Does better CSR disclosure minimise the problem of asymmetric financial reporting? The role of market supervision

Corporate social responsibility (CSR) is a crucial business practice that has attracted the attention of companies and market participants worldwide. This paper examines the impact of CSR on financial reporting comparability. Specifically, this study investigates two main topics: (1) whether CSR leads to a more comparable financial report and (2) whether market supervision (i.e. liquidity and investor concerns) components of CSR are the channels through which CSR affects financial report quality. The results reveal that good CSR practice effectively minimises the problem of asymmetric financial reporting, even when accounting for other factors that affect financial reporting quality. CSR has the potential to attract market supervision and encourage companies to maintain comparability in their financial reporting practice. This observation indicates that CSR participation is a tool to elicit market supervision and to improve the information reporting environment.