Corporate social responsibility disclosure and financial transparency: Evidence from India

Disclosures are expected to foster financial transparency and improve the quality of information available to investors. Previous research has examined the role of non-financial disclosures in achieving this goal. Corporate social responsibility (CSR) disclosure has been widely employed as represent...

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Bibliographic Details
Published in:Pacific-Basin finance journal 2019-09, Vol.56, p.330-351
Main Authors: Nair, Rajiv, Muttakin, Mohammad, Khan, Arifur, Subramaniam, Nava, Somanath, V.S.
Format: Article
Language:English
Subjects:
CSR disclosure
Financial transparency
Institutional ownership
Retail ownership
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Summary:Disclosures are expected to foster financial transparency and improve the quality of information available to investors. Previous research has examined the role of non-financial disclosures in achieving this goal. Corporate social responsibility (CSR) disclosure has been widely employed as representative of non-financial disclosure. Recent legislation in some countries mandating non-financial disclosure makes this debate even more pertinent. We investigate the role of CSR disclosure in financial transparency in India, where mandatory CSR disclosure is required for firms to meet the thresholds set by the Companies Act 2013. Our investigation straddles mandatory disclosure regime and considers different classes of investors. Our findings suggest that CSR disclosure improves financial transparency during mandatory disclosure regime. We also find that ownership by the retail investors strengthens the association between CSR disclosure and financial transparency. However, we fail to document any significant effects of ownership by the institutional investors on the association between CSR disclosure and financial transparency. •We explore the association between financial transparency and CSR disclosure in India under mandatory disclosure regime.•We examine the effect of different investor groups on the association between CSR disclosure and financial transparency.•Our findings suggest that CSR disclosure improves financial transparency during mandatory disclosure regime.•Ownership by the retail investors strengthens the association between CSR disclosure and financial transparency.
ISSN:0927-538X
1879-0585
DOI:10.1016/j.pacfin.2019.06.015