Audited Financial Reporting and Voluntary Disclosure of Corporate Social Responsibility (CSR) Reports

43 Pages Posted: 29 Sep 2015

See all articles by Long Chen

Long Chen

George Mason University - Department of Accounting

Bin Srinidhi

University of Texas at Arlington - Department of Accounting; City University of Hong Kong (CityUHK) - Department of Accountancy

Albert Tsang

Hong Kong Polytechnic University

Wei Yu

Hunter College - City University of New York

Multiple version iconThere are 2 versions of this paper

Date Written: September 29, 2015

Abstract

Prior studies show that corporate social responsibility (CSR) reporting is informative to investors but lacks credibility. This study examines whether a commitment to audits of financial outcomes, proxied by audit fees, is associated with greater CSR reporting credibility. We find that audit fees are positively associated with the likelihood of standalone CSR report issuance, and this positive association becomes stronger when managers perceive a greater need for credibility, i.e., when CSR reports are longer or issued with external assurance, when firms have strong CSR concerns, and when reports are issued sporadically. Corroborating our results, we find that CSR reports issued by firms committing to high audit fees accelerate the incorporation of future earnings information into current stock price. Taken together, our findings suggest that a commitment to higher financial reporting quality has the potential to bring positive externality to firms’ non-financial disclosures and ultimately affects the issuance of CSR reports.

Keywords: Corporate social responsibility, CSR disclosure, Complementarity, Audited financial reporting, Audit fees

JEL Classification: M14, M40

Suggested Citation

Chen, Long and Srinidhi, Bin and Tsang, Albert and Yu, Wei, Audited Financial Reporting and Voluntary Disclosure of Corporate Social Responsibility (CSR) Reports (September 29, 2015). Available at SSRN: https://ssrn.com/abstract=2666872 or http://dx.doi.org/10.2139/ssrn.2666872

Long Chen (Contact Author)

George Mason University - Department of Accounting ( email )

Fairfax, VA
United States

Bin Srinidhi

University of Texas at Arlington - Department of Accounting ( email )

Arlington, TX 76013
United States

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Albert Tsang

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Wei Yu

Hunter College - City University of New York ( email )

695 Park Avenue
New York, NY 10065
United States

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