Signaling through corporate accountability reporting

Thomas Lys; James P. Naughton; Clare Wang

doi:10.1016/j.jacceco.2015.03.001

Signaling through corporate accountability reporting

Thomas Lys, James P. Naughton^*, Clare Wang

^*Corresponding author for this work

Accounting Information and Management

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220 Scopus citations

Abstract

We document that corporate social responsibility ("CSR") expenditures are not a form of corporate charity nor do they improve future financial performance. Rather, firms undertake CSR expenditures in the current period when they anticipate stronger future financial performance. We show that the causality of the positive association between CSR expenditures and future firm performance differs from what is claimed in the vast majority of the literature and that corporate accountability reporting is another channel through which outsiders may infer insiders' private information about firms' future financial prospects.

Original language	English (US)
Pages (from-to)	56-72
Number of pages	17
Journal	Journal of Accounting and Economics
Volume	60
Issue number	1
DOIs	https://doi.org/10.1016/j.jacceco.2015.03.001
State	Published - Aug 1 2015

Keywords

Corporate accountability reporting
Corporate social responsibility
Signaling
Voluntary disclosure

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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title = "Signaling through corporate accountability reporting",

abstract = "We document that corporate social responsibility ({"}CSR{"}) expenditures are not a form of corporate charity nor do they improve future financial performance. Rather, firms undertake CSR expenditures in the current period when they anticipate stronger future financial performance. We show that the causality of the positive association between CSR expenditures and future firm performance differs from what is claimed in the vast majority of the literature and that corporate accountability reporting is another channel through which outsiders may infer insiders' private information about firms' future financial prospects.",

keywords = "Corporate accountability reporting, Corporate social responsibility, Signaling, Voluntary disclosure",

author = "Thomas Lys and Naughton, {James P.} and Clare Wang",

note = "Funding Information: We thank Brad Barber, Ing-Haw Cheng, Michael Jung, Scott Hirst, Robert Jackson, David Maber, Tjomme Rusticus, Dan Taylor, Beverly Walther, seminar participants at Michigan and Northwestern, participants at the UC Davis Sustainability & Finance Symposium, participants at the HBS-JAE Conference on Corporate Accountability Reporting and especially the discussant Chris Armstrong, an anonymous referee, and the editor SP Kothari for their helpful suggestions and comments. Ira Yeung provided excellent research assistance. We are grateful for the funding of this research by The Kellogg School of Management and the Lawrence Revsine Research Fellowship . Publisher Copyright: {\textcopyright} 2015 The Authors.",

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AU - Naughton, James P.

AU - Wang, Clare

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N2 - We document that corporate social responsibility ("CSR") expenditures are not a form of corporate charity nor do they improve future financial performance. Rather, firms undertake CSR expenditures in the current period when they anticipate stronger future financial performance. We show that the causality of the positive association between CSR expenditures and future firm performance differs from what is claimed in the vast majority of the literature and that corporate accountability reporting is another channel through which outsiders may infer insiders' private information about firms' future financial prospects.

AB - We document that corporate social responsibility ("CSR") expenditures are not a form of corporate charity nor do they improve future financial performance. Rather, firms undertake CSR expenditures in the current period when they anticipate stronger future financial performance. We show that the causality of the positive association between CSR expenditures and future firm performance differs from what is claimed in the vast majority of the literature and that corporate accountability reporting is another channel through which outsiders may infer insiders' private information about firms' future financial prospects.

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KW - Corporate social responsibility

KW - Signaling

KW - Voluntary disclosure

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Signaling through corporate accountability reporting

Abstract

Keywords

ASJC Scopus subject areas

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