and lower costs of bank loans, suggesting that rating agencies and banks perceive lower default risk for firms with more readable CSR reports. Further analysis indicates that the positive association between CSR report readability and credit ratings is more pronounced for firms with high CSR performance. Conversely, the negative association between CSR report readability and bank loan spreads is more pronounced for firms with low CSR performance and credit quality, suggesting complementary roles of rating agencies and banks in their use of CSR reports.Originality/valueOverall, the results highlight the importance of improving the textual characteristics of CSR reports, especially readability, in reducing information risk in the credit market.

Can corporate social responsibility disclosure alleviate asset price volatility? Evidence from China

Using a textual analysis of corporate disclosure, this study explores how corporate social responsibility (CSR) disclosure affects asset price volatility. We find that CSR disclosure can significantly reduce asset price volatility. This finding is robust to alternative measures and different specifications by controlling for potential endogeneity. Further analysis shows that the negative relationship between CSR disclosure and return volatility is more pronounced for firms characterized by higher information asymmetry, pollution industries, and higher CSR performance. We demonstrate that a better CSR disclosure can reduce information asymmetry and increase investors’ information acquisitions. Overall, this study emphasizes the positive role of CSR disclosure in alleviating asset price volatility, which can provide practical implications for regulators and corporate CSR engagements by advocating CSR disclosure.

Does CSR Affect the Impact of Real Earnings Management on the Cost of Debt?

Purpose - We explore how corporate social responsibility (CSR) plays a role in the debt market when companies engage in real earnings management. Specifically, we analyze the cost of capital of a company with real earnings management as measured by abnormally operating cash flows, abnormally production costs and discretionary expenditures, and examine the role of CSR in the relationship.
 Design/Methodology/Approach - The analysis sample is for Chinese publicly listed companies, the data were obtained from China Stock Market and Accounting Research (CSMAR), and the CSR data were collected from the Hexun database. We implemented OLS regression analysis by setting the proxies of real earnings management as dependent variable, cost of debt capital as a dependent variable, and CSR as a moderating variable.
 Findings - Our empirical results show that real earnings management significantly increases the cost of debt after controlling for discretionary accruals, another proxy variable for earnings management. Especially, we find that corporate social responsibility weakens the negative impact of real earnings management on the cost of debt.
 Research Implications - This study provides evidence that corporate social responsibility plays a significant role in mitigating the adverse impact of real earnings management on the debt market. Therefore, creditors in the debt market need to be more cautious in assessing the impact of real earnings management that may be underestimated due to high CSR performance.

Financial experts of top management teams and corporate social responsibility: evidence from China

This study examines how the financial experience of senior executives influences corporate social responsibility (CSR) performance and reporting activities. With a sample of Chinese listed companies over the period 2009–2018, we find that companies with senior executives with financial expertise are associated with higher CSR performance and tend to issue lengthier sustainability reports than companies without; in addition, the percentage of financial experts on the top management team (TMT) is positively related to CSR. We next find that such improvement in CSR is mainly driven by senior executives who have work experience in regulatory-oriented financial institutions. By examining the role of the TMT’s latitude of action, we find that the positive influence of senior executives’ financial experience on CSR is more pronounced in non-state-owned enterprises and in cash-abundant companies. Last, further analysis demonstrates that the enhancement in CSR driven by financially sophisticated executives drives firm value. The results are robust to alternative measures, sensitivity tests, and various controls for endogeneity concerns.

Element Matching and Configuration Path of Corporate Social Responsibility Performance

With rapid progress in the corporate social responsibility (CSR) theories and the up-gradation of the global market information disclosure system, enterprises have increased their attention toward relevant stakeholders and social responsibility. CSR exerts a substantial impact on the sustainable development of enterprises and markets in the economic and social fields. On the one hand, the increasingly perfect supporting facilities promote the financial growth of the entire society. While on the other hand, the profit-seeking trend of capital is also on the rise. The incongruity between the rapid progress of enterprises and the lack of social responsibility limits the benign development of the market. This study discusses the antecedents of CSR from the variable combination perspective using the fuzzy-set qualitative comparative analysis. It also investigates which combination of characteristics has better CSR performance. After the configuration analysis, it is identified that four paths lead to high CSR performance. These include the market-developed type, political link type, financial performance type, and state-owned enterprise subsidy type, and the level of each type is explained in-depth. Finally, this study provides management inspiration for the government and enterprises to formulate a sound social responsibility strategy and improve CSR performance by optimizing the matching of CSR activities and business objectives.

The Impact of Corporate Social Responsibility Performance Feedback on Corporate Social Responsibility Performance.

This study empirically analyzes how corporate social responsibility (CSR) performance feedback impacts CSR performance, focusing on the performance feedback perspective of behavioral theory of the firm (BTOF). By performing generalized least squares (GLS) regression analysis based on Korean company data from 2012 to 2019, we presented evidence that positive social and historical performance feedback had a positive effect on CSR performance. Our results provide evidence that firms with higher social and historical CSR performance than CSR aspiration may have higher CSR performance than those that do not.

CORPORATE SOCIAL RESPONSIBILITY AND REAL EARNINGS MANAGEMENT: DOES BOARD GENDER DIVERSITY MATTER?

The purpose of this paper was to examine the moderating effect of board gender diversity on the relationship between corporate social responsibility (CSR) and real earnings management (REM). It drowns on French listed companies from 2005 to 2019. The results show that there is a positive relationship between CSR and REM. Our findings also show that this positive relation is moderated in firms with higher board gender diversity, mainly because female directors show a high socially responsible behaviour and are negatively associated with earnings management practices. Our results are robust to alternative board gender diversity measures, only after the quota law adoption. The positive relationship between CSR and REM suggests that companies with higher CSR performance are exposed to high discretionary behaviour. CSR can be strategically used by managers to hide unethical practices, such as real earnings management activities. In addition, the findings highlight the importance of board gender diversity in reducing agency costs and ensuring higher monitoring, particularly after the quota law adoption.

Will the Governance of Non-State Shareholders Inhibit Corporate Social Responsibility Performance? Evidence from the Mixed-Ownership Reform of China’s State-Owned Enterprises

Fulfilling social responsibilities in order to sustain development has increasingly become a strategic choice for companies. Good corporate governance can guarantee high corporate social responsibility performance. This paper selects state-owned enterprises listed on the Shanghai and Shenzhen A-Share market from 2013 to 2019 as samples and uses a panel data OLS regression model to empirically test the impact of the governance of non-state shareholders on the social responsibility performance of state-owned enterprises from two aspects of shareholding: structure and high-level governance. The results show that, first, the governance of non-state shareholders helps to improve the social responsibility performance of state-owned enterprises; second, that mechanism analysis indicates that non-state shareholders improve the social responsibility performance of state-owned enterprises by improving the internal control quality; and third, the impact of the governance of non-state shareholders on the social responsibility performance of state-owned enterprises is heterogeneous in three aspects: the degree of marketization, the level of product market competition, and the corporate profitability. This paper not only helps to clarify the factors which influence the social responsibility performance of state-owned enterprises, but also enriches studies on the economic consequences brought by non-state shareholders through participating in the governance of state-owned enterprises.

Corporate social responsibility, green financial system guidelines, and cost of debt financing: Evidence from pollution‐intensive industries in China

AbstractUsing a sample of publicly listed firms from 2014 to 2019 in pollution‐intensive industries in China, this study investigates the effect of corporate social responsibility (CSR) on corporate cost of debt financing and how the issuance of the “Green Financial System Guidelines” moderates the above relationship. We find that high CSR performance (including responsibility for shareholders, employees, suppliers and customers, the environment, and the community) is associated with low cost of debt in polluting companies. Moreover, the “Green Financial System Guidelines” strengthens the role of CSR in reducing corporate cost of debt. Further analyses reveal that CSR reduces cost of debt by reducing information asymmetry and business risk, and that green credit development strengthens the role of CSR in reducing corporate cost of debt. Our baseline results are robust to alternative measures and tests that address potential endogeneity concerns by employing the Heckman two‐stage and propensity score matching (PSM) methods.

Marketing Investments and Corporate Social Responsibility

Although the short-term effects of marketing efforts that promote immediate consumer responses have been extensively investigated, the long-term impacts of marketing activities have received little attention. Marketing effects can be carried over time as consumers experience an emotional attachment to products and build trust and affection. In addition, a firm’s advertising spending not only improves customer awareness of the firm’s products and services but also serves to promote other company information, such as the firm’s corporate social responsibility (CSR), a long-term strategic commitment to improving the welfare of customers and society. This paper focuses on the long-term effects of marketing investments by examining the relation between advertising expenditures and a firm’s commitment to CSR, finding that firms with a higher advertising expenditure are more likely to have a higher CSR performance. The findings of this study demonstrate that marketing investments are related to a firm’s long-term sustainable activities. Additionally, the finding may indicate that a firm’s CSR initiatives are influenced by the extent to which the firm commits to advertising that promotes customer awareness of the firm’s products and services.