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

Yi-Chun Chen¹; Mingyi Hung¹; Yongxiang Wang^2,3

¹ Hong Kong University of Science and Technology · ² University of Southern California · ³ California Southern University

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 SO2 emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.

DOI

10.1016/j.jacceco.2017.11.009

Volume

65 (1)

Pages

169-190

Language

en

Export

BibTeX

Sources

crossref openalex