Corporate Social Responsibility Disclosure and the Value of Cash Holdings

This study investigates whether corporate social responsibility (CSR) reports mitigate the value destruction associated with increases in cash holdings. We find that the issuance of a standalone CSR report increases the marginal value of cash holdings. We find that this effect is stronger for firms with higher information opacity and for firms with higher credibility of CSR information. Our results suggest that information in CSR reports can facilitate monitoring and thus induce more efficient use of cash holdings. The notion that financial reports provide information that enhances monitoring is well established in the literature. Our study is the first to show that non-financial reports also enhance monitoring.