Corporate social responsibility and unverifiable net assets ratio

Svetlana Orlova () and Li Sun ()
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Svetlana Orlova: Collins College of Business, The University of Tulsa
Li Sun: Collins College of Business, The University of Tulsa

International Journal of Disclosure and Governance, 2022, vol. 19, issue 1, No 3, 48 pages

Abstract: Abstract The move of the Financial Accounting Standards Board to expand the use of fair value instruments results in an increase in unverifiable assets and liabilities, which do not have actively traded market prices. Prior research suggests that managers may use discretion in estimating fair values of such assets and liabilities for their self-serving interests, leading to more agency conflicts. We examine the association between a firm’s corporate social responsibility (CSR) performance and the unverifiable net assets ratio, used to capture the level of unverifiable assets and liabilities. We find a significant negative relation between CSR and the unverifiable net assets ratio, suggesting that socially responsible firms use a low level of unverifiable assets and liabilities.

Keywords: Corporate social responsibility; Fair value accounting; Unverifiable assets; Unverifiable liabilities (search for similar items in EconPapers)
JEL-codes: G30 M41 M49 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41310-021-00126-0

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