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Nothing but the Truth? Private Information and Reporting on Corporate Social Responsibility

Author

Listed:
  • Jean-Etienne de Bettignies
  • Hua Fang Liu
  • David T. Robinson

Abstract

We develop and test a model in which firms can make non-verifiable statements about their CSR engagement, and hence may have incentives to mislead markets with exaggerated CSR claims. Firms may privately receive a signal correlated with their CSR engagement - e.g. a measure of greenhouse gas emissions - and have discretion over whether to publicly disclose it. Based on whether a signal is disclosed to them, and on what the signal is, markets form beliefs about the firm's CSR activities and the truthfulness of its claims. The model illustrates the disciplining effect of ex post private signal availability on firms' ex ante reporting on their CSR engagement. We test the model using a difference-in-differences approach that exploits special features of the introduction of the UK Companies Act of 2013, and find evidence supporting the model's predictions.

Suggested Citation

  • Jean-Etienne de Bettignies & Hua Fang Liu & David T. Robinson, 2020. "Nothing but the Truth? Private Information and Reporting on Corporate Social Responsibility," NBER Working Papers 28159, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28159
    Note: CF PR
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    Citations

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    Cited by:

    1. Wen, Hui & Ho, Ken C. & Gao, Jijun & Yu, Li, 2022. "The fundamental effects of ESG disclosure quality in boosting the growth of ESG investing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    2. Maarten Pieter Schinkel & Leonard Treuren, 2021. "Corporate Social Responsibility by Joint Agreement," Tinbergen Institute Discussion Papers 21-063/VII, Tinbergen Institute.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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