The complementarity between CSR disclosures and CSR contracting
56 Pages Posted: 24 Sep 2020
Date Written: July 14, 2024
Abstract
Over the past decades, companies faced increasing pressure to provide information about their Corporate Social Responsibility (CSR). Firms differ however in the extent to which they communicate their CSR-related efforts to stakeholders and incorporate CSR-based performance measures in executives' incentive contracts. We examine the relationship between CSR disclosures and contracting and argue that these two practices are complements in signaling a CSR commitment. Using hand-collected data to capture the disclosure quality of CSR reports and intensity of CSR contracting for S&P 500 firms, we show that firms indeed align the adoption choices of the two practices. Further, firms using both practices intensively are associated with a stronger CSR commitment and more credible CSR disclosures. Finally, we document that firms that face higher credibility concerns show stronger complementarity between these two practices.
Keywords: CEO annual incentive contract, CSR disclosure, CSR contracting, CSR commitment, Performance measurement, Complementarity theory JEL codes: M14, M40
JEL Classification: M41
Suggested Citation: Suggested Citation