The Informational Contribution of Social and Environmental Disclosures for Investors

Most prior research on corporate social responsibility (CSR) disclosure considers environmental and social components as additive or complementary. In this paper, we extend the existing literature on CSR by investigating the substitution effect of social disclosure and environmental disclosure in reducing information asymmetry between managers and investors. We also attempt to study the association between different environmental disclosure sources and information asymmetry. Environmental disclosure comes from three complementary sources: paper-based annual/environmental report, web page and press releases. Our results suggest that social disclosure and paper-based environmental disclosure substitute each other in reducing stock market asymmetry. We also show that environmental information communicated on the web page or by press releases does not affect information asymmetry when we consider social disclosure. These observations suggest that future research in CSR disclosure might fruitfully distinguish between social and environmental disclosure as well as communication devices. Moreover, as expected, we observe that environmental performance is negatively associated with environmental disclosure. Our results also show that environmental news exposure and firm size are key drivers of environmental disclosure