Corporate social responsibility disclosure and cash holdings

Titolo Rivista FINANCIAL REPORTING
Autori/Curatori Giovanni Coppola, Michele Fabrizi, Marco Ghitti
Anno di pubblicazione 2024 Fascicolo 2024/1
Lingua Inglese Numero pagine 31 P. 127-157 Dimensione file 249 KB
DOI 10.3280/FR2024-001006
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FrancoAngeli è membro della Publishers International Linking Association, Inc (PILA)associazione indipendente e non profit per facilitare (attraverso i servizi tecnologici implementati da CrossRef.org) l’accesso degli studiosi ai contenuti digitali nelle pubblicazioni professionali e scientifiche

Purpose: the demand for firms to disclose their corporate social responsibility (CSR) activities has risen steeply over the last two decades, pushing many jurisdic-tions to implement mandatory non-financial reporting. We exploit the European non-financial reporting directive (NFRD) to study how companies change their cash management policies in response to additional mandatory CSR disclosure requirements. Methodology: we adopted a difference-in-differences (DID) approach, which is designed to estimate causality between the mandatory adoption of the NFRD and firms’ cash holdings. We implemented a two-way fixed effect model in the context of mandatory disclosure and staggered adoption of regulation, in order to study how firms changed their cash holdings following the introduction of the NFRD. Findings: we find that firms increased cash holdings following enactment of the NFRD, which is in line with the theory that cash is held for precautionary reasons. The growth in cash holdings is not equally distributed, as it is less pronounced in firms that are in a high-investment phase. Our findings reveal that mandatory non-financial disclosure can have real effects. Originality/value: This research shows that, in the short-term, mandatory CSR disclosure can have real effects on cash holding. Long-term effects should be con-sidered further by future research. Practical implications (optional): Policymakers should consider that additional CSR requirements are costly to firms, and thus find mechanisms that induce firms to adopt these requirements despite their costs

Keywords:corporate social responsibility, non-financial disclosure, mandatory disclosure, cash holdings, real effects

Jel codes:G38, K22, M14, M41, M48

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Giovanni Coppola, Michele Fabrizi, Marco Ghitti, Corporate social responsibility disclosure and cash holdings in "FINANCIAL REPORTING" 1/2024, pp 127-157, DOI: 10.3280/FR2024-001006