Happy troubles? CSR awards and CSR report quality

Abstract

We propose that quality of corporate social responsibility (CSR) reports, as measured by independent agencies, will decline when firms perform well in social responsibility. Building on the existing literature on stakeholder theory and existing literature, we theorize that lower‐quality CSR reports may correlate with better actual CSR because performing well in CSR will increase external stakeholders' expectations but simultaneously stimulate discontent among shareholders, forcing firms to mitigate the conflict through CSR reports. This study takes Chinese listed firms from 2010 to 2019 as subjects and examines the relationship between winning prestigious CSR awards and CSR report quality. The results support our hypothesis. We further investigate two moderator variables and find the negative relationship is weakened when firms are state‐owned, potentially resulting in more social expectation pressures from the government and public. As an important financial indicator tracked by internal stakeholders, return on equity weakens this negative relationship.