Corporate Social Responsibility and Stock Liquidity: The Moderating Role of External Monitoring

Document Type : Research Paper

Authors

1 department of accounting,Bandargaz Branch, Islamic Azad University, Bandargaz,Iran

2 Assosiate Professor of accounting, University of Guilan, Rasht, Iran.

3 Department of Accounting, Payame Noor University (PNU), Tehran, Iran

Abstract

Today, the development of a comprehensive corporate social responsibility reporting in order to create transparency and accountability in capital markets, attracted considerable attention. Therefore, the purpose of the present study is to investigate the relationship between corporate social responsibility reporting and stock liquidity and study the moderating effect of external monitoring on this relationship. The present study is concerned with examining the association between social responsibility and stock liquidity as well as exploring the moderating effect of external monitoring on this relation. A sample of 87 firms listed in Tehran Stock Exchange during 2013 to 2018 is examined. To analyze data and test hypotheses, the multivariate regression model based on panel data is used. The results show that there is a significant positive relationship between corporate social responsibility reporting and stock liquidity. In addition, the results indicate that external monitoring played a moderating role in the relationship between corporate social responsibility and stock liquidity and exacerbated the positive relationship between them. Research findings can be useful for investors, the Securities and Stock Exchange organization and other stakeholders for decision making.

Keywords

References

 
AbdurRouf, M.D. (2011). The Corporate Social Responsibility Disclosure. Business and Economics Research Journal, 2 (3), 19–32.
Agarwal, P. (2008). Institutional Ownership and Stock Liquidity, Working paper. https://ssrn.com/abstract=1029395.
Amihud, Y. (2002). Illiquidity and Stock Returns: Cross-section and Time-series Effects. Journal of Financial Markets, 5, 1, 31-56.
Angelidis, J.P. & Ibrahim, N.A. (1993). Social demand and corporate strategy: A corporate social responsibility model. Review of Business. 15. 7-10.
Cheung, A.W. (2016). Corporate social responsibility and corporate cash holdings, Journal of Corporate Finance, 37, 412-430.
Chung, K., Elder, J., & Kim, J. (2010). Corporate Governance and Liquidity. The Journal of Financial and Quantitative Analysis, 45(2), 265-291. 
Dhaliwal, D., Li, Z., Tsang, A., & Yang, Y. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review, 86, 59–100.
Dhaliwal, D., Radhakrishnan, S., Tsang, A., & Yang, Y. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. The Accounting Review, 87, 723–759.
Enderle, G., & Tavis, L. (1998). A balanced concept of the firm and the measurement of its long-term planning and performance. Journal of Business Ethics, 17 (11), 1129-1144.
Foroghi D, Fadavi M H, & Hajian Nejad A. (2015). Investigating the Impact of Tax Avoidance Policies on the Type of Auditor's Report in Firms Listed in Tehran Stock Exchange. taxjournal. 23 (25), 181-199(in Persian).
 Foroghi, D., Farahmand, S., & Ebrahimi, M. (2012). The Relationship between Stock Market Liquidity and Corporate Performance in Tehran Stock Exchange Listed Companies. Journal of Securities Exchange, 4(15), 125-143(in Persian).
Foroghi, D., Shahshahani, M. & Pourhossein, S. (2008). Managements' Perceptions about Social Accounting Information Disclosures: Listed Companies in TSE. Accounting and Auditing Review, 15(3), 55-70(in Persian).
Gjerde, T., S. Mahenthiran, & D. Cademartori. (2013). Effect of ownership, governance, and transparency on liquidity—Chilean evidence. Journal of Contemporary Accounting & Economics, 9 (2), 183–202.
Graham, J. R. & Harvey, C. R. & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1–3), 3–73
Gujarati, D. (2004). The Basics of Econometrics. Translation by Dr. Hamid Ebrahimi, Volume II, Tehran: Tehran University Press (in Persian).
Haddad, A. E., Alshattarat, W. K. & Nobanee, H. (2009). Voluntary disclosure and stock market liquidity: Evidence from the Jordanian capital market. International Journal of Accounting, Auditing and Performance Evaluation, 5 (3), 285–309.
Hajiha, Z., & Sarfaraz, B. (2015). The Relation between Corporate Social Responsibility and Cost of Equity Capital of Firms Listed in Tehran Stock Exchange. Empirical Research in Accounting, 4(2), 105-123 (in Persian).
Harjoto, M. A. (2018). Corporate Social Responsibility and Corporate Fraud. Social Responsibility Journal, 13(4), 762-779.
Heflin, F., Shaw, K. & Wild, J. (2005). Disclosure policies and market liquidity: Impact of depth quotes and order sizes. Contemporary Accounting Research, 22, 829–865.
Karamanou, I. & Vafeas, N. (2005). The Association between Corporate Boards, Audit Committees, and Management Earning Forecasts: An Empirical Analysis. Journal of Accounting Research, Vol. 43, No. 3, 453-486.
Kim, Y.S., Kim, Y., & H. Kim. (2017). Corporate social responsibility and Internal Control Effectiveness, Asia-Pacific Journal of Financial Studies, 46,341–372.
Lerner, D.L. & Fryxell, E.G. (1988). An empirical study of the predictors of corporate social performance: a multi-dimensional analysis. Journal of Business Ethics, 7, 951–959.
Liu, C., Lin, B., & Shu, E. (2017). Employee quality, monitoring environment and internal control. China Journal of Accounting Research, 10 (1), 51-70.
Lys, T., Naughton, J., & Wang, C. (2015). Signaling through corporate accountability reporting. Journal of Accounting and Economics, 60, 56–72.
Maranjory, M. & Alikhani, R. (2014). Social Responsibility Disclosure and Corporate Governance. Accounting and Auditing Review, 21(3), 329-348 (in Persian).
Pourali, M., & Hajjami, M. (2014). Relationship between social responsibility disclosure and institutional ownership in companies listed in Tehran Stock Exchange. Journal of Management Accounting and Auditing Knowledge, 3, 135-150(in Persian).
Rahahleh, M. Y & Shariari, J. A. (2008). The Extent of Social Responsibility Accounting Application in the Qualified Industrial Zones in Jordan. Journal of International Management Review. 4(2), 5-17.
Rezaei Pitenoei, Y., Safari Gerayli, M., & Norouzi, M. (2017). Social Trust, External Monitoring and Stock Price Crash Risk: Testing Complementary and Substitution Theory. Accounting and Auditing Review, 24(3), 349-370 (in Persian).
Safari Gerayeli, M. (2018). Corporate Social Responsibility and Market Value of Corporate Cash Holdings. Financial Management Strategy, 6(1), 163-183 (in Persian).
Saleh, M., Zulkifli, N. & Muhamad, R. (2010). Corporate social responsibility disclosure and its relation on institutional ownership. Managerial Auditing Journal, 25 (6), 591–613.
Sandhu, HS, & Kapoor, S. (2010). Corporate social responsibility initiatives: An analysis of voluntary corporate disclosure. South Asian Journal of Management, 17(2), 47-80.
Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control, J. Polit. Econ, 94, 461–478.
Subramaniam, R.K, Samuel, S., & Mahenthiran.S. (2017). Liquidity Implications of Corporate Social Responsibility Disclosures: Malaysian Evidence. Journal of International Accounting Research, 15(1), 133-154.
Vadeei Noghabi M H, & Rostami A. (2014). The Impact of Type of Institutional Ownership on Future Stock Price Crash Risk: Evidence from Companies Listed in Tehran Stock Exchange (TSE). Quarterly financial accounting journal. 6 (23), 43-66 (in Persian).
Wyss, R., (2004). Measuring and Predicting Liquidity in the Stock Market. PHD Dissertation, University of St. Gallen.
Cho, S.Y., Lee, C., & Pfeiffer Jr, R.J. (2013). Social Responsibility and information asymmetry, J.Account.Public Policy, (32), 71-83.
Yahyazadehfar, M., & Khorramdin, J. (2009). The Role of Liquidity Factors and Illiquidity Risk on Excess Stock Return in Tehran Stock Exchange. Accounting and Auditing Review, 15(4), 101-118 (in Persian).
Financial Management Strategy
Volume 11, Issue 3 - Serial Number 42
November 2023
Pages 175-192

Files

History

  • Receive Date: 23 July 2022
  • Revise Date: 07 October 2023
  • Accept Date: 14 October 2023

Share

How to cite

Statistics