Who can realize the “spot value” of corporate social responsibility? Evidence from Chinese investors’ profiles

This paper answers, in the Chinese stock market, who can realize the “spot value” of corporate social responsibility (CSR).

The authors use event-study to build the research framework. Using CSR report content analysis, the authors measure the specification level of CSR disclosure. Applying the Baidu index, the authors mine Chinese investors’ profiles data to investigate retail investor heterogeneity closely.

The authors find strong evidence that the measure captures a behavioral bias in CSR pricing: firms that choose to disclose CSR report experience positive abnormal return more among retail investors than institutional investors, more among young investors than older, but no difference between female and male investors.

For Chinese public firms, the authors give them evidence that they can realize positive abnormal returns by applying certain CSR disclosure strategies. For Chinese investors, especially retail investors and youths, the authors ask them to rethink whether their positive evaluation of CSR is a rational trade-off choice or whether they are fooled by the “hedging mask” and “attention-grabbing.”

The findings can give some suggestions to regulators: encouraging voluntary disclosure and reducing mandatory disclosure can drive enterprises to engage in more CSR activities because the voluntarily CSR disclosure can realize both long-term value and “spot value.” Complementarily, a more rigorous CSR report auditing regulation can suppress the “greenwash” by increasing the “lying cost.”

Using behavioral finance theory, the authors connect the gap between neoclassical research on the “U-shaped” value realization of CSR and the increasing voluntary CSR disclosure in the Chinese market. The authors find that heuristic reason and emotionality orientation results in the Chinese “CSR-friendly” market.