A sociological theory of corporate finance: Societal responsibility and cost of equity in China

Chinese Management Studies

Volumn 9, Issue 3, 2015, Pages 269-294

  Li, Yuanhui ^a   Foo, Check Teck ^b,c  

^a BEIJING JIAOTONG UNIVERSITY   (China)

^b HARBIN INSTITUTE OF TECHNOLOGY   (China)

^c Sun Tzu Art of War Institute   (Singapore)

Author keywords

Corporate social responsibility (CSR); Cost of equity; Information disclosure

Indexed keywords

EID: 84943252985     PISSN: 1750614X     EISSN: None     Source Type: Journal    
DOI: 10.1108/CMS-12-2014-0232     Document Type: Article

References (60)

1. Bloomfield, R.J. and Wilks, T.J. (2000), "Disclosure effects in the laboratory: liquidity, depth, and the cost of capital", The Accounting Review, Vol. 75 No. 1, pp. 13-41.
2. Bo, X.H. and Wu, L.S. (2009), "The governance roles of state-owned controlling and institutional investors: a perspective of earnings management", Economic Research Journal, Vol. 55 No. 2, pp. 81-91.
3. Botosan, C.A. (1997), "Disclosure level and the cost of equity capital", The Accounting Review, Vol. 72 No. 3, pp. 323-349.
4. Botosan, C.A. and Plumlee, M.A. (2002), "A re-examination of disclosure level and the expected cost of equity capital", Journal of Accounting Research, Vol. 40 No. 1, pp. 21-40.
5. Brennan, M.J., Chordia, T. and Subrahmanyam, A. (1998), "Alternative factor specifications, security characteristics, and the cross-section of expected stock returns", Journal of Financial Economics, Vol. 49 No. 3, pp. 345-373.
6. Claus, J. and Thomas, J. (2001), "Equity premia as low as three percent? Evidence from analysts' earnings forecasts for domestic and international stock markets", The Journal of Finance, Vol. 56 No. 5, pp. 1629-1666.
7. Coles, J.L., Loewenstein, U. and Suay, J. (1995), "On equilibrium pricing under parameter uncertainty", The Journal of Financial and Quantitative Analysis, Vol. 30 No. 3, pp. 347-364.
8. Cui, X.M. (2009), "On the influencing factors for enterprise releasing social responsibility report-evidence from enterprise social responsibility reports by listed firms in 2008", Journal of Nanjing Agricultural University (Social Science Edition), Vol. 9 No. 4, pp. 40-46.
9. Dhaliwal, D.S., Li, O.Z., Tsang, A. and Yang, Y.G. (2011), "Voluntary nonfinancial disclosure and the cost of equity capital: the initiation of corporate social responsibility reporting", The Accounting Review, Vol. 86 No. 1, pp. 59-100.
10. Donaldson, T. and Preston, L.E. (1995), "The stakeholder theory of the corporation: concepts, evidence, and implications", Academy of Management Review, Vol. 20 No. 1, pp. 65-91.
11. Easton, P.D. (2004), "PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital", The Accounting Review, Vol. 79 No. 1, pp. 73-95.
12. Fama, E.F. and French, K.R. (1992), "The cross section of expected stock returns", The Journal of Finance, Vol. 47 No. 2, pp. 427-466.
13. Fieseler, C. (2011), "On the corporate social responsibility perceptions of equity analysts", Business Ethics: A European Review, Vol. 20 No. 2, pp. 131-147.
14. Fombrun, C. and Shanley, M. (1990), "What is in a name? Reputation building and corporate strategy", The Academy of Management Journal, Vol. 33 No. 2, pp. 233-258.
15. Francis, J., LaFond, R., Olsson, P.M. and Schipper, K. (2004), "Costs of equity and earnings attributes", The Accounting Review Vol. 79 No. 4, pp. 967-1010.
16. Gebhardt, W.R., Lee, C. and Swaminathan, B. (2001), "Toward an implied cost of capital", Journal of Accounting Research, Vol. 39 No. 1, pp. 135-176.
17. Ghoul, S.E., Guedhami, O., Kwok, C.C.Y. and Mishra, D.R. (2011), "Does corporate social responsibility affect the cost of capital?", Journal of Banking & Finance, Vol. 35 No. 9, pp. 2388-2406.
18. Gode, D. and Mohanram, P. (2003), "Inferring the cost of capital using the Ohlson-Jeuttner model", Review of Accounting Studies, Vol. 8 No. 4, pp. 399-431.
19. Gordon, J.R. and Gordon, M.J. (1997), "The finite horizon expected return model", Financial Analysts Journal, Vol. 53 No. 3, pp. 52-61.
20. Goss, A. and Roberts, G.S. (2011), "The impact of corporate social responsibility on the cost of bank loans", Journal of Banking & Finance, Vol. 35 No. 7, pp. 1794-1810.
21. Healy, P.M., Hutton, A.P. and Palepu, K.G. (1999), "Stock performance and intermediation changes surrounding sustained increases in disclosure", Contemporary Accounting Research, Vol. 16 No. 3, pp. 485-520.
22. Heinkel, R., Kraus, A. and Zechner, J. (2001), "The effect of green investment on corporate behavior", The Journal of Financial and Quantitative Analysis, Vol. 36 No. 4, pp. 431-449.
23. Kim, O. (1994), "Market liquidity and volume around earnings announcements", Journal of Accounting and Economics, Vol. 17 Nos 1/2, pp. 41-67.
24. Kinney, W.R. Jr and Libby, R. (2002), "Discussion of the relation between auditors' fees for nonaudit services and earnings management", The Accounting Review, Vol. 77 No. 1, pp. 107-114.
25. Kitagawa, N., Kim, H. and Goto, M. (2011), "The effect of non-financial risk information on the evaluation of implied cost of capitals", Working Paper, Graduate School of Business Administration, Kobe University.
26. La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R.W. (2001), Law and Finance, Springer Berlin Heidelberg.
27. Li, H.B. and Zhou, L.A. (2005), "Political turnover and economic performance: the disciplinary role of personnel control in china", Journal of Public Economics, Vol. 89 Nos 9/10, pp. 1743-1762.
28. Li, Z. and Li, Z.Q. (2012), "Whether corporate social responsibility report attestation opinion has information content- empirical evidence from Chinese listed companies", Audit Research, Vol. 28 No. 1, pp. 78-86.
29. Li, Z. and Xiao, Q.P. (2012), "Corporate social responsibility, investor behavior and stock liquidity", Research on Financial and Economic Issues, Vol. 34 No. 3, pp. 24-31.
30. Li, Y., Zhang, J. and Foo, C.T. (2013), "Towards a theory of social responsibility reporting: empirical analysis of 613 CSR reports by listed corporations in China", Chinese Management Studies, Vol. 7 No. 4, pp. 519-534.
31. Mao, X.S., Ye, K.T. and Zhang, X. (2012), "Measuring and evaluating cost of equity capital: evidence from stock markets", Accounting Research, Vol. 33 No. 11, pp. 12-22.
32. Mendes-Da-Silva, W. and de Lira Alves, L.A. (2004), "The voluntary disclosure of financial information on the Internet and the firm value effect in companies across Latin America", 13th International Symposium on Ethics, Business and Society, Universidad Navarra Barcelona, available at: http://ssrn.com/abstract_493805
33. Meng, X.J., Xiao, Z.P. and Qu, J.L. (2010), "Interactive relation between corporate social responsibility disclosure and the cost of capital: an analysis framework based on asymmetric information", Accounting Research, Vol. 31 No. 9, pp. 25-29.
34. Moussavi, F. and Evans, D. (1986), "An attributional approach to measuring corporate social performance", paper presented at the Academy of Management Meetings, San Diego, CA.
35. Ohlson, J. and Juettner-Nauroth, B. (2005), "Expected EPS and EPS growth as determinants of value", Review of Accounting Studies, Vol. 10 No. 2, pp. 349-365.
36. Qian, Y. (1994), "A theory of shortage in socialist economies based on the 'soft budget constraint'", American Economic Review, Vol. 84 No. 1, pp. 145-156.
37. Richardson, A.J. and Welker, M. (2001), "Social disclosure, financial disclosure and the cost of equity capital", Accounting, Organizations and Society, Vol. 26 Nos 7/8, pp. 597-616.
38. Richardson, A.J., Welker, M. and Hutchinson, I.R. (1999), "Managing capital market reactions to social responsibility", International Journal of Management Reviews, Vol. 1 No. 1, pp. 17-43.
39. Shen, H.T. and Jin, T.T. (2007), "Corporate characteristics and corporate social responsibility information disclosure", Accounting Research, Vol. 28 No. 3, pp. 9-16.
40. Shen, Y.F., Xiao, M. and Huang, J.J. (2005), "Investor protection and corporation cost of equity", Economic Research Journal, Vol. 51 No. 6, pp. 33-43.
41. Shi, P. (2010), "Corporate social responsibility report and corporate value", Jianghai Academic Journal, Vol. 53 No. 6, pp. 99-103.
42. Tang, G.Z. and Liu, L. (2005), "Effect of rate regulation on capital structure of China listed corporation", Management World, Vol. 21 No. 1, pp. 50-58.
43. Tian, Y.H. and Liu, J.F. (2003), "The relationship between capital cost and capital structure in Chinese listed corporation", Journal of Huazhong University of Science and Technology (Nature Science Edition), Vol. 31 No. 1, pp. 92-94.
44. Van der Laan Smith, J., Adhikari, A. and Tondkar, R.H. (2005), "Exploring differences in social disclosures internationally: a stakeholder perspective", Journal of Accounting and Public Policy, Vol. 24 No. 2, pp. 123-151.
45. Verrecchia, R.E. (2001), "Essays on disclosure", Journal of Accounting and Economics, Vol. 32 Nos 1/3, pp. 97-180.
46. Waddock, S.A. and Graves, S.B. (1997), "The corporate social performance-financial performance link", Strategic Management Journal, Vol. 18 No. 4, pp. 303-319.
47. Wang, W. and Jiang, G.F. (2004), "Information disclosure, transparency and the cost of capital", Economic Research Journal, Vol. 50 No. 7, pp. 107-114.
48. Welker, M. (1995), "Disclosure policy, information asymmetry, and liquidity in equity markets", Contemporary Accounting Research, Vol. 11 No. 2, pp. 801-827.
49. Ye, K.T. and Lu, Z.F. (2004), "The analysis of influential factors of the cost of equity financing about listed companies in China", Management World, Vol. 20 No. 5, pp. 22-34.
50. Ye, K.T., Zhang, R. and Xu, H.P. (2010), "Reputation, institution and debt financing: evidence from Chinese private-owned listed firms", Journal of Financial Research, No. 8, pp. 171-183.
51. Zeng, Y. and Lu, Z.F. (2006), "Information disclosure quality and equity financing cost", Economic Research Journal, Vol. 52 No. 2, pp. 69-79.
52. Zhi, X.Q. and He, T.R. (2010), "Information disclosure quality and equity capital cost", China Soft Science, Vol. 25 No. 12, pp. 125-131.
53. Zhu, S. (2011), "Corporate social responsibility, market evaluation and informativeness of accounting earnings", Accounting Research, Vol. 32 No. 11, pp. 27-34.
54. Diamond, D.W. and Verrecchia, R.E. (1991), "Disclosure, liquidity, and the cost of capital", The Journal of Finance, Vol. 46 No. 4, pp. 1325-1359.
55. Easley, D. and O'Hara, M. (2004), "Information and the cost of capital", The Journal of Finance, Vol. 59 No. 4, pp. 1553-1583.
56. Guo, H. and He, D. (2010), "Measurement and application of the cost of equity capital based on the residual income valuation model", Management World, Vol. 16 No. 1, pp. 183-185.
57. Hail, L. and Leuz, C. (2006), "International differences in the cost of equity capital: do legal institutions and securities regulation matter?", Journal of Accounting Research, Vol. 44 No. 3, pp. 485-531.
58. Ohlson, J.A. (1995), "Earnings, book values, and dividends in equity valuation", Contemporary Accounting Research, Vol. 11 No. 2, pp. 661-687.
59. Shen, H.B. (2007), "Market segmentation, cross listing and expected capital cost-empirical evidence from Ohlson-Juettner model", Journal of Financial Research, Vol. 28 No. 2, pp. 146-156.
60. Zhang, Q. (2008), "Causation and causal analysis in social sciences", Zhejiang Social Sciences, Vol. 24 No. 3, pp. 2-12.