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Model 2 is the Probit regression of the effect of all the above type of ownership except the aggregate domestic financial institutional holding replaced with its seven individual components. In Model 1 (2) the coefficient for SOE is 0.174 (0.194) and significant at 5% level, indicating firms controlled by the state are more likely to disclose CSR information. This result supports hypothesis 1a. In Model 1 the coefficient for the aggregate institutional holding is insignificant. However, in Model 2 the coefficient for mutual funds holding is 0.022 and significant at 1% level. This suggests that mutual funds tend to hold more shares of firms that disclose CSR information, in contrast to the other types of financial institutions. These results lend partial support to hypothesis 2a. Furthermore, in Model 1 (2) the coefficient for foreign ownership is 0.131 (0.125) and significant at 10% level, suggesting foreign investors tend to prefer to hold shares issued by firms that disclose CSR information. This provides some support for hypothesis 3a. Finally, the coefficient for corporate holding is 0.011 (0.010) and significant at 1% level in Model 1 (2), indicating listed firms prefer to hold shares issued by fellow listed firms that disclose CSR information. This result supports hypothesis 4a.
Model 3 is the Tobit regression of the effect of state, aggregate domestic financial institutional, foreign and corporate ownership on the quality of CSR report. Model 4 presents the results on the effects of all the above owner type except the aggregate financial institution replaced with its seven individual components on the quality of firm’s CSR report. The results of Model 3 (4) are similar to those in Model 1 (2). Firms controlled by the state tend to produce better quality CSR report, supporting hypothesis 1b. Although the coefficient of aggregate institutional holding is insignificant in Model 3, the coefficient of mutual funds is
0.530 and significant at 1% level in Model 4, indicating that mutual funds hold more shares issued by firms with better CSR report. Together the results provide partial support to hypothesis 2b. Furthermore, the coefficient of corporation’s holding is 0.298 (0.280) in Model 3 (4), suggesting listed firms tend to hold shares of firms with better quality CSR reports. This supports hypothesis 4b. However, Model 3 and 4 indicate no significant relationship between foreign ownership and CSR report quality, invalidating hypothesis 3b.
Table 2: Regression Results
Table 2 also presents the estimation results for control variables. Similar to Stanwick & Stanwick (1998), Orlitzky (2001), Scholtens (2008), Li et al. (2013) and Waddock and Graves (1997), we find both firm size and financial performance are positively related to CSR. Furthermore, similar to the existing literature (Ullmann, 1985; Graves and Waddock, 1994; Cormier et al., 2005; Reverte, 2009; Li et al., 2013) we find ownership concentration is negatively related to the likelihood of CSR disclosure, as indicated by the negative and significant coefficient for Top 10 in Model 1 and 2. However, the relationship between ownership concentration and the quality of CSR report is insignificant. Finally, the coefficient for leverage is negative but insignificant in Model 1, 3 and 4 and only marginally significant in Model 2, suggesting either negative or zero relationship between leverage and CSR (Branco & Rodrigues, 2008; Cormier et al., 2005; Reverte, 2009).
CONCLUSIONThis paper comprehensively examines the link between different types of shareholders and CSR in the context of China. Our findings reveal that different owners have differential impact on the CSR. The SOEs are the best at CSR disclosure and their CSR reports’ quality is the best compared with others. Among the institutional investors, firms with more shares held by mutual fund are significantly better at CSR disclosure and their CSR reports are of significantly better quality. We also found foreign investors played a significant role in the decision process to adopt CSR disclosure; however, the quality of company CSR reports is not significantly different from others. In addition Chinese public listed firms prefer to invest in fellow listed companies that disclose CSR information. This paper enriches our understanding of the development of CSR disclosure in different institutional environment. It provides managers insight into the process of how different types of ownership affect the decision to disclose CSR information as well as the quality of such disclosure. Our findings have practical implications as firms can recognise how particular types of owners value their efforts regarding CSR. Policy makers should promote the transparency of ownership information with both investors and listed firms. From a theoretical perspective, this study suggests the importance of accounting for the heterogeneity among shareholders in relation to CSR due to their differences in role, position and size within society.
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