CSR Disclosure Items Used as Fairness Heuristics in the Investment Decision

36 Pages Posted: 16 Jan 2012 Last revised: 18 Jul 2016

See all articles by Helen L. Brown-Liburd

Helen L. Brown-Liburd

Rutgers University, Newark - Rutgers Business School - Department of Accounting and Information Systems

Jeffrey R. Cohen

Boston College - Department of Accounting

Valentina L. Zamora

Seattle University - Albers School of Business and Economics

Date Written: July 18, 2016

Abstract

The growth in demand for corporate social responsibility (CSR) information raises the question of how various CSR disclosure items are used by investors, an important stakeholder group driven by instrumental, moral, and relational motives. Prior research examines the instrumental motive to maximize individual shareholder wealth and the moral motive to actualize personal stewardship interests. We contribute to the literature by examining investors’ relational motive to realize positive stakeholder relationships within and between organizations and communities. The relational motive arises when investors look at a company’s treatment of other stakeholder groups as a heuristic to form a perception of how fairly they will also be treated by that company in the future, and thus invest in the company they perceive as fair. Fair treatment in the future matters to the investor who purchases stock from the company or via the capital markets in exchange for becoming a shareholder and thus a residual claimant of the company. As such, the investor expects future cash flows from holding and/or reselling the stock and expects to be treated fairly by the company in the future. We propose that investors, use as a fairness heuristic, CSR disclosure items – CSR investment level or CSR assurance – that represent the company’s commitment to its stakeholders, and that the resulting fairness perception affects the extent to which the CSR disclosure items influence their investment decision. Using responses from 113 investors in an online experiment, we find that fairness perceptions are higher when CSR investment is above (versus below) the industry average, and that fairness perceptions partially mediate the impact of the CSR investment level on investment amount allocations. We do not find that the presence (versus absence) of CSR assurance is used by investors as a fairness heuristic. Our results are robust to controlling for preferences for financial performance and hence investors’ instrumental motive, and to controlling for individual environmental attitudes, and hence investors’ moral motive. Implications for future research and public policy are discussed.

Keywords: Corporate social responsibility, fairness perceptions; investment decisions

JEL Classification: M14, M41, M45, M49

Suggested Citation

Brown-Liburd, Helen L. and Cohen, Jeffrey R. and Zamora, Valentina L., CSR Disclosure Items Used as Fairness Heuristics in the Investment Decision (July 18, 2016). Available at SSRN: https://ssrn.com/abstract=1985839 or http://dx.doi.org/10.2139/ssrn.1985839

Helen L. Brown-Liburd

Rutgers University, Newark - Rutgers Business School - Department of Accounting and Information Systems ( email )

180 University Avenue
Newark, NJ 07102
United States

HOME PAGE: http://raw.rutgers.edu/helenbrownliburd

Jeffrey R. Cohen

Boston College - Department of Accounting ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3165 (Phone)
617-552-2097 (Fax)

Valentina L. Zamora (Contact Author)

Seattle University - Albers School of Business and Economics ( email )

901 12th Avenue
P.O. Box 222000
Seattle, WA 98122-1090
United States
206-296-5703 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
1,040
Abstract Views
3,496
rank
20,373
PlumX Metrics