Study On Economic Consequences Of Corporate Social Irresponsibility From The Perspective Of Finance

With the rapid economic growth of China, some enterprises occurred security accidents and environmental pollution, some enterprises issued false advertisements and made inferior commodities, which have brought great losses to stakeholders. These social irresponsible events did not take place in a single industry or in a single company by accidental, but happened in all walks of life intensively. They are called Corporate Social Irresponsibility. These extremely corporate social irresponsible events could harmed sustainable developments of society and resulted to stakeholders’discontent, questioned even antagonism, which became an important cause of social instability. Though regulators improved the corresponding regulatory policies gradually and different subjects researched these events from different angles, they did not solve these problems fundamentally. Corporate social irresponsibility as an independent subject does not still get enough attention.Corporate social irresponsibility and corporate social responsibility are related and independent research topic. There are close relationship and essence of distinguish between corporate social responsibility and corporate social irresponsibility. Corporate social irresponsibility is a kind of negative externalities. Under incomplete institution or contracts, enterprises translate cost to shareholders, which is difficult to be found, even not received enough punishments after being disclosed. The intentionally or unintentionally ignorance of corporate social irresponsibility caused that the research and practice of corporate social responsibility could not stopped, even reduced corporate social irresponsible events.Corporate social responsibility is "doing good", which don’t have limits,while Corporate social irresponsibility is "doing bad", which has clearly boundary. The issues that violate value of shareholders are needed further research. As a profit organization, enterprises have financial reasons and influences for corporate social irresponsibility. Only in-depth study from the perspective of economic consequences of corporate social irresponsibility, we can analyze the gain and loss of corporate social irresponsibility and solve these problems fundamentally.Firstly, it combed relevant literature at domestic and abroad about corporate social irresponsibility, corporate financial quality, financial performance and capital cost to find out main points and empirical evidences. Secondly, based on the concept of Corporate Social Responsibility and its relationship and difference between Corporate Social Irresponsibility, this article defined the concept of Corporate Social Irresponsibility, as well as the concepts of corporate financial quality, financial performance and capital cost. After that, it measured and listed items of corporate social irresponsibility, set up a corporate social irresponsibility index, analyzed the present situation of its information disclosure. Then, followed by use of contract theory, agent theory, externalities theory and stakeholder theory, it analyzed deeply the effect of corporate social irresponsibility. Then, In the subsequent empirical test part, it used listed companies of main markets of Shanghai and Shenzhen A shares as research object and analyzed economic consequences of corporate social irresponsibility gradually.Corporate social irresponsibility was more serious, earnings management of these enterprises became more serious too. Real and accrual based earnings management were all increased, but enterprises didn’t use two methods at the same time. They chose different earnings management methods under different conditions. So, when corporate social irresponsibility takes place, quality of earnings will occur critical problems. Investors and other stakeholders should question financial report rationally and enhance the regulations of earnings management of these enterprises.At the same time, enterprises, which were disclosed social irresponsible events, translated their costs to society, which decreased their operating costs, but increased period expense, non-business expenditure and total operating cost. The return of equity was decreased. From angle of shareholder wealth, corporate social irresponsibility became more serious, financial performance became worse, too.The condition of corporate social irresponsibility was more serious, the cost of equity and debt would increased. Investors and creditors paid attention to enterprises events. When corporate social irresponsibility occurred, financial risk would increased, which made investors raise the expected rate of return and made creditors increase the cost of capital. These make the whole financial cost increase significantly.The innovations are as follows:(1) Based on analyzing connotation and extension of concept of corporate social irresponsibility, it lays a theoretical foundation for the further study. (2) According to the existing literature, the study of corporate social irresponsibility always uses normative or economic analysis. This paper makes empirical tests on the actual effect of corporate social irresponsibility on earnings management, financial performance, capital costs and other issues, which broadens research angles of related research, enriches and expands the relevant theory. (3) The research of corporate social irresponsibility and the analysis of its regulatory mechanisms in this article provide various methods for regulators to control corporate social irresponsibility with high efficiency.