The Impact Of Mandatory CSR Disclosure On Cash Dividend

Since the 1990s,China's economy has been rising rapidly.However,extensive development has inevitably brought many environmental and social problems.The sustainable development of economy together with environment and society has become a hot topic.Under the goal of the Chinese Communist Party of''building a harmonious society,',Chinese listed firms,as important promoters of social development,are endowed with high expectations in fulfilling their social responsibilities.The government has issued several policies and regulations to encourage firms to take the initiative to disclose their social responsibilities.At the end of 2008,both Shanghai stock exchange and Shenzhen stock exchange required a subset of listed Chinese firms to issue CSR reports as of the end of 2008,which made the CSR disclosure as a mandatory policy.The policy which changed from voluntary disclosure to mandatory disclosure not only reflected the government's great attention on CSR,but also caught the eyes of many scholars.Using a quasi-natural experiment that mandates a subset of listed firms to issue corporate social responsibility reports,this paper examines the effect of mandatory CSR disclosure on corporate cash dividend payment in China.The paper first analyzes the possible mechanism of mandatory CSR disclosure on corporate cash dividend payment from the perspective of' signaling theory,and then put forward corresponding hypotheses.Further,this study uses A share-listed firms data from 2006-2010(excluding 2008)to run our DID models,the empirical results show that the mandatory CSR disclosure significantly reduce the dividend payout ratio,the conclusion still hold after several robustness tests.The paper also find the mandatory CSR policy can increases analysts coverage,and the reduction in dividend payout ratio by Mandatory CSR policy turned out be more significant in firms with higher analysts coverage promotion.Furthermore,this study find that the impact of mandatory CSR disclosure on dividend payout ratio only exist in firms with high growth opportunities,lower rate of independent directors as well as state owned firms.The paper argues that the mandatory CSR disclosure reduces the information asymmetry through increased analysts coverage,and the improved information environment weakens the signal effect of dividends,which in turn urges the firms to cut down the dividend payout ratio.Especially when the firm has a high growth rate and need a large amount of investment capital.In addition,for firms with lower rate of independent directors as well as state-owned firms,their original information transparency is relatively low,the mandatory CSR disclosure tend to have a higher marginal value in improving information environment,therefore the reduction on signal effects can be more obvious in these firms.