Asymmetric Information and International Corporate Social Responsibility

Kerstin Lopatta (kerstin.lopatta@uni-oldenburg.de), Frerich Buchholz (frerich.buchholz@oldenburg.de) and Thomas Kaspereit
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Kerstin Lopatta: University of Oldenburg - Accounting and Corporate Governance & ZenTra
Frerich Buchholz: University of Oldenburg - Accounting and Corporate Governance

No 29 / 2014, ZenTra Working Papers in Transnational Studies from ZenTra - Center for Transnational Studies

Abstract: We investigate the relation between asymmetric information of insider trades and international corporate social responsibility for U.S. firms listed in the MSCI world index during the period 2004 to 2010. In comparison to current studies, which focus on measuring the interrelation between the cost of capital or firm value and corporate sustainability, our analysis entails the direct relationship between international corporate sustainability and information asymmetry. We measure information asymmetry by the abnormal returns that occur when insiders trade in the stock of their firms. Hence, our investigation is based on a micro level and helps to explain the results at the more aggregated level of cost of capital, and at the fully aggregated level of firm value. In our cross-sectional analysis we found evidence that firms with a higher degree of corporate sustainability spend more efforts in reducing information asymmetry.

Keywords: Asymmetric Information; Corporate Governance; International Corporate Social Responsibility; Cross-Sectional Analysis; Event Study; Insider Trading (search for similar items in EconPapers)
JEL-codes: D21 D53 D82 G14 G34 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-01, Revised 2014-01
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-cta
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