The Effect of Firm Ownership Structure on the Gap Between CSR Activity and CSR Reporting

Despite the importance of corporate social responsibility (CSR) in strategic choices of firms, there has been an increasing concern about the authenticity of CSR reporting as some firms exaggerate CSR commitments in disclosures without substantive implementation. Building upon the stakeholder theory and the institutional theory, this study investigates whether a firm’s decision to exaggerate its CSR performance in reporting is associated with its ownership structure. Using the data of CSR reporting of Chinese firms listed in Shenzhen and Shanghai stock exchanges, we find that foreign-invested firms exhibit the greater level of gap between CSR activity and CSR reporting than their domestic counterparts. This gap is more salient in environmental and social domains than in governance domain. While state-owned enterprises (SOEs) show greater CSR reporting performances in both quality and quantity, the reporting gap by those firms is not less common than foreign-invested firms and private firms. Our findings suggest that firms strive to manage diverse interests of stakeholders when implementing CSR and these pressures could lead to the gap between claims reported by firms and their actual CSR implementation.