The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China

Yi-Chun Chen; Mingyi Hung; Yongxiang Wang

doi:10.1016/j.jacceco.2017.11.009

The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China

Yi-Chun Chen, Mingyi Hung^*, Yongxiang Wang

^*Corresponding author for this work

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1121 Citations (Scopus)

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Abstract

We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO ₂ emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.

Original language	English
Pages (from-to)	169-190
Number of pages	22
Journal	Journal of Accounting and Economics
Volume	65
Issue number	1
DOIs	https://doi.org/10.1016/j.jacceco.2017.11.009
Publication status	Published - Feb 2018
Externally published	Yes

Bibliographical note

Copyright © 2017 The Authors. Published by Elsevier B.V.. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

China
Firm performance
Mandatory CSR disclosure
Social externalities

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10.1016/j.jacceco.2017.11.009Licence: CC BY-NC-ND

Publisher version (open access)Final published version, 589 KBLicence: CC BY-NC-ND

Cite this

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title = "The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China",

abstract = "We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO 2 emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders. ",

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AU - Wang, Yongxiang

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N2 - We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO 2 emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.

AB - We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO 2 emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.

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KW - Social externalities

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The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China

Abstract

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