Yang Zhang

This study examines the relationship between corporate social responsibility and the effectiveness of internal control, while simultaneously examining board gender diversity to check whether female directors contribute to corporate transparency or not. The sample of the study comprises 15,231 firm-year observations of companies listed on the Shanghai and Shenzhen stock exchanges from 2013 to 2018. The raw data for variable calculation come from authoritative and reputable sources, such as China Stock Market and Accounting Research (CSMAR), DIB Internal Control database, and RKS CSR score. The empirical study shows that socially high-performing firms possess a more effective internal control mechanism. However, the paper failed to find a positive association of gender diversity on the board with internal control effectiveness, and failed to attest reinforcing effect of female directors on internal control in socially responsible firms. This study suggests that in China’s institutional environment, female directors are unlikely to contribute to increased corporate transparency. This study is useful for both regulators and company management to establish a master plan and tactics for board composition to improve corporate transparency, taking into account the effect of the investigated phenomena within the jurisdiction under study.

Acknowledgment
This paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “EMBRACING EU CORPORATE SOCIAL RESPONSIBILITY: CHALLENGES AND OPPORTUNITIES OF BUSINESS-SOCIETY BONDS TRANSFORMATION IN UKRAINE” 101094100 — EECORE — ERASMUS-JMO-2022-HEI-TCH-RSCH-UA-IBA / ERASMUS-JMO-2022-HEI-TCHRSCH https://eecore.snau.edu.ua/

This study aims to investigate whether stockholders and creditors place a positive value on corporate social responsibility (CSR) information disclosure when making decisions about providing financing to firms, thereby influencing their investment choices. Utilizing data from the China Stock Market & Accounting Research Database (CSMAR) and HEXUN, the study analyzes CSR disclosures and financial data of 7,123 firm-year observations of A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2012 to 2020. A comprehensive methodology involving regression analysis was applied to assess the relationship between CSR quality and the cost of debt capital. Various robustness tests, including different model specifications and alternative variable measurements, were conducted to ensure the reliability and validity of the findings. The results obtained indicate that higher CSR quality significantly correlates with a lower cost of debt capital, supporting the hypothesis that improved CSR disclosure reduces perceived credit risk. However, CEO financial expertise shows a significantly positive relationship with the cost of debt capital. Furthermore, the study reveals that CSR assurance and engagement with Big 4 accounting firms do not noticeably affect the price of debt capital, whereas mandatory CSR reporting does. The findings underscore the importance of CSR quality in financial decision-making, offering valuable insights.

Acknowledgment
This paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “EU Best Practice of Life Cycle Assessment, Social, Environmental Accounting and Sustainability Reporting” – 101047667-ERASMUS-JMO-2021-MODULE https://jm.snau.edu.ua/en/eu-best-practice-of-life-cycle-assessment-social-environmental-accounting-and-sustainability-reporting/
Oleh Pasko expresses sincere gratitude for the support from the Kirkland Research Program, generously provided by the Leaders of Change Foundation established by the Polish-American Freedom Foundation.