Corporate social responsibility and stock price informativeness : the public interest perspective
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In this paper, we propose a new theory that sheds a different light on the potential relationship between Corporate Social Responsibility (CSR) and Stock Price Informativeness (PI). More specifically, we explain why a neutral association between CSR and PI can be an indicator of high economic and social welfare, while a positive association can be an indicator of both markets and governments failure. Under a neutral relationship, we argue that mandatory disclosure is getting firms to disclose near their optimal level. Therefore, any voluntary disclosure beyond the mandatory regime (such as CSR disclosure) should not improve PI. We base our hypothesis on public interest theory that suggests that regulators promote the public interest when a market failure is identified. On the other hand, under a positive association between CSR and PI, we argue that regulators do not offer adequate incentives for firms to disclose at their socially optimal levels because the level of voluntary disclosure by socially responsible firms is optimal in comparison to the level of mandatory disclosure provided by other firms with weak CSR engagement.
Marhfor , A , Bouslah , K , M'Zali , B & Ghilal , R 2020 , ' Corporate social responsibility and stock price informativeness : the public interest perspective ' , Canadian Journal of Administrative Sciences , vol. Early View . https://doi.org/10.1002/cjas.1576
Canadian Journal of Administrative Sciences
Copyright © 2020 ASAC. Published by John Wiley & Sons, Ltd. This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1002/cjas.1576
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