The dark side of mandatory CSR disclosure: Evidence from expropriation in China

We examine how mandatory corporate social responsibility (CSR) disclosure impacts the expropriation of minority shareholders. On the one hand, controlling shareholders may increase expropriation to shift the costs caused by increased CSR investment following the CSR disclosure mandate. On the other hand, the limited assets of controlling shareholders and the enhanced information transparency after the CSR disclosure mandate may mitigate expropriation. Employing a difference-in-differences design, we find that mandatory CSR disclosure increases expropriation by controlling shareholders. We also find that firms subject to the CSR disclosure mandate show an increase in CSR expenditures, yet a decrease in shareholder value. Further analysis indicates that the effect of mandatory CSR disclosure on expropriation is more pronounced among firms with higher pollution levels, lower dividend payouts, and a lower degree of equity balance. This paper provides further evidence that minority shareholders ultimately bear the costs of mandatory CSR disclosure, supplements the existing literature on the economic consequences of mandatory CSR disclosure from the perspective of expropriation of minority shareholders, and offers insights into the agenda related to CSR disclosure.