The relationship between corporate social responsibility expenditures and firm value: The moderating role of integrated reporting. (20th February 2021)

• Record Type: Journal Article
• Authors: Grassmann, Michael
• Is Part Of: Journal of cleaner production. Volume 285(2021)
• Publication Date: 2021-02-20
• Subjects: Environmental expenditures -- Firm value -- Integrated reporting -- Social expenditures -- U-shaped -- Voluntary disclosure; Factory and trade waste -- Management -- Periodicals; Manufactures -- Environmental aspects -- Periodicals; Déchets industriels -- Gestion -- Périodiques; Usines -- Aspect de l'environnement -- Périodiques; 628.5
• DOI: 10.1016/j.jclepro.2020.124840
• Languages: English
• ISSNs: 0959-6526

Abstract

Abstract: For decades, research has debated whether a firm's corporate social responsibility (CSR) activities increase its firm value. Whereas the cost-concerned school proposes a detrimental effect, the value-creation school suggests a positive relationship. To date, empirical results are still inconclusive. One explanation might be that the relationship is not linear but U-shaped. Thus, both schools could coexist. Additionally, the disclosure of an integrated report might positively moderate the relationship, as integrated reporting (IR) should enhance investors' information environment. This study applies the Ohlson model for a global and listed sample of 8, 992 firm-year observations between 2012 and 2017 and provides evidence that environmental expenditures follow a U-shaped relationship, and that social expenditures follow an inverted U-shaped relationship with firm value. Based on these findings, IR positively moderates the association between environmental expenditures and firm value for firms with either a low or a high level of environmental expenditures. However, for firms that are "stuck in the middle" with regard to their environmental expenditures, the moderating effect of IR appears negative. The results show no indication of a moderating effect of IR for the inverted U-shaped relationship between social expenditures and firm value. Highlights: Environmental expenditures show a U-shaped relationship with firm value. Social expenditures show an inverted U-shaped relationship with firm value. Integrated Reporting (IR) has no impact on the perception of social expenditures. IR benefits firms with either a low or a high level of environmental expenditures. IR is detrimental for firms with "stuck in the middle" environmental expenditures.