Does Corporate Social Responsibility Affect Information Asymmetry: Evidence from the Adoption of SFAS 123RDoes Corporate Social Responsibility Affect Information Asymmetry: Evidence from the Adoption of SFAS 123R
- Other Titles
- Does Corporate Social Responsibility Affect Information Asymmetry: Evidence from the Adoption of SFAS 123R
- Authors
- 김형준; 문성재
- Issue Date
- Jun-2022
- Publisher
- 한국금융정보학회
- Keywords
- Corporate Social Responsibility; Accounting Regulation; Financial Reporting Quality; Investment Efficiency
- Citation
- 금융정보연구, v.11, no.2, pp 59 - 82
- Pages
- 24
- Journal Title
- 금융정보연구
- Volume
- 11
- Number
- 2
- Start Page
- 59
- End Page
- 82
- URI
- https://scholarworks.bwise.kr/sch/handle/2021.sw.sch/21144
- DOI
- 10.35214/rfis.11.2.202206.002
- ISSN
- 2234-7739
2384-4000
- Abstract
- Using the adoption of Statements of Financial Accounting Standards (SFAS) 123R as a quasi-natural experiment, this study examines whether corporate social responsibility (CSR) alleviates the level of information asymmetry. After the implementation of SFAS 123R, firms should report their employee stock options (ESO) at fair value, indicating that this act exogenously improves firms’ financial reporting quality. The literature suggests that SFAS 123R reduces information asymmetry between the firm and outside investors, thus eventually improving firms’ investment efficiency. However, we find that a firm’s CSR performance mitigates the positive relationship between the improvement of financial reporting quality (by SFAS 123R) and investment. Various additional tests to supplement the main analysis also show consistent results. Our finding that CSR offsets the positive effect of SFAS 123R on investment efficiency, suggests the role of CSR in reducing information asymmetry; for instance, CSR firms’ disclosure of transparent information could be more frequent than that of non-CSR firms even before SFAS 123R. In particular, this finding provides an implication for outside investors as CSR can significantly play a positive role in information asymmetry, supporting the conflict-resolution hypothesis of CSR. Furthermore, this study extends the CSR literature by using an exogenous event on financial reporting quality (i.e., SFAS 123R) to examine whether CSR mitigates information asymmetry. Overall, we conclude that CSR performance is a key factor in enhancing firms’ surrounding information environment.
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