The Effects of CSR Input on Valuation and Accounting Quality -- Biotechnology and Medical Industries
Journal of Finance and Accounting
Volume 4, Issue 3, May 2016, Pages: 146-156
Received: Apr. 22, 2016;
Accepted: May 9, 2016;
Published: May 25, 2016
Views 3465 Downloads 130
Ling-Hui Cho, Yung Zip Chemical Ind. Co., Ltd., Taichung, Taiwan
Li-Kai Liao, Department of Accounting, Tunghai University, Taichung, Taiwan
This paper examines the effects of the corporate social responsibility (CSR) input on company’s valuation and accounting quality by using the samples of biotechnology and medical industries. After considering the interaction term between the accounting quality and CSR, this paper further examine whether the companies which input higher CSR will not be wrong valuation from the market. The findings show that the companies with a higher CSR, their stock prices are less likely to be underpriced by the market. The companies with higher prior period’s CSR have better current period’s accounting quality. After controlling for the interaction between accounting quality and CSR, the companies which input higher CSR at current and lagged-one periods are less likely to be under-valuation by the market.
The Effects of CSR Input on Valuation and Accounting Quality -- Biotechnology and Medical Industries, Journal of Finance and Accounting.
Vol. 4, No. 3,
2016, pp. 146-156.
Argenti, P. A., and B. Druckenmiller. 2004. Reputation and the corporate brand. Corporate Reputation Review 6(4), 368-374.
Baker, M., and J. Wurgler. 2002. Market timing and capital structure. Journal of Finance 57(1), 1-32.
Bowen, H. R. 1953. Social responsibilities of the businessman. New York: Harper and Brothers.
Carroll, A. B. 1991. The pyramid of CSR: Toward the moral management of organizational stakeholders. Business Horizons 34(4), 39-48.
Chen & Tsao. 2008. Is there a social responsibility to be a good stock? Financial and stock research links. OTC Monthly 136,106-121.
Cho, S. Y., C. Lee, and R. J. Pfeiffer. 2013. CSR performance and information asymmetry. Journal of Accounting and Public Policy 32(1), 71-83.
Dhaliwal, D. S., O. Z. Li, A. Tsang, and Y. G. Yang. 2011. Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of CSR reporting. The Accounting Review 86(1), 59-100.
Dhaliwal, D. S., S. Radhakrishnan, A. Tsang, and Y. G. Yang. 2012. Nonfinancial disclosure and analyst forecast accuracy: International evidence on CSR disclosure. The Accounting Review 87(3), 723-759.
Dhaliwal, D. S., O. Z. Li, A. Tsang, and Y. G. Yang. 2014. CSR disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency. Journal of Accounting and Public Policy 33(40), 328-355.
Dechow, P. M., and I. D. Dichev. 2002. The quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review 77 (4), 35-59.
Dittmar, A., and R. Dittmar. 2008. The timing of financing decisions: an examination of the correlation in financing waves. Journal of Financial Economics 90(1), 59-83.
Elliott, W. B., J. Koëter-Kant, and R. S. Warr. 2008. Market timing and the debt-equity choice. Journal of Financial Intermediation 17(2), 175-197.
Fombrun, C. J. N. A. Gardberg, and M. L. Barnett. 2000. Opportunity platforms and safety nets: Corporate citizenship and reputational risk. Business and Society Review 105(1), 85-106.
Friedman, M. 1970. The social responsibility of business is to increase its profits. New York Times Magazine 3(13), 32-33.
Goodpaster, K. E. 1991. Business ethics and stakeholder analysis. Business Ethics Quarterly 1(1), 53-73.
Kim, W., and M. S. Weisbach. 2008. Motivations for public equity offers: An international perspective. Journal of Financial Economics 87(2), 281-307.
Kim, Y., M. Park, and B. Wier. 2012. Is earnings quality associated with CSR? The Accounting Review 87(3), 761-796.
LaFond, R., and R. Watts. 2008. The information role of conservatism. The Accounting Review 83 (2), 47-478.
Lee, G., and R. Masulis. 2009. Seasoned equity offerings: Quality of accounting information and expected flotation costs. Journal of Financial Economics 92(3), 443-469.
Perrini, F., and A. Tencati. 2006. Sustainability and stakeholder management: The need for new corporate performance evaluation and reporting systems. Business Strategy and the Environment 15(5), 296 -308.
Rajaopal, S., and M. Venkatachalam. 2011. Financial reporting quality and idiosyncratic return volatility. Journal of Accounting and Economics 51(1-2), 1-20.
Schnietz, K. E., and M. J. Epstein, 2005. Exploring the financial value of a reputation for CSR during a crisis. Corporate Reputation Review 7(4), 327-345.
Siegel, D., & Vitaliano, D. 2007. An empirical analysis of the strategic use of corporate social responsibility. Journal of Economics and Management Strategy 17, 773-792.
Simpson, W., and T. Kohers. 2002. The link between social and financial performance: Evidence from the banking industry. Journal of Business Ethics 35(2), 97-109.
Thomas, A., & Williams, G. R. 1991. A strategy to provide retirement benefits for international transferees in a global company. Benefits and Compensation International, 10, 2-7.
Tsukamoto, S. W. 2005. An economic approach to business ethics: Moral agency of the firm and the enabling and constraining effects of economic institutions and interactions in a market economy. Journal of Business Ethics 60(1), 75-89.
Tucker, L., and T. C. Melewar. 2005. Corporate reputation and crisis management: The threat and manageability of anti-corporatism. Corporate Reputation Review 7(4), 377-386.
Warr, R., W. Elliott, J. Koëter-Kant, and Ö. Öztekin. 2012. Equity mispricing and leverage adjustment costs. Journal of Financial and Quantitative Analysis 47(3), 589-616.
Xie, B., W. Davidson III, and P. DaDalt. 2003. Earnings management and corporate governance: The role of the board and the audit committee. Journal of Corporate Finance 9(3), 295-316.