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The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China

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  • Chen, Yi-Chun
  • Hung, Mingyi
  • Wang, Yongxiang

Abstract

We examine how mandatory disclosure of corporate social responsibility (CSR) impacts firm performance and social externalities. Our analysis exploits China's 2008 mandate requiring firms to disclose CSR activities, using a difference-in-differences design. Although the mandate does not require firms to spend on CSR, we find that mandatory CSR reporting firms experience a decrease in profitability subsequent to the mandate. In addition, the cities most impacted by the disclosure mandate experience a decrease in their industrial wastewater and SO2 emission levels. These findings suggest that mandatory CSR disclosure alters firm behavior and generates positive externalities at the expense of shareholders.

Suggested Citation

  • Chen, Yi-Chun & Hung, Mingyi & Wang, Yongxiang, 2018. "The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China," Journal of Accounting and Economics, Elsevier, vol. 65(1), pages 169-190.
  • Handle: RePEc:eee:jaecon:v:65:y:2018:i:1:p:169-190
    DOI: 10.1016/j.jacceco.2017.11.009
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    More about this item

    Keywords

    Mandatory CSR disclosure; Firm performance; Social externalities; China;
    All these keywords.

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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