The effect of voluntary and mandatory corporate social responsibility disclosure on firm profitability: Evidence from China

We examine the association between a firm's profitability and its voluntary and mandatory CSR disclosures. We find both voluntary and mandatory CSR disclosure has a negative effect on the firm's profitability and voluntary CSR disclosure has a stronger negative effect than mandatory CSR disclosure. In addition, for firms with better corporate governance and better financial condition, the negative effect of voluntary disclosure on profitability weakens. We believe the firms voluntarily disclosing CSR are eager to attract more long-term investors, so they spend more on CSR activities and lower their profitability. We also find that firm with voluntary CSR disclosure attracts more institutional investors, has higher stock return, and raises more debt.