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Mandatory Corporate Social Responsibility (CSR) Reporting and Financial Reporting Quality: Evidence from a Quasi-Natural Experiment

Author

Listed:
  • Xue Wang

    (Renmin University of China)

  • Feng Cao

    (Hunan University)

  • Kangtao Ye

    (Renmin University of China)

Abstract

This study examines the impact of mandatory Corporate Social Responsibility (CSR) reporting on firms’ financial reporting quality using a quasi-natural experiment in China that mandates a subset of firms to report their CSR activities starting in 2008. We find that mandatory CSR disclosure firms constrain earnings management after the policy. The result is robust to a battery of sensitivity tests and more prominent for firms with lower analyst coverage. Further analyses reveal that upward earnings management by mandatory disclosure firms is more likely to be caught after the policy. The findings suggest that mandatory CSR disclosure mitigates information asymmetry by improving financial reporting quality.

Suggested Citation

  • Xue Wang & Feng Cao & Kangtao Ye, 2018. "Mandatory Corporate Social Responsibility (CSR) Reporting and Financial Reporting Quality: Evidence from a Quasi-Natural Experiment," Journal of Business Ethics, Springer, vol. 152(1), pages 253-274, September.
    • Handle: RePEc:kap:jbuset:v:152:y:2018:i:1:d:10.1007_s10551-016-3296-2
    DOI: 10.1007/s10551-016-3296-2
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    More about this item

    Keywords

    Corporate Social Responsibility; CSR; Earnings management; Information asymmetry;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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