The effect of investor protection on the quality of CSR reporting
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This study investigates whether the level of investor protection in a country has an effect on the quality of Corporate Social Responsibility (CSR) reporting by companies. This study argues that higher investor protection in a country leads to stronger legal institutions, leading to more legal power for environmental non-governmental organizations against misconduct by corporations, leading to corporations issuing low-quality CSR reports to distract from their misconduct. This study also argues that this difference is more likely to be weaker when the CSR performance is higher, as companies with a high CSR performance will have an incentive to signal their high CSR performance irrespective of the level of investor protection. Data is retrieved from the GRI Sustainability Disclosure Database, EIKON, Orbis and the World Economic Forum, leading to a sample of 1304 companies from 40 countries worldwide with data from 2016. The results show that there is a negative relationship between investor protection and the quality of CSR reports, indicating that companies in countries with a high level of investor protection overall issue lower-quality CSR reports. Furthermore, the results show that the relationship between investor protection and the quality of CSR reporting becomes stronger for companies with a higher CSR performance.
Faculteit der Managementwetenschappen