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Cited by 4,337Corporate Social Responsibility ReportingAuditing, Earnings Management, GovernanceCorporate Governance and Financial Management

Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting

Open access
Dhaliwal, Dan S., Li, Oliver Zhen, Tsang, Albert, Yang, Yong George·2011·The Accounting Review
DOI 10.2308/accr.00000005
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Abstract

ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of equity capital. We find that firms with a high cost of equity capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of equity capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of equity capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise equity capital following the initiations; among firms raising equity capital, initiating firms raise a significantly larger amount than do non-initiating firms.

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Crossref · 10.2308/accr.00000005

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4 of 4 references verified0 citation errors · 0 not checkable

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  • CSR information can be useful to investors in estimating future cash flows or assessing firms' risks because CSR and sustainability topics are often closely related to firms' normal business activities.

    “CSR information can be useful to investors in estimating future cash flows or assessing firms’ risks, because CSR and sustainability topics are often closely related to firms’ normal business activities (e.g., Dhaliwal et al. 2011; Dhaliwal et al. 2012; Grewal et al. 2020).”

    From Mandatory CSR and sustainability reporting: economic analysis and literature review (2021) · cites this paper as Dhaliwal et al. 2011

  • The relation between CSR disclosures and cost of capital often depends on mediating factors, such as actual CSR performance, type of CSR disclosures, materiality to investors, and third-party assurance.

    “The relation often depends on a number of mediating factors, such as firms’ actual CSR performance (Dhaliwal et al. 2011), the type of CSR disclosures (e.g., environmental and governance topics; Ng and Rezaee 2015), whether the CSR disclosures are material to investors (Matsumura et al. 2017), or whether a third-party provides assurance of the CSR reports (Casey and Grenier 2015).”

    From Mandatory CSR and sustainability reporting: economic analysis and literature review (2021) · cites this paper as Dhaliwal et al. 2011

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Authors
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G.
Affiliations
  • University of Arizona (US)
  • Chinese University of Hong Kong (HK)
Corresponding author
Li, Oliver Zhen
ORCID
Venue
The Accounting Review
Publisher
American Accounting Association
Published
2011-01-01
Volume
86
Issue
1
Pages
59-100
ISSN
  • 0001-4826 (ISSN-L)
  • 1558-7967
DOI
10.2308/accr.00000005
OpenAlex
W3122389139
Cited by
4,337
References
4
Citations by year
2026: 576 · 2025: 538 · 2024: 481 · 2023: 390 · 2022: 426 · 2021: 330 · 2020: 308 · 2019: 245 · 2018: 217 · 2017: 204 · 2016: 160 · 2015: 152 · 2014: 133 · 2013: 95 · 2012: 63
FWCI
163.43
Type
journal article
Language
en
Open access
Locations
  • The Accounting Review (publishedVersion)
  • SSRN Electronic Journal (acceptedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Business, Management and Accounting › Accounting › Auditing, Earnings Management, Governance
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Governance and Financial Management
Keywords
voluntary disclosure, corporate social responsibility disclosure, cost of equity, institutional investors, analyst coverage, analyst forecast accuracy, equity capital raising, nonfinancial disclosure

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