Asymmetric Information and International Corporate Social Responsibility

21 Pages Posted: 15 Jan 2014

See all articles by Kerstin Lopatta

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Frerich Buchholz

University of Oldenburg - Accounting and Corporate Governance

Thomas Kaspereit

Universite du Luxembourg

Date Written: January 13, 2014

Abstract

We investigate the relation between asymmetric information of insider trades and international corporate social responsibility for U.S. firms listed in the MSCI world index during the period 2004 to 2010. In comparison to current studies, which focus on measuring the interrelation between the cost of capital or firm value and corporate sustainability, our analysis entails the direct relationship between international corporate sustainability and information asymmetry. We measure information asymmetry by the abnormal returns that occur when insiders trade in the stock of their firms. Hence, our investigation is based on a micro level and helps to explain the results at the more aggregated level of cost of capital, and at the fully aggregated level of firm value. In our cross-sectional analysis we found evidence that firms with a higher degree of corporate sustainability spend more efforts in reducing information asymmetry.

Keywords: Asymmetric Information, Corporate Governance, International Corporate Social Responsibility, Cross-Sectional Analysis, Event Study, Insider Trading

JEL Classification: D53, D82, G14, D21, G34

Suggested Citation

Lopatta, Kerstin and Buchholz, Frerich and Kaspereit, Thomas, Asymmetric Information and International Corporate Social Responsibility (January 13, 2014). ZenTra Working Paper in Transnational Studies No. 29 / 2014, Available at SSRN: https://ssrn.com/abstract=2378743 or http://dx.doi.org/10.2139/ssrn.2378743

Kerstin Lopatta (Contact Author)

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

Frerich Buchholz

University of Oldenburg - Accounting and Corporate Governance ( email )

Oldenburg, D 26111
Germany

Thomas Kaspereit

Universite du Luxembourg ( email )

Université du Luxembourg
Campus Limpertsberg,
Luxembourg, 1511
Luxembourg

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