This paper examines the determinants and economic efficiency of corporate voluntary disclosure. The focus is on the trade-off for an individual firm when the costs and benefits of voluntary disclosure stem from the consequences of its investment decisions and the impact on its share price. Investment and voluntary disclosure decisions are intertwined. First, voluntary disclosure leads to more accurate pricing, which induces more efficient investment decisions. Second, the firm may affect the market pricing in its favor by strategically disclosing or withholding its private information. This opportunistic use of disclosure may cause the real investment to be distorted at the margin. My analysis shows that the efficiency of voluntary disclosure is influenced by both effects. Further, this paper investigates how the investment efficiency and the propensity for providing voluntary disclosure respond to various environmental variables. Two such key variables are the general economic outlook of the investment opportunity and the quality of firm private information.

The current study investigates the association between corporate social responsibility (CSR) and financial performance (FP), and discusses the driving motives of banks to engage in CSR. Three motives, namely, strategic choices, altruism, and greenwashing, suggest that the relationship between CSR and FP is positive, non-negative, and non-existent, respectively. We obtained our sample, which covered 2003–2009, from the Ethical Investment Research Service (EIRIS) databank and Bankscope database. The data consists of 162 banks in 22 countries. We then classified the banks into four types based on their degree of engagement in CSR. This study proposes the use of an extended version of the Heckman two-step regression, in which the first step adopts a multinomial logit model, and the second step estimates the performance equation with the inverse Mills ratio generated by the first step. The empirical results show that CSR positively associates with FP in terms of return on assets, return on equity, net interest income, and non-interest income. In contrast, CSR negatively associates with non-performing loans. Hence, strategic choice is the primary motive of banks to engage in CSR.

In an attempt to explain the weak evidence of priced exchange rate risk, we hypothesize that in addition to currency derivative usages, earnings management serves as another factor contributing to a reduction in exchange rate exposure. Our evidence reveals that earnings management activities, particularly those undertaken for the purpose of income smoothing, significantly reduce firm-specific exchange rate exposure, and that such role is particularly important if appropriate currency derivative instruments are limited. These results complement prior attempts to explain the puzzle of unpriced exchange rate risk. The investigation also highlights the importance of recognizing different managerial purposes behind discretionary accruals.