Too little or too much? The curvilinear relationship between corporate social responsibility disclosure and investment efficiency in BRICS economies

Abstract

AbstractThis research article investigates the complex relationship between corporate social responsibility disclosure (CSRD) and investment efficiency in the BRICS economies (Brazil, Russia, India, China, and South Africa). Through the lens of signaling theory, the study examines how CSRD serves as a signal to stakeholders and influences firms' investment decisions. A comprehensive dataset spanning 9240 firm‐year observations from 2011 to 2021 is analyzed to derive insights. The study reveals a multifaceted association between CSRD and investment efficiency. Initially, CSRD is found to increase signal costs, resulting in higher investment inefficiency. However, this effect is observed only up to a certain threshold. Beyond this point, CSRD starts reducing investment inefficiency, primarily due to improved signal benefits and perceived value. Additionally, the study introduces CSR assurance as a crucial moderator that influences the complex interplay between CSRD and investment efficiency. In summary, this research offers valuable insights into the strategic role of CSRD in BRICS economies, highlighting the significance of signal dynamics and the moderating impact of CSR assurance. Such insights can guide businesses and policymakers in these economies as they navigate the intricate landscape of CSR disclosure and its implications for efficient resource allocation.