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Corporate social responsibility, market reaction and accounting conservatism

Xixi Shen (School of Finance, Nankai University, Tianjin, China)
Kung-Cheng Ho (Pearl River Delta Collaborative Innovation Center of Scientific Finance and Industry, Institute of Regional Finance, Guangdong University of Finance and Economics, Guangdong, China)
Lu Yang (College of Economics, Shenzhen University, Guangdong, China)
Leonard Fong-Sheng Wang (Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China)


ISSN: 0368-492X

Article publication date: 10 August 2020

Issue publication date: 6 July 2021




Non-financial information disclosure may reflect the quality of corporate financial reports or disclosure policy choices. The authors examine the relationship between corporate social responsibility (CSR) and accounting conservatism and also investigate channels through which such effects are transmitted. The purpose of this paper is to explore how CSR, as non-financial information that has received widespread attention, affects choices regarding corporate financial policy.


Using ordinary least squares regression, the authors analyze China CSR Score data for 2010–2018. They control certain influencing variables related to the nature and characteristics of enterprises and discover that CSR can effectively increase accounting conservatism. Then, they extract the components of market reactions to CSR and study the market reaction path of CSR as it affects financial policy. They also conduct a robustness test to ensure that the results are not accidental in a complex environment.


The results reveal the influence of non-financial information on firms’ financial policy. In addition, the results confirm the attraction of liquidity and investor attention as the major market reaction channels by which CSR significantly promotes accounting conservatism. Additionally, other critical paths of influence deserve further exploration. The results remain robust for alternate measures of accounting conservatism, different components of CSR, other proxies on CSR, endogenous testing and alternate estimation methods.


The study represents the first analysis of the influence of CSR information disclosure on accounting conservatism in emerging markets, and it undertakes a preliminary exploration to clarify the mechanism of CSRs’ role in accounting conservatism. The results also provide a policy reference for external supervision and internal governance of enterprises. Thus, the results can help company managers maintain a favorable corporate image and establish a high-level investor protection mechanism.



Funding: The authors were funded by NSSFC number (19ZDA061, 19AJY027), NSFC number (71903199)


Shen, X., Ho, K.-C., Yang, L. and Wang, L.F.-S. (2021), "Corporate social responsibility, market reaction and accounting conservatism", Kybernetes, Vol. 50 No. 6, pp. 1837-1872.



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