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Corporate social responsibility disclosure and financial transparency: Evidence from India

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  • Nair, Rajiv
  • Muttakin, Mohammad
  • Khan, Arifur
  • Subramaniam, Nava
  • Somanath, V.S.

Abstract

Disclosures are expected to foster financial transparency and improve the quality of information available to investors. Previous research has examined the role of non-financial disclosures in achieving this goal. Corporate social responsibility (CSR) disclosure has been widely employed as representative of non-financial disclosure. Recent legislation in some countries mandating non-financial disclosure makes this debate even more pertinent. We investigate the role of CSR disclosure in financial transparency in India, where mandatory CSR disclosure is required for firms to meet the thresholds set by the Companies Act 2013. Our investigation straddles mandatory disclosure regime and considers different classes of investors. Our findings suggest that CSR disclosure improves financial transparency during mandatory disclosure regime. We also find that ownership by the retail investors strengthens the association between CSR disclosure and financial transparency. However, we fail to document any significant effects of ownership by the institutional investors on the association between CSR disclosure and financial transparency.

Suggested Citation

  • Nair, Rajiv & Muttakin, Mohammad & Khan, Arifur & Subramaniam, Nava & Somanath, V.S., 2019. "Corporate social responsibility disclosure and financial transparency: Evidence from India," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 330-351.
    • Handle: RePEc:eee:pacfin:v:56:y:2019:i:c:p:330-351
    DOI: 10.1016/j.pacfin.2019.06.015
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    3. Sandeep Yadav, 2020. "Institutional Ownership and Corporate Social Performance in Emerging Economies Multinationals: Evidence from India," Indian Journal of Corporate Governance, , vol. 13(2), pages 227-252, December.
    4. Shruti, R. & Thenmozhi, M., 2023. "Founder ownership and value relevance of IFRS convergence: Role of institutional investors," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    5. Yue Liu & Pierre Failler & Liming Chen, 2021. "Can Mandatory Disclosure Policies Promote Corporate Environmental Responsibility?—Quasi-Natural Experimental Research on China," IJERPH, MDPI, vol. 18(11), pages 1-19, June.
    6. Aluchna, Maria & Roszkowska-Menkes, Maria & Kamiński, Bogumił & Bosek-Rak, Dominika, 2022. "Do institutional investors encourage firm to social disclosure? The stakeholder salience perspective," Journal of Business Research, Elsevier, vol. 142(C), pages 674-682.
    7. Jadiyappa, Nemiraja & Joseph, Anto & Sisodia, Garima & Krishnankutty, Raveesh & Shrivatsava, Santosh, 2021. "Corporate social responsibility and cash holdings in India: Evidence from a natural experiment," Finance Research Letters, Elsevier, vol. 39(C).
    8. Ahmed Diab & Aref M. Eissa, 2023. "ESG Performance, Auditor Choice, and Audit Opinion: Evidence from an Emerging Market," Sustainability, MDPI, vol. 16(1), pages 1-18, December.
    9. Kabir, Rezaul & Thai, Hanh Minh, 2021. "Key factors determining corporate social responsibility practices of Vietnamese firms and the joint effects of foreign ownership," Journal of Multinational Financial Management, Elsevier, vol. 59(C).
    10. Shailesh Rastogi & Bhakti Agarwal, 2023. "Transparency and disclosure (TD) and valuation of Indian banks," Bank i Kredyt, Narodowy Bank Polski, vol. 54(5), pages 519-540.
    11. Iram Hasan & Shveta Singh & Smita Kashiramka, 2022. "Does corporate social responsibility disclosure impact firm performance? An industry-wise analysis of Indian firms," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(8), pages 10141-10181, August.
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    13. Anassaya Chawviang & Supaporn Kiattisin, 2022. "Sustainable Development: Smart Co-Operative Management Framework," Sustainability, MDPI, vol. 14(6), pages 1-25, March.
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