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

Xue Wang, Feng Cao and Kangtao Ye ()
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Xue Wang: Renmin University of China
Feng Cao: Hunan University
Kangtao Ye: Renmin University of China

Journal of Business Ethics, 2018, vol. 152, issue 1, No 16, 253-274

Abstract: 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.

Keywords: Corporate Social Responsibility; CSR; Earnings management; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G14 G38 M14 M41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (59)

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DOI: 10.1007/s10551-016-3296-2

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