Abstract

This study examines the relation between Corporate Social Responsibility (CSR), the properties of corporate disclosure, and corporate value. CSR is defined as the corporate activities that strive for solving social concerns beyond the firms economic interest. Managers have an incentive to invest in CSR because the support from constituent groups in society is essential for sustainable development and firms ignoring CSR cannot survive. On the other hand, managers can invest in CSR in order to opportunistically gain personal reputation or cover corporate misconduct. Therefore, investors cannot discern the nature of CSR investment ex－ante and ask financial information to reduce information asymmetry and uncertainty resulting from CSR expenditure. Because managers who are concerned with CSR have an incentive to meet investors’ needs for information and differentiate their own CSR investment by providing transparent information, disclosure frequency is relatively high. Investors are expected to reflect these superior properties of CSR firm’s disclosure on corporate value. The empirical results reveal that a firm’s CRS activities are positively associated with the frequency of Reg FD and the positive relation between the frequency of Reg FD and firm value is more pronounced for firms with high frequency than firms with low frequency. Main results of this study have an implication that investors’ information asymmetry and uncertainty on CSR expenditure can be reduced and firm value can be enhanced when managers provide better financial information complementary to non－financial performance. The contributions of this study are as follows. First, this study extends the scope of research on CSR into the field of corporate disclosure by providing the empirical evidence that there are significant relations between CSR and disclosure frequency. In addition, this study provides one of the explanations to an important question, “Why is there a positive relation between CSR and firm value?”, by suggesting the role of high quality of voluntary disclosure. Second, this study provides empirical result that CSR is one of the determinants for voluntary disclosure decisions. The empirical result that CSR firms provide a better quality of disclosure will be useful for investors using disclosure information for decision－making.

Keywords

• Corporate Social Responsibility
• KEJI Index
• Voluntary Disclosure
• Regulation Fair Disclosure
• Firm Value

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