The Moderating Role Of Management Credibility In Corporate Social Responsibility’s Effect On Investors’ Decision

Since2009, the number of corporate social responsibility (CSR) report in China hasrapidly increased which is not only the result of government’s policy promoting, but also thecompany’s positive responses to shareholders that concerned about CSR. Nevertheless, frominvestors’ perspective, whether CSR disclosure provides useful information for them and affectstheir decision? This paper experimentally examines the effect of CSR disclosure on investors’decision making. MBA students at a large university are used as participants for this study.Participants viewed the materials about two hypothetical companies, which are modeled on twolisted companies of food industry. To test our hypotheses, we use2*2mixed experimentaldesign. We manipulate the level of CSR disclosure and management credibility between twocompanies. The dependent variable is investor’s decision making, including the performanceevaluation of long-term and short-term, investment possibility and amount. Our results indicatethat:（1）CSR disclosure has a positive significant effect on the possibility and the amount ofinvestors’ investment;(2) When CSR is at a high level, investors’ expectations on long-termperformance of company will be higher than short-term one; and (3) management credibilitymoderates the effect of CSR disclosure on the investors’ investment. This advances theliterature by pinning down the source of investors’ decision usefulness of CSR disclosures. Ourresults suggest that companies should improve investors’ trust on the management to increasedecision usefulness of CSR information to investors.The main contribution of this paper is reflected in the following aspects:(1) we test anddiscover the impact of social responsibility disclosure on investors`expectation on long-termperformance, the possibility and amount of investors’ decision;(2) we found the moderatingrole of management credibility in corporate social responsibility`s effect on investors`decisionsand explore the usefulness of social responsibility information from the perspective of themanagement credibility, and pointed out the method of improving the credibility and usefulnessof the CSR report;(3) we use the experimental methods to directly examined impact of socialresponsibility information disclosure on investors`decisions and the moderating role ofmanagement credibility in corporate social responsibility`s effect on investors`decisions, thiscan avoid the defects of archival research. Experimental control can separate CSR andmanagement credibility from the complex information, and directly verifies the relationshipbetween CSR and investors`decision and moderating role of management credibility.