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Journal of Business Ethics

Erschienen in:

02.01.2016

Does Corporate Social Responsibility Affect Information Asymmetry?

verfasst von: Jinhua Cui, Hoje Jo, Haejung Na

Erschienen in: Journal of Business Ethics | Ausgabe 3/2018

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Abstract

In this study, we examine the empirical association between corporate social responsibility (CSR) and information asymmetry by investigating their simultaneous and endogenous effects. Employing an extensive U.S. sample, we find an inverse association between CSR engagement and the proxies of information asymmetry after controlling for various firm characteristics. The results hold using 2SLS considering the reverse side of information asymmetry influencing CSR activities. The results also hold after mitigating endogeneity based on the dynamic panel system generalized method of moment. Furthermore, the CSR–information asymmetry relation is amplified in high-risk firms due to managers’ efforts to build a good reputation. Last, we find that CSR engagement is inversely associated with reputational risk measure and lower predicted value of reputational risk is positively associated with lower information asymmetry measures. We interpret these results as supporting the stakeholder theory-based, reputation-building explanation that considers CSR engagement as a vehicle to build and maintain firm reputation thereby enhancing the information environment.

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We also use the bid–ask spread in our robustness tests.

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Several U.S. government agencies, such as the Environmental Protection Agency (EPA), the Securities and Exchange Commission (SEC), and Federal Trade Commission (FTC) are increasing their scope of sustainability disclosure oversight. In February 2010, the SEC issued an interpretive release to provide guidance to public companies regarding the SEC’s non-financial disclosure requirements as they apply to climate change matters. Effective in December 2011, the EPA established mandatory greenhouse gas (GHG) reporting requirements (40 CFR Part 98) for large sources and suppliers in the United States. In response to requirements in the 2010 Dodd-Frank Act, the SEC adopted conflict minerals reporting requirements. The FTC has issued Guides for the Use of Environmental Market Claims (Green Guides) to address sustainability reporting at the product level (White 2012).

Akerlof (1970) provides the first formal model to study signaling and how dramatically asymmetric information can affect market equilibrium. The signaling literature suggests that signals are typically used by insiders to disseminate information that helps differentiate items that look similar to outsiders. In that regard, signals should also be credible, observable, and costly to imitate (Ross 1977) and should add to the existing information set of outsiders (Spence 1973, 2002).

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Using the dynamic panel system GMM based on Blundell and Bond (1998), the economic significances of CSRIDX on both AMIHUD and DISP are still non-trivial and economically even more significant. For example, a one-standard deviation increase in CSRIDX would decrease AMIHUD by 13.71 or 12.31 % of its mean, while a one-standard deviation increase in CSRIDX would decrease DISP by 28.52 or 27.35 % of its mean.

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Titel: Does Corporate Social Responsibility Affect Information Asymmetry?
verfasst von: Jinhua Cui
Hoje Jo
Haejung Na
Publikationsdatum: 02.01.2016
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 3/2018
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-3003-8

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