This paper examines the corporations' decision to disclose information related to corporate social responsibility (CSR) and its implications. While there are no accounting standards similar to those for financial reporting, companies here in the U.S. and abroad have voluntarily started disclosing CSR information. While a study as recently as 2010 shows that only 30 percent of S&P 500 firms issued CSR reports, this situation has changed dramatically in the last 5 years with respect to the extent and substance of CSR disclosures. The issue of whether and how CSR disclosures are informative deserves attention. For investors, the potential interplay between financial results and CSR reporting provides an important piece of information. For a policy maker, this interplay provides an important dimension to consider with respect to environmental policy evaluation. For corporate managers, the impact of CSR disclosures on public image and the cost of capital plays an important role in strategic decision-making. In this paper, I analyze possible motivators for the disclosure decision. I also examine how capital investment expenditure may be associated with CSR disclosures and performance. I use data available from Bloomberg for measures of CSR. As expected, I find a positive association between CSR reporting and firm size; and between CSR disclosures and environmentally sensitive industries. Additionally I find a positive association between CSR disclosures and capital investment, and a negative association between CSR disclosures and the cost of capital.
Hong V. Nguyen, University of Scranton, USA
Stream: Economic Sustainability: Sustainable Businesses and CSR
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