The influence of CSR reporting models on managers' capital allocation decisions
Johnson, Joseph Aaron
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In my dissertation, I experimentally examine whether and how the reporting model a firm uses to guide its corporate social responsibility (CSR) disclosures can influence managers’ capital allocation decisions. Chapter 1 provides an overview of my research question, why this research question is important, what I predict I will find, and the main results of my experiment. In Chapter 2, I briefly review the CSR literature generally and in accounting specifically, touching particularly on what has catalyzed the recent growth in CSR disclosure, how it influences behavior, and the emerging role of CSR reporting models as well as differences among these models. Two key features that differ among available reporting models are the intended users of the disclosures (e.g., capital providers or all stakeholders) and the disclosure location (e.g., MD&A or Sustainability Report). In Chapter 3, I draw upon research in social psychology on the social contingency model to hypothesize that differences in the intended users and the disclosure location jointly influence the extent to which managers’ capital allocations are weighted toward financial versus social benefits. I also hypothesize that this influence is mediated by how accountable managers feel for financial and social performance. Chapter 4 outlines the experimental design and method I use to test my hypotheses. The results of my experiment and related statistical analyses are reported in Chapters 5 and 6, in which I find support for my predictions across two different participant populations I use as proxies for managers. Specifically, I find that participants allocate capital to social benefits across all conditions, but that their overall allocations are largely driven by financial considerations. That is, they weight financial benefits more heavily than social benefits. However, when the reporting model disconnects CSR disclosure from a more traditional financial reporting setting (i.e., when the CSR disclosures are made to all stakeholders in a Sustainability Report), participants’ weight on financial benefits is reduced. In addition, I find that these results are driven by changes in perceived accountability for both financial and social performance. I also find evidence that the influence of the CSR disclosure location is contingent on whether the disclosure audience’s preferences are perceived to uniformly favor financial benefits. Chapter 7 concludes and reiterates the important implications of my dissertation. Namely, the results of my study help inform standard setters, regulators, stakeholders, and managers about the consequences of alternative CSR reporting models and highlight the potential effects of CSR disclosure standards on stakeholder welfare.