Mandatory CSR disclosure, monitoring and investment efficiency

evidence from China

Li Liu, Gary Gang Tian*

*Corresponding author for this work

Research output: Contribution to journalArticle


This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms' investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand-alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control-ownership wedge, state-owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems.

Original languageEnglish
Number of pages50
JournalAccounting and Finance
Publication statusE-pub ahead of print - 25 Dec 2019


  • China
  • Investment efficiency
  • Mandatory corporate social responsibility disclosure
  • Monitoring

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