Corporate Social Responsibility and Information Asymmetry

This research investigates the connection between Corporate Social Responsibility (CSR) and the issue of information asymmetry. Our CSR sample comes from the DJSI (Dow Jones Sustainability North America Index), and the sample consists from 764 firm-year observations during 2002 to 2010. Our empirical work find there is a significantly negative relationship between CSR and information asymmetry proxy, which means that market responds CSR with smaller gap between bid-ask spreads. CSR also reduces the excess returns when higher degree of information asymmetry exists, which compensate less excess returns to investor than non-CSR firms. Furthermore, CSR firms have less degree of overreaction than matching firms when the book-to-market effect and intangible information are considered.