Essays on corporate social responsibility and informativeness

Abstract

This Ph.D. thesis consists of three empirical studies on corporate social responsibility (CSR) and stock price informativeness. The first empirical study examines the impact of directors’ philanthropy preferences on CSR performance, which is the inside initial motivation of corporate social responsibility (CSR). I find directors’ philanthropy preferences measured as past charity experience are significantly and positively associated with better environmental and social performance. I additionally provide empirical evidence on a causal inference by adopting two unexpected natural disasters with global impacts as quasi-natural experiments. Next, I investigate the question of why directors transfer their personal preference into better firm-level CSR performance. My results show that directors with philanthropy preferences are more sensitive to local demands and values on environmental and social related issues and thus the firms are more likely to react to social norms in local communities. Finally, I show this improvement is not at a cost of corporate governance. On the contrary, this inside initial motivation is more pronounced in firms with better governance. The second empirical chapter examines the impact of anti-market culture on firm environmental and social (E&S) outcomes. Using the varying degree of intensity of anti-Jewish pogroms in 20 European countries as a quasi-exogenous measure of anti-market sentiment, I discover that anti-market ideology has a strong, positive impact on firm E&S performance, and such relationship is more pronounced in firms with more state ownership and better governance quality. Taken together, my results add novel evidence to the view that corporate social responsibility is partially a result of the style of social control on economic life. The last empirical chapter focuses on the relation between directors’ military experience and stock price informativeness. Military training promotes leadership skills and emphasizes a unique value system encompassing integrity, duty, selflessness and self-discipline. I hypothesize that directors with military experience encourage timely disclosure of firm-specific information, which leads to higher stock-price informativeness. I document that having a military director on board is positively related to idiosyncratic volatility, informed trading and shorter price delay. Exploiting exogenous variations in the likelihood of having military directors as a result of conscription or of a military coup, I confirm the robustness of these results. Taken together, the findings suggest that directors with experience of military service shape the organizational ethical climate and influences the monitoring function of the boards on which they serve.