Corporate Social Responsibility Performance Information and Information Asymmetry

36 Pages Posted: 16 Aug 2012 Last revised: 1 Dec 2014

See all articles by Seong-Yeon Cho

Seong-Yeon Cho

Oakland University

Cheol Lee

Wayne State University

Ray J. Pfeiffer

Texas Christian University - Neeley School of Business

Date Written: August 14, 2012

Abstract

Using Corporate Social Responsibility (CSR) performance scores from KLD STAT, we investigate whether CSR performance affects information asymmetry. We find that both positive and negative CSR performance reduce information asymmetry. Moreover, we find that the influence of negative CSR performance is much stronger than that of positive CSR performance in reducing information asymmetry. We also investigate the effect of informed investors on the CSR performance-asymmetry relation. We find that the negative association between CSR performance and bid-ask spread decreases for firms with a high level of institutional investors compared to those with a low level of institutional investors. This finding suggests that informed investors may exploit their CSR information advantage. Overall, our results suggest that CSR performance plays a positive role for investors by reducing information asymmetry and that regulatory action may be appropriate to mitigate the adverse selection problem faced by less-informed investors.

Keywords: Corporate social responsibility performance, information asymmetry, bid-ask spread, institutional investors

JEL Classification: M14

Suggested Citation

Cho, Seong Y and Lee, Cheol and Pfeiffer, Ray J., Corporate Social Responsibility Performance Information and Information Asymmetry (August 14, 2012). Journal of Accounting and Public Policy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2129509 or http://dx.doi.org/10.2139/ssrn.2129509

Seong Y Cho

Oakland University ( email )

Rochester, MI 48084
United States
248-370-4307 (Phone)

Cheol Lee (Contact Author)

Wayne State University ( email )

United States
313-577-2242 (Phone)

Ray J. Pfeiffer

Texas Christian University - Neeley School of Business ( email )

TCU Box 298530
Fort Worth, TX 76129
United States
817-257-6435 (Phone)

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