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Does CSR reporting matter to foreign institutional investors in China?

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  • Yu, Wei
  • Zheng, Ying

Abstract

This study empirically examines how the mandatory reporting of corporate social responsibility (CSR) affects the investment behavior of foreign institutional investors as measured by Qualified Foreign Institutional Investors (QFIIs) in China. Our analysis uses difference-in-differences (DiD) design by exploring the enactment of China’s 2008 CSR mandatory disclosure requirement. The results show that firms with mandatory CSR reporting undergo an increase in their QFII ownership percentage. Local institutional investors’ ownership and investment weight relative to the market portfolio also increased following the mandate for firms to provide CSR reporting. We find some evidence that QFIIs from common-law countries may invest more in firms with CSR reporting when compared with QFIIs’ full portfolio and QFIIs from code-law countries. Overall, our study provides practical guidance on the impact of nonfinancial information, indicating that CSR reporting can help firms in China to improve their information environment and attract international and local institutional shareholders.

Suggested Citation

  • Yu, Wei & Zheng, Ying, 2020. "Does CSR reporting matter to foreign institutional investors in China?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:jiaata:v:40:y:2020:i:c:s1061951820300239
    DOI: 10.1016/j.intaccaudtax.2020.100322
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    2. Wang, Ye & Liu, Xufeng & Wan, Die, 2023. "Stock market openness and ESG performance: Evidence from Shanghai-Hong Kong connect program," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1306-1319.
    3. Jianyu Zhao & Jing Qu & Lei Wang, 2023. "Heterogeneous institutional investors, environmental information disclosure and debt financing pressure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(1), pages 253-296, March.
    4. Ali Uyar & Mehmet Ali Koseoglu & Cemil Kuzey & Abdullah S Karaman, 2023. "Does firm strategy influence corporate social responsibility and firm performance? Evidence from the tourism industry," Tourism Economics, , vol. 29(5), pages 1272-1301, August.
    5. Cui, Di & Ding, Mingfa & He, Zhongda & Shen, Mi, 2022. "Restricted shares and CSR: Evidence from foreign strategic investors in China," Pacific-Basin Finance Journal, Elsevier, vol. 76(C).
    6. Patrick Velte, 2023. "Which institutional investors drive corporate sustainability? A systematic literature review," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 42-71, January.
    7. Garanina, Tatiana & Kim, Oksana, 2023. "The relationship between CSR disclosure and accounting conservatism: The role of state ownership," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 50(C).
    8. Mattias Sandgren & Timur Uman & Mattias Nordqvist, 2023. "Accountants in family firms—a systematic literature review," Small Business Economics, Springer, vol. 61(1), pages 349-388, June.
    9. Erragragui, Elias & Peillex, Jonathan & Benlemlih, Mohammed & Bitar, Mohammad, 2023. "Stock market reactions to corporate misconduct: The moderating role of legal origin," Economic Modelling, Elsevier, vol. 121(C).
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    11. Marshall, Andrew & Rao, Sandeep & Roy, Partha P. & Thapa, Chandra, 2022. "Mandatory corporate social responsibility and foreign institutional investor preferences," Journal of Corporate Finance, Elsevier, vol. 76(C).
    12. Han, Hope H. & Lee, Jiyoon & Wang, Boxian, 2023. "Greenhouse gas emissions, firm value, and the investor base: Evidence from Korea," Emerging Markets Review, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    Mandatory CSR reporting; QFIIs; Information transparency; Investor protection; China;
    All these keywords.

    JEL classification:

    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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