Responsible Investment

CSR-focused firms show enhanced information symmetry

February 15, 2013
Image ‘Asymmetry’ by --Tico-- (CC BY-NC-ND 2.0)

With this article, the research team of Cui and Na (both PhD candidates at the School of Business, Korea University, Korea) working with Santa Clara University professor Jo, developed two “relevant but competing explanations regarding the impact of CSR engagement on information asymmetry and vice versa.”

Stakeholder theory vs. agency theory

As with other recent research[1] that attempts to determine the relationship between CSR and ‘good’ behavior in firm management, in this study the researchers developed their own hypotheses by drawing on earlier research based on stakeholder theory (the basis of their information-asymmetry reduction hypothesis through conflict resolution) and agency theory (the basis of their over-investment hypothesis). The two hypotheses tested by the team:

  1. CSR engagement reduces the level of information asymmetry after controlling for confounding factors (stakeholder theory);
  2. CSR engagement positively (at least opaquely) influences the level of information asymmetry after controlling for the confounding factors (agency theory)

Extensive data set based on US firms

Their data set was derived from the KLD Stats database (examining CSR criteria of US firms), merged with the Compustat and Center for Research in Security Prices (CRSP) databases. The combined sample consisted of around 21,492 firm-year observations from 1991 to 2010, based on US firms.

Broadening the ongoing discussion about CSR

The large sample and extensive calculations employed by the team provide new insights and knowledge in the field of CSR and ‘fair’ information distribution, suggest the team. “To the best of our knowledge, no prior empirical studies have examined the impact of CSR on information asymmetry controlling for endogeneity issues,” the authors of the article say. “Thus, we aim to fill the gap by examining a simultaneous and causal investigation of the linkage between information asymmetry and CSR in a systematic fashion.”

CSR and ‘opacity’: an inverse relationship

While the definition of CSR is a ‘moving target’ which will continue to shift dynamically[2], transparency in reporting and communication is generally recognized as a crucial aspect of a firm’s socially responsible engagement.

Thus a CSR-oriented firm’s frequent and voluntary disclosure of its activities should inherently reduce information asymmetry[3] between internal and external stakeholders, and discourage self-serving behavior by a firm’s management, a consideration borne out by the research of Cui, Jo and Na.

“We find an inverse association between CSR engagement and the level of information asymmetry after controlling for various firm characteristics,” say the researchers about the conclusions of their study. “We interpret these results to support the stakeholder-theory based information-reduction explanation that considers CSR engagement as a vehicle to reduce asymmetric information between managers and non-investing stakeholders,” they conclude.


  1. Cai, Ye, Hoje Jo, and Carrie Pan. “Vice or Virtue? The Impact of Corporate Social Responsibility on Executive Compensation.” Journal of Business Ethics 104, no. 2 (December 1, 2011): 159–173. doi:10.1007/s10551-011-0909-7.
  2. Buskirk, Andrew Van. “Disclosure Frequency and Information Asymmetry.” Review of Quantitative Finance and Accounting 38, no. 4 (May 1, 2012): 411–440. doi:10.1007/s11156-011-0237-0.
  3. Marrewijk, Marcel van. “Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion.” Journal of Business Ethics 44, no. 2–3 (May 1, 2003): 95–105. doi:10.1023/A:1023331212247.

This article may be reproduced according to our terms of use with attribution (and link, if online) to To be cited as: “CSR-focused firms show enhanced information symmetry”, Lloyd Kurtz,, February 15, 2013.

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