Corporate social responsibility and financial disclosures: An alternative explanation for increased disclosure [Book Review]
Journal of Business Ethics 33 (1):1 - 13 (2001)
AbstractResearchers and practitioners have devoted considerable attention to firms'' policies regarding discretionary disclosures. Prior studies argue that firms increase demand for their debt and equity issues and, thus, lower their cost of capital, by providing more informative disclosures. However, empirical research has generally not been able to document significant benefits from increased disclosure.This paper proposes an alternative explanation – firms disclose because it is the socially responsible thing to do. We argue that companies have incentives to engage in stakeholder management by undertaking socially responsible activities and that providing extensive and informative disclosures is one such practice.We examine the relationship between firms'' disclosures and measures of social responsibility. We use ratings provided by the Council on Economic Priorities as proxies for the degree of social responsibility adopted by the sample firms. Disclosure rankings provided by the annual Association for Investment Management and Research Corporate Information Committee Reports (AIMR Reports) are used to measure disclosure level.Our results indicate that there is a positive relationship between disclosure level and corporate social responsibility. That is, firms that engage in socially responsive activities provide more informative and/or extensive disclosures than do companies that are less focused on advancing social goals. In addition, we find that socially responsible firms are more likely to provide this increased disclosure through better investor relations practices. These results support our contention that increased disclosure is a form of socially responsible behavior.
Similar books and articles
Expressions of Corporate Social Responsibility in U.K. Firms.Diana C. Robertson & Nigel Nicholson - 1996 - Journal of Business Ethics 15 (10):1095 - 1106.
Determinants of Corporate Disclosure and Transparency: Evidence From Hong Kong and Thailand.Stephen Yan-Leung Cheung, J. Thomas Connelly & Piman Limpaphayom - 2007 - International Corporate Responsibility Series 3:313-342.
Corporate Social Responsibility: Is It Rewarded by the Corporate Bond Market? A Critical Note. [REVIEW]Klaus-Michael Menz - 2010 - Journal of Business Ethics 96 (1):117-134.
Added to PP
Historical graph of downloads
Citations of this work
Value-Enhancing Capabilities of CSR: A Brief Review of Contemporary Literature.Mahfuja Malik - 2015 - Journal of Business Ethics 127 (2):419-438.
Sustainable Development and Corporate Performance: A Study Based on the Dow Jones Sustainability Index.M. Victoria López, Arminda Garcia & Lazaro Rodriguez - 2007 - Journal of Business Ethics 75 (3):285-300.
Investing in Socially Responsible Companies is a Must for Public Pension Funds – Because There is No Better Alternative.S. Prakash Sethi - 2005 - Journal of Business Ethics 56 (2):99 - 129.
Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International Evidence. [REVIEW]Hsiang-Lin Chih, Chung-Hua Shen & Feng-Ching Kang - 2008 - Journal of Business Ethics 79 (1-2):179 - 198.
Sustainability Practices and Corporate Financial Performance: A Study Based on the Top Global Corporations. [REVIEW]Rashid Ameer & Radiah Othman - 2012 - Journal of Business Ethics 108 (1):61-79.
References found in this work
The Association Between Corporate Social-Responsibility and Financial Performance: The Paradox of Social Cost. [REVIEW]Moses L. Pava & Joshua Krausz - 1996 - Journal of Business Ethics 15 (3):321 - 357.
Corporate Social Performance, Stakeholder Orientation, and Organizational Moral Development.Jeanne M. Logsdon & Kristi Yuthas - 1997 - Journal of Business Ethics 16 (12-13):1213-1226.
Criteria for Evaluating the Legitimacy of Corporate Social Responsibility.Moses L. Pava & Joshua Krausz - 1997 - Journal of Business Ethics 16 (3):337-347.