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Asymmetric Information and Corporate Social Responsibility

Business & Society, Vol. 55, No. 3, 2016, pp. 458-488.

Posted: 31 Jan 2012 Last revised: 18 May 2016

Kerstin Lopatta

University of Oldenburg - Accounting and Corporate Governance

Frerich Buchholz

University of Oldenburg - Accounting and Corporate Governance

Thomas Kaspereit

John Molson School of Business

Date Written: March 24, 2015

Abstract

This article addresses the question whether companies benefit from their commitment to corporate social responsibility (CSR). The authors argue that firms which score high on CSR activities build investor confidence and find evidence that they benefit from lower information asymmetry. The authors measure information asymmetry by insider trading, which is defined as the trading of a company’s shares by corporate insiders who have an information advantage with the aim to reap gains or avoid losses. Using a sample of U.S. firms listed in the MSCI World Index during the period 2004 to 2013 and the firm- and industry-level CSR rating from Global Engagement Service (GES), the authors show that insider transactions in firms with a high score on CSR activities lead to lower abnormal returns. This investigation extends current literature on the business case for CSR by explaining the influence of CSR activities on asymmetric information.

Keywords: asymmetric information; corporate social responsibility (CSR); financial markets; insider trading

JEL Classification: D21, G14, G34

Suggested Citation

Lopatta, Kerstin and Buchholz, Frerich and Kaspereit, Thomas, Asymmetric Information and Corporate Social Responsibility (March 24, 2015). Business & Society, Vol. 55, No. 3, 2016, pp. 458-488.. Available at SSRN: https://ssrn.com/abstract=1995534 or http://dx.doi.org/10.2139/ssrn.1995534

Kerstin Lopatta

University of Oldenburg - Accounting and Corporate Governance ( email )

Ammerländer Heerstraße 114-118
Oldenburg, DE D-26111
Germany

Frerich Buchholz (Contact Author)

University of Oldenburg - Accounting and Corporate Governance ( email )

Oldenburg, D 26111
Germany

Thomas Kaspereit

John Molson School of Business ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada

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