Regulatory Pressure, Blockholders, and Corporate Social Responsibility (CSR) Disclosures in China

Abstract

Purpose - This paper investigates the relationship between external regulation pressure and Corporate Social Responsibility (CSR) reporting decision and comprehensiveness, and the relationship between block ownership and CSR in China. Design/methodology/approach - This paper provides descriptive statistics of the current state of CSR reporting in China. In addition, regression models are utilized to analyze the behavior of CSR reporting of a sample of 5,334 listed firms in China. Findings - Our paper records a significant increase of CSR reporting in the period of 2008-2010. Using a sample of 5,334 listed firms in China, we find a positive yet weak association between centrally controlled State-Owned Enterprises (SOEs) and CSR reports. Moreover, we find that firms with more concentrated block ownership are less likely to issue CSR reports. Research limitations/implications - Taken as a whole, our analyses suggest that the entrenchment effect from blockholders seems to dominate the incentive effect and this depresses the quality of CSR reports. Practical implications - Despite the well known effect of economic factors on CSR decision, corporate governance such as ownership structure could complicate the final results. Furthermore, the institutional background of the country and its implications for corporate governance should be considered jointly and concurrently. Social implications - The positive effect from regulatory pressure on centrally owned SOEs suggests that regulation remains an effective tool to encourage CSR reporting in emerging markets. Originality/value - First, our study confirms prior research that CSR disclosure decision is primarily driven by economic and strategic considerations. Moreover, our results suggest that a country's institutional background, in addition to economic and strategic considerations, influences the decision and quality of CSR disclosures. Second, we extend the literature on ownership structure, particularly with respect to blockholders. Third, our research design addresses a weakness in earlier studies which are biased exclusively on state ownership to the exclusion of all other blockholders.