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Asymmetric Information and International Corporate Social Responsibility

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  • Kerstin Lopatta

    ()
    (University of Oldenburg - Accounting and Corporate Governance & ZenTra)

  • Frerich Buchholz

    ()
    (University of Oldenburg - Accounting and Corporate Governance)

  • Thomas Kaspereit

    ()
    (University of Oldenburg - Accounting and Corporate Governance)

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    Abstract

    We investigate the relation between asymmetric information of insider trades and international corporate social responsibility for U.S. firms listed in the MSCI world index during the period 2004 to 2010. In comparison to current studies, which focus on measuring the interrelation between the cost of capital or firm value and corporate sustainability, our analysis entails the direct relationship between international corporate sustainability and information asymmetry. We measure information asymmetry by the abnormal returns that occur when insiders trade in the stock of their firms. Hence, our investigation is based on a micro level and helps to explain the results at the more aggregated level of cost of capital, and at the fully aggregated level of firm value. In our cross-sectional analysis we found evidence that firms with a higher degree of corporate sustainability spend more efforts in reducing information asymmetry.

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    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2378743
    File Function: First version, 2014
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    Bibliographic Info

    Paper provided by ZenTra - Center for Transnational Studies in its series ZenTra Working Papers in Transnational Studies with number 29 / 2014.

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    Length: 21 pages
    Date of creation: Jan 2014
    Date of revision: Jan 2014
    Handle: RePEc:zen:wpaper:29

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    Related research

    Keywords: Asymmetric Information; Corporate Governance; International Corporate Social Responsibility; Cross-Sectional Analysis; Event Study; Insider Trading;

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