Corporate social responsibility
performance and information
asymmetry: the moderating role of
ownership concentration
Ijaz Ur Rehman, Syeda Khiraza Naqvi, Faisal Shahzad and Ahmed Jamil
Ijaz Ur Rehman is based at
the College of Business
Administration, Al Falah
University, Dubai, United
Arab Emirates. Syeda
Khiraza Naqvi and Faisal
Shahzad are both based at
the Department of
Management Sciences,
COMSATS University
Islamabad, Attock
Campus, Pakistan. Ahmed
Jamil is based at the
National College of
Business Administration
and Economics, Rahim Yar
Khan Campus, Pakistan.
Received 14 June 2020
Revised 23 October 2020
Accepted 31 December 2020
PAGE 424 j SOCIAL RESPONSIBILITY JOURNAL j VOL. 18 NO. 2 2022, pp. 424-440, © Emerald Publishing Limited, ISSN 1747-1117
Abstract
Purpose – This paper aims to examine the moderating effect of ownership concentration on the
relationship between corporate social responsibility performance (CSRP) and information asymmetry
using a sample of Chinese firms.
Design/methodology/approach – The authors use a sample of 208 listed firms from nine different
sectors in China over the period of 2008–2018. They use the generalized method of moment approach to
examine the dynamic relationship between CSRP, information asymmetry and ownership concentration.
CSRP index is constructed using environmental performance, social performance and corporate
governance performance measures.
Findings – The results indicate that CSRP positively affects the information asymmetry. Moreover, by
taking ownership concentration as a moderating variable, the results indicate that ownership
concentration negatively moderates the association between CSRP and information asymmetry.
Research limitations/implications – The findings of the study advance the understanding of CSR
practices in China. The findings have important implications for the regulators and managers in China for
adopting socially responsible activities for the improvement of firm performance and protecting
shareholder rights.
Originality/value – The study extends the existing research on the association between CSRP and
information asymmetry by including the ownership concentration as a moderating variable. The research
showed that CSR plays an important role in reducing the informational gap between managers and
outside stakeholders. However, the relationship between CSR and information asymmetry is not studied
yet with the moderating role of ownership concentration.
Keywords Information asymmetry, Ownership concentration,
Corporate social responsibility performance
Paper type Research paper
1. Introduction
Corporate social responsibility (CSR) is a growing area of research in the literature.
Recently, corporations develop a standard of ethics for their smooth functioning that would
provide benefits to the stakeholders as well. Companies should not operate only for profit
but also work for the benefit of society (W. Wu, 2019). When companies incorporate the
social responsibility practices in their working system, it is beneficial for the firm in the long-
term, ensures the success of the company by meeting the needs of customers, suppliers
and other stakeholders, (Said et al., 2009) and helps them to act ethically.
In academics and business background, a hundred notions have been suggested through
which businesses act and work ethically and humanely (Van Marrewijk, 2003). Based on the
DOI 10.1108/SRJ-06-2020-0244
studies and discussions, concepts like corporate citizenship, sustainable growth, and
corporate social responsibility performance (CSRP) have emerged. According to (Carroll,
1991) model of CSRP, there exist four main responsibilities of business i.e. economic, legal,
ethical, and discretionary responsibilities. However, (Wu and Hu, 2019) describe that CSRP
contributes toward sustainable growth by protecting the environmental, social, and
economic benefits for stakeholders.
In the modern business environment, CSRP not only includes ethical, legal, and
discretionary responsibilities but it is the foremost step for the investors and businesses
(Smith, 2001). Investors and businesses consider CSRP investment a better strategy for a
firm that helps them to function sustainably. To improve firm performance and for operating
sustainably, a large number of companies incorporate CSRP activities in their operations
(Jo and Harjoto, 2011).
CSRP is the overall commitment and responsibility to build and promote the benefits of
customers and as a whole for society (Tai and Chuang, 2014). In general, CSRP includes
the process of risk mitigation, improved the social system, and it includes new opportunities
for the businesses that benefit the environment (Crisp, 2018). Besides this CSRP also
provides information to different stakeholders to minimize the informational conflict between
managers and stakeholders.
Prior research showed that CSRP plays a vital role in providing the information to different
stakeholders that improve their decision-making process and lessens the information gap
between managers and stakeholders (Cho et al., 2013; Cui et al., 2018) which reduces the
agency problem and ultimately increases the firm profitability (Yang et al., 2018). In general,
Information Asymmetry (IA) becomes lower for the firm engages in CSRP. Overall, studies
showed that CSRP reduces the agency problem, improves firm performance thereby
reducing IA.
In recent years, CSRP is gaining more interest. For instance, Cormier et al. (2011), the
former researcher who studied the impact of CSRP on IA, and the result suggests that both
environmental and public exposure helps in reducing the asymmetry of the stock market.
By considering the studies of (Cho et al., 2013; Cui et al., 2018; Lu and Chueh, 2015;
Shahzad et al., 2018) it is concluded that an increase in CSRP activities by a firm reduces
the level of IA and enhances the firm performance. Moreover, (Martı́nez-Ferrero et al., 2017;
Martı́nez-Ferrero et al., 2016) studied the relationship between CSRP and IA with the
moderating role of family ownership and stakeholder protection respectively. The results of
the study showed that an increase in family ownership increases the information
indifference between majority and minority shareholders and negatively affects the said
association. In the case of stakeholder protection, the result showed that an increase in
stakeholder protection environment improves the CSRP disclosure thus reduces IA. Thus, it
is concluded that many other moderators influence the relationship between CSRP and IA.
Therefore, the current study uses listed Chinese companies’ data from 2008 to 2018 as a
sample to study the impact of CSRP on IA and to examine whether OC moderates the
relationship between CSRP and IA. The underlying study uses Chinese companies’ data
because the Vice Chairman of China’s security commission makes it mandatory for all the
listed companies to set up CSRP activities and must disclose their CSRP reports.

1.1 The institutional environment in China

With the development of China’s economy, many problems among people begin to occur
one after another. Among them, shareholder protection, environmental issues and labor-
principal relations have become an important concern for the government as well as for the
whole society (Wu and Hu, 2019). The worst-case arises when an investor cannot get
the relevant information about the company and make an adverse selection. To improve the
relationship between shareholders and the firm, the government and corporations tried their

VOL. 18 NO. 2 2022 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 425

 best to find a solution for all the problems and started to work out how a firm can function in
the best ethical and translucent manner.
In the present business decade, shareholder value is created by investing resources into
CSRP related activities. To operate in China’s economy firm has to abide by business ethics
and social norms set by the company law of the People Republic of China (2006).
Moreover, many dimensions and guidelines become included in consumer protection,
environmental, and corporate laws. For instance, in China’s Company Law Article 5, firms
must adhere to laws and regulations in their operating activities. Gao (2009) describes that
even though the CSRP is in its development stage, the investors and companies must give
great attention to it. Chung et al. (2015) found that CSRP is the main component in China’s
market and describes that CSRP improves firm performance by maximizing consumer
satisfaction and loyalty. Differing from previous studies, the current study examines the
relationship between CSRP and IA with the moderating role of OC.
Thus, the contribution of the present study can be summarized as follows: current study
extends the existing research on the association between CSRP and IA (Cho et al., 2013;
Cui et al., 2018; Lu and Chueh, 2015) by including the OC as a moderating variable. The
research showed that CSRP plays an important role in reducing the informational gap
between managers and outside stakeholders. However, the relationship between CSRP
and IA is not studied yet with the moderating role of OC. Therefore, the current study takes
into account OC as a moderating variable to study the association between CSRP and IA.
The remainder of the study is systematized as follows: the subsequent section describes
the literature review and hypothesis development, then the study looks for the sample and
research design, and describe the results. The final phase presents the discussion of the
findings and then summarize the conclusion.

2. Literature review
2.1 Corporate social responsibility performance and information asymmetry
CSRP is the obligation of the company to design the policies and make decisions that
become beneficial for society (Wang, 2015). In the current business environment, the green
economic plan can be timely handled and shareholder needs can be achieved by
satisfying the needs of the shareholders ethically. In academics and business background,
a hundred notions have been suggested through which businesses act and work ethically
and humanely (Van Marrewijk, 2003). Based on the studies and discussions, concepts like
corporate citizenship, sustainable growth, and CSRP have emerged. CSRP is a double
edge sword that can satisfy the needs of the stakeholders as well as help the firm in
building a positive corporate image that increases firm reputation (Greening and Turban,
2000). CSRP is not a new concept in literature; rather it plays an indispensable role for the
benefit of the society as well as for companies. Moreover, CSRP includes the company’s
management practices for the benefit of society ahead of legal constraints. Surroca et al.
(2010) describe that CSRP activities create a positive reputation for the firm, improves the
reporting practices (Nguyen et al., 2019) that reduces the level of IA.
IA refers to the state of trading in which only a specific group of investors have more
information about the market circumstances than others, and they have different skills and
knowledge background in practicing information (Martı́nez-Ferrero et al., 2017). Moreover,
agency theory suggests that managers in the firm are self-centered and want to maximize
their wealth at the cost of minority shareholders (Shahzad et al., 2019; Sun et al., 2019) by
taking the advantage of private information available. Such type of problem arises due to a
conflict of interests between the agent and principal, and it’s challenging for the principal to
check the manager’s activities.

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This type of condition in the market creates the agency problem and increases the agency cost for
the firm (Jensen and Meckling, 1976). To eliminate the information gap and to reduce the agency
costs for the firm, there is a need for a managerial effort channel i.e. the managers must adopt
CSRP as a way to improve information transparency (Cui et al., 2018).
According to (Dhaliwal et al., 2011), when a firm discloses public information it increases
their level of transparency that ultimately reduces the informational gap. Moreover, (Yoon
and Lee, 2019) describe that CSR reports provide valuable information (non-financial) to the
financial markets and enhances the firm’s level of transparency, which then reduces the
information gap between informed or uninformed investors. Literature also provides
evidence that those firms who issued stand-alone CSRP information, reduce the analyst
forecast errors and lowers the information gap, so this is in line that higher transparency
reduces the IA (Martı́nez-Ferrero et al., 2017). Information is a vital resource, and it reduces
the chances of risk. The current study mainly considers CSRP as an important construct,
because market participants are keenly interested in getting information about CSRP for
making investment decisions (Cho et al., 2013; Martı́nez-Ferrero et al., 2017). According to
(Cohen et al., 2012) investors firstly look for the information about CSR performance and
then on that basis make their investment decisions because CSR disclosure improves the
efficiency of analysts and investors and it is assumed that CSR disclosure work as an
alternate for financial information (Dhaliwal et al., 2011) that increases the firm reputation.
Prior studies have also shown that CSRP activities raise the reputation of the firm (Greening
and Turban, 2000). To maintain the reputational capital managers of the high CSRP firms
reveal more information to make an improved information environment that reduces the IA.
Moreover, (Jo and Kim, 2007) indicate that the firm with more investment in CSRP activities
turns out to be more transparent through voluntary disclosure of valuable information which
minimizes the informational gap between investors and managers.
Based on the previous literature, it is argued that information indifference creates the
agency problem and increases the agency costs for the firm so, to remove this indifference,
there is a need for greater transparency. Those firms which engage themselves in CSRP
activities have high firm value, low political cost and investors, analyst and capital market
participants have more trust in them. Thus, when the firm engages in CSRP activities, it
provides greater transparency and lowers the IA.
It is hypothesized that the firms involved in CSRP activities or improvement in CSRP
(environmental, social and corporate governance) provide a sound base for the investors,
an analyst and the managers also act ethically so that firms can get the benefit of less IA.
H1. CSRP affects the information asymmetry.

2.2 Moderation effect of ownership concentration on the relationship between

CSRP and IA
OC refers to the situation in which the majority shares of the company is owned by a single owner.
Recent studies show that in emerging markets, large shareholders own the majority shares, and
opportunistically take the advantage based on private information and expropriate the rights of
minority shareholders which create the environment of information indifference between managers
and shareholders and this indifference creates the agency problem and increases the agency
costs for the firm (Byun et al., 2011; Peng and Yang, 2014). This phenomenon is commonly
observed in concentrated ownership structure where individual investors and block-shareholders
purchase the majority of the shares (Akhtaruddin and Haron, 2010) and take control over
managerial decisions. Thus, major shareholder includes the individual investors and block
shareholders and minor shareholders consist of outside investors.
Outside investors primarily depend upon block-holders and single owners for getting information
about the firm because they do not have direct access to information, and they influence the

VOL. 18 NO. 2 2022 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 427

 management through the board to share the firm’s adequate information (Akhtaruddin and Haron,
2010). Adequate disclosure of the firm mainly depends upon the desire of the board members on
one hand and the influencing authority of the outsiders on another hand. Firm theory suggests that
when the outside concentration increases, the monitoring of the firm also increases that improves
the transparency of the firm, and decreases the agency cost (Eng and Mak, 2003). On the other
hand, holding the majority shares by board members reduce the monitoring activities on the firm
and increases the agency cost. Mak and Li (2001) provide evidence that board share ownership
is negatively linked to monitoring activities.
When the ownership is in the hand of large shareholders, it affects the firm performance
based on two hypotheses: entrenchment hypothesis and convergence-of-interests
hypothesis. According to (Jensen and Meckling, 1976; Peng and Yang, 2014)
convergence-of-interest hypothesis states, when the right of cash flow is concentrated in
the hand of the single owner, then controlling single shareholder find it beneficial to increase
the firm performance that ultimately increases his wealth. Alternatively, the entrenchment
hypothesis states that when the ownership is concentrated in the hand of a single person,
then the sole owner tries to maximize his profit at the expense of minority shareholders
(Morck et al., 2000) and become more self-interested which creates agency problem in the
firm and reduces the firm performance (Jensen and Ruback, 1983).
Based on theory when board members own the majority shares it creates the management
entrenchment. Shleifer and Vishny (1997) provide evidence that management
entrenchment is linked with concentrated ownership.
䊏 Through concentrated ownership, the managers get an advantage over the minority
shareholders (Morck et al., 2000).
䊏 Similarly, according to Fan and Wong (2002) management entrenchment in
concentrated ownership affects the transparency of the firm and increases the agency
cost because, in concentrated ownership, managers of the firm avoid sharing the
information with their rivals that increase IA and reduces the firm transparency.

Studies have shown that ownership concentration affects the IA (Chu and Song, 2010;
Jiang et al., 2011). Thus, the current study uses ownership concentration as a moderator
between CSRP and IA. Ownership concentration influences IA in such away. As, ownership
concentration creates the agency problem that increases the agency costs and the firm has
a weak governance system, in such a situation; controlling shareholders want to hide their
motives behind different CSRP activities and do not want to share information (McWilliams
et al., 2006). Chien and Peng (2012) describe that CSRP activities have beneficial effects
for the firm in the long run and it is a burden for the firm in the short-run. In a controlled
ownership structure, the single owner wants to maximize his benefit/profit in the short-run,
so they do not invest in CSRP activities and believe that environmental issues cannot be
easily captured (Peng and Yang, 2014) increases IA and decreases the firm value.
It is concluded here that when concentrated ownership increases it reduces the voluntary
disclosure about CSRP activities and increases the IA. Therefore, there exists a positive
relationship between CSRP and IA due to the higher ownership concentration.
H2. Ownership concentration moderates the relationship between CSRP and information
asymmetry.

3. Research methodology and model

3.1 Sample size and data
The current study employs nine different sectors i.e. oil and gas producers, basic materials,
industrials, consumer goods, health care, consumer services, telecommunications, utilities
and technology as a study sample for the period of 2008 to 2018, thus constitutes 208

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Chinese listed companies’. The reason for choosing a sample from 2008 is that the
Shanghai Stock Exchange makes it mandatory in 2008 for the listed companies to share
their CSRP information in financial reports (Naseem et al., 2019). The data to be analyzed is
panel data and is collected from Thomson Reuter’s data stream. Thomson Reuters is a rich
database that provides data on all the variables including CSRP, bid-ask, and closing price.
The current study uses only non-financial companies as a sample because financial
companies exhibit specific distinctiveness in terms of shares (La Porta et al., 2002). A
summary statistics of sample distribution across the industries is reported in the Table 1.

3.2 Variable Definition and measurement

To investigate the association between the dependent and independent variables, the
current study employs IA as the dependent variable, CSRP as the independent variable.
Furthermore, to extend the literature on the CSRP and IA, the study incorporates ownership
concentration as a moderating variable. Control variables consist of firm size, leverage, and
the inverse of a closing stock price.
3.2.1 Dependent variable. 3.2.1.1 Information asymmetry. IA is a composite variable, and it
is difficult to measure with a single construct. There is a greater diversity of IA proxies,
among them the most commonly used proxy for the IA is the bid-ask spread. As (Cheng
and Neamtiu, 2011; Cho et al., 2013; Kanagaretnam et al., 2005), calculate the SPREAD by
taking the average of the proportion of each day bid-ask spread to the closing price yearly.
Bid-ask spread include a liquidity component that provides investors the protection against
the adverse selection.

P
IAit ¼ Bidt Askt
(1)
CP

where Bidt and Askt represent the daily bid and ask price in year t, correspondingly, CP
represents the daily closing price. For calculating IA, the daily ask price is subtracted from
the daily bid price and divide by the closing price. To calculate the yearly value for IA, the
average of all daily values of IA is calculated.
3.2.2 Independent Variable. 3.2.2.1 Corporate social responsibility performance.
Comprehensive CSRP index is used for measuring CSRP, as (Attig et al., 2016; Cheng
et al., 2014; Naseem et al., 2020; Rehman et al., 2020; Samet and Jarboui, 2017)
combines the environmental, social and corporate governance scores retrieved from
Thomson Reuter’s data stream. As there is no theoretical background on how to
calculate each measure, thus the principles recognized by Sharfman (1996),
Waddock and Graves (1997) is used. Each pillar has its equal importance. Therefore,

Table 1 Sample distribution by sector

ICB Code Sectors Name Number of companies from each sector %age of each sector

0001 Oil and Gas Producers 6 2.88%

1000 Basic Materials 32 15.38%
2000 Industrials 59 28.36%
3000 Consumer Goods 38 18.26%
4000 Health Care 20 9.61%
5000 Consumer Services 19 9.13%
6000 Telecommunications 2 0.96%
7000 Utilities 14 6.73%
9000 Technology 18 8.65%
Total Companies 208 100%

VOL. 18 NO. 2 2022 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 429

 the variable CSR is the evenly weighted standard of the ESG score for every firm in
each year.

CSRPit ¼ Environmental 6 Social 6 Corporate Governance (2)

Holme and Watts (1999) define CSRP as:

[. . .] enduring promise by the company to perform according to rules of ethics that lead to the
economic development and make improvements in the standard of living of people and society
on a larger basis.

To measure the CSRP index, the data of environmental performance, social performance,
and corporate governance performance are used as a proxy, and data is gathered from
Thomson Reuters Data Stream.
Within these three pillars, the environmental score (61 indicators) includes resource
use, emissions, and innovations, and the environmental pillar has a total weightage of
34% in ESG measure. Social score (63 indicators) includes workforce, human rights,
community, and product reliability and has a total weightage of 35.5% in ESG measure.
Corporate governance (54 indicators) includes management, shareholders, and CSRP
strategy and has a total weightage of 30.5% in ESG measures. ESG score has a total of
178 indicators.
3.2.3 Moderating variable. 3.2.3.1 Ownership concentration. Based on the previous research,
the single controlling shareholder is used as a proxy for the ownership concentration because the
single controlling shareholder is in an improved position than multiple shareholders to coordinate
business activities, to refuse the external investors and, sequentially, tax authorities by eliminating
the private benefit (Bennedsen and Wolfenzon, 2000). Guedhami and Pittman (2008) also used a
single controlling shareholder as a proxy for the ownership concentration. The reason is that the
single controlling shareholder can independently state the corporate policies and can closely
monitor the process of firm management.
3.2.4 Control variables. The control variables derived from the previous literature, affect the
IA in different ways. Different control variables that relate to CSRP and IA have taken from
the literature.
Firstly, the firm size is used as a control variable. According to Iqbal and Santhakumar
(2018), Seyhun (1986), the size of the firm and level of IA is inversely related. When the size
of the company increases the investors, analysts and media pay more attention to the
company and the level of IA reduces. Therefore, a negative sign between the size and IA is
expected. Research showed that firms with a higher value of debt give negative signals to
investors because according to investors the firm is not able to meet their financial
obligations in the future so the value of the firm decreases (Osazuwa and Che-Ahmad,
2016). Research also showed that the high level of IA between the managers and investors
give a negative signal to investors because the investor believes that their exit an agency
problem in the company and the firm future is not certain, this situation creates the IA in the
firm and decreases the firm value (Clemons, 2010). So the overall results suggest that the
agency problems within the firm decrease the firm value and increase the IA (Cheryta et al.,
2018). Moreover, Abbott et al. (2003) argue that a company with elevated financial leverage
increases agency cost and decrease the firm value . Prior research (Cho et al., 2013)
showed that stock price and IA are positively related therefore a positive sign is expected
for Invprice.

3.3 Model specification

3.3.1 CSRP and information asymmetry. To test H1 and examining the impact of CSRP on
IA, the proposed model includes IA as the dependent variable and CSRP as an

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independent variable. The present study employs the (Cho et al., 2013; Cui et al., 2018)
model to investigate the impact of CSRP on IA. The proposed model for CSRP and IA is as
follows:

X
IAit ¼ a þ b 1 CSRPit þ b 2 SIZEit þ b 3 LEVit þ b 4 INVPRICEit þ Year Dummies
X
þ Industry Dummies þ eit
(3)

where IAit represents the information asymmetry and is proxied by the bid-ask spread.
CSRPit represents CSRP and is measured by using ESG (Environmental, Social and
Corporate Governance) scores taken from Thomson Reuters Data Stream.
While SIZEit, LEVit, INVPRICEit represent the control variables. The variable SIZEit is
calculated as the natural logarithm of the total assets. Cho et al. (2013) report that the
variable size is negatively associated with IA. The other control variable is Leverage and
calculated as the total liabilities divided by total assets, the other control variable INVPRICE
is calculated by taking the inverse of the closing stock price. A detailed description of all the
variables is given in the Appendix. The present study extends the model of CSRP and IA
with the inclusion of moderating variables i.e. Ownership Concentration (OC).

3.3.2 Ownership concentration as a moderator. To test the next hypothesis with the
moderation effect of ownership concentration, the proposed model includes IA as a
dependent variable, CSRP as the independent variable, and OC as a moderating variable.
To test the moderating effect of OCit between CSRPit and the IA; the model is as follows:

IAit ¼ a þ b 1 CSRPit þ b 2 OCit þ b 3 CSRP  OC þ b 4 SIZEit þ b 5 LEVit þ b 6 INVPRICEit

X X
þ Year Dummies þ Industry Dummies þ eit
(4)

where IAit represents the information asymmetry and is calculated by subtracting ask price
from bid price and divided by closing Price.
CSRPit represents CSRP and is calculated by using environmental performance, social
performance, and corporate governance performance scores. OCit represents ownership
concentration and is proxied by a single controlling shareholder. CSRP OC represents the
interaction term and is used to determine the moderating role of ownership concentration
between CSRP and IA. Therefore, it is predicted that both the OC and CSRP affect the IA;
thus, the expected sign for b 2 is positive, i.e. an increase in OC relates to increasing in IA
because the single owner wants to maximize his profit at the expense of minority
shareholders. While SIZEit, LEVit, INVPRICEit represent the control variables and symbolize
the firm size, leverage, and inverse of closing stock price, respectively. The detail for control
variables is the same as described in equation (3).

4. Results and discussion

4.1 Sample distribution of data and key variables
Table 2 shows the descriptive statistics of the variables used in the current study.
Descriptive statistics give a brief description of the variables and summarize the data set. It
involves mean, standard deviation, maximum and minimum values of the data set. The
dependent variable is IA and the independent variable is CSRP. The moderating variable
consists of ownership concentration and control variables include size, leverage, and the
inverse of a closing stock price.

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 Table 2 Descriptive statistics
Variables Mean Standard Deviation Min. Max.

Information Asymmetry (IA it) 0.167 0.157 0.000 2.057

CSR Performance (CSRPit) 14.053 20.787 0.000 90.303
Ownership Concentration (OCit) 50.322 16.631 5.87 86.51
Size (SIZEit) 17.058 1.489 13.378 20.154
Leverage (LEVit) 0.491 0.192 0.119 0.826
INPRICE 0.149 0.120 0.017 0.852
Notes: Table 2 reports the statistics for the dependent, independent, moderating and control variables involved in the study. It includes
the mean, standard deviation, minimum and maximum value. The explanatory variable is IA, the explanatory variable is CSRP, and the
moderating variable includes OC. The control variables consist of size, leverage, and Invprice (inverse of closing stock price). Bid-ask
spread served as a measurement index for the dependent variable i.e. IA. ESG score served as a measurement index for independent
variable i.e. CSRP. The moderating variable ownership concentration is proxied by the single biggest owner. The size determines the
size of the company as the natural log of total assets. Leverage determines the level of the company’s leverage as the proportion of total
debt to the total equity. Invpriceit represents the closing stock price calculated as the inverse of the closing stock price

The mean value for the dependent variable i.e. IA is 0.167 and the value of standard
deviation is 60.157, the mean value indicates that the value of SPREAD is small and reports
that the companies in the sample present a lower level of IA. While, the previous study of
(Cui et al., 2018) conducted in the U.S reported a mean of 0.0036 for the period 1991 to
2010. Furthermore, (Lu and Chueh, 2015) reported a mean value of 0.0015 for the period
2002 to 2010 the study conducted in North America. The result of both studies reports that
companies in the sample present a lower level of IA. The mean value of the independent
variable i.e. CSRP is 14.053. The degree of CSRP is represented in scale having values
between 0–100. Thus, the mean value suggests that companies in the sample disclose
lower levels of CSRP information.
Concerning other variables, the mean value for moderating variable, i.e. ownership
concentration is 50.322. The mean value for the control variable i.e. firm size is 17.058, while
the study of (Cui et al., 2018) has an average value of 7.327. The mean value for leverage is
0.491 (49.1%) and shows that the amount of debt is high for Chinese companies. The mean
value for invprice is 0.149 (14.9%).

4.2 Pearson correlation matrix

Table 3 reports the Pearson correlation coefficients among the variables. The variables
include IA as the dependent variable and the independent variable as CSRP. OC
represents the ownership concentration as a moderating variable. The size, leverage, and
invprice represent the control variables.
The primary variable CSRP has a significant and positive correlation with IA. The positive
sign indicates that as CSRP increases, the level of IA also increases, which is consistent
with the results of the system GMM estimator. The relationship between ownership
concentration and IA is also positive and significant. Thus, indicate that as ownership
concentration increases the level of IA also increases, because in the case of concentrated
ownership single owners want to maximize the profit at the expense of minority
shareholders (Morck et al., 2000) that exacerbate the IA.
Moving toward the control variables the association between size and IA is significant and
positive. Leverage also has a significant and positive correlation with IA thereby suggesting
that as the level of debt increases for the firm the level of IA also increases. The inverse of
closing stock price also has a positive and significant relationship with IA. The correlation
analysis for the variables provides a sound base for the relationship between CSRP and IA.
Furthermore, the correlation among the coefficients does not go beyond the value of 0.7,
thus indicating that there is not an issue of multicollinearity in variables.

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 Table 3 Pearson correlation
IA CSRP OC Size Lev Invprice VIF

IA 1.000

CSRP 0.137 1.000 1.21
 
OC 0.193 0.099 1.000 1.35
  
Size 0.096 0.526 0.317 1.000 2.59
  
Lev 0.051 0.234 0.063 0.562 1.000 2.11
    
Invprice 0.486 0.053 0.091 0.075 0.069 1.000 1.03

Notes: Represents the significance at 90%. Bid-ask spread served as a measurement index for the
dependent variable i.e. IA. ESG score served as a measurement index for independent variable i.e.
CSRP. Single controlling shareholder measures the moderating variable ownership concentration.
The size determines the size of the company as the natural log of total assets. Leverage determines
the level of the company’s leverage as the proportion of total debt to the total equity. Invpriceit
represents the closing stock price calculated as the inverse of the closing stock price

4.3 Multicollinearity
The analysis of the variance inflation factor (VIF) reveals that VIF is smaller than 2.81, thus indicate
that multicollinearity is not an issue in the model. Table 3 shows the Pearson correlation and
Variance Inflation Factor (VIF) for variables. The findings reveal that the value of correlation for the
variables does not go beyond 0.7, thus indicate that multicollinearity is not an issue.

4.4 Generalized method of moments

4.4.1 Corporate social responsibility performance and information asymmetry. The current
study uses the one-step version of the system GMM estimator (Arellano and Bond, 1991) for
studying the association between CSRP and IA. The benefit of using a one-step GMM estimator is
that it can tackle the problem of endogeneity as well as serial correlation by using different sets of
instruments (Ahmad et al., 2020). The system GMM estimator uses the same measures for CSRP
and IA i.e. CSRP is proxied by environmental performance, social performance, and corporate
governance performance measure, and IA is proxied by the bid-ask spread.
Table 4 shows the one-step version of the system GMM estimator (Arellano and Bond, 1991) for
the direct relationship between CSRP and IA. The results show that the coefficient for CSRP is
positive and significant for IA i.e. the CSRP activities increase the level of IA. As (Barnea and
Rubin, 2010) describe that CSRP is a basic reason for conflict among stakeholders because in
most cases managers of the firm take additional benefit at the cost of minority shareholders that
enhances the informational opaqueness between managers and shareholders thus increases IA.
Furthermore, (Kim and Jeong, 2019) describe that CSRP increases the level of IA for the firms.
The coefficient for control variables depicts that size has a positive effect on IA meaning that when
the size of the firm increases the level of IA also increases. The coefficient for leverage is positive
and significant for IA and the coefficient for the inverse of a stock price is also positive and
significant for IA.
4.4.2 Moderation effect of ownership concentration. The current study extends the literature
on CSRP and IA with the moderation effect of ownership concentration. Table 5 reports the
results of the system GMM estimator by considering CSRP and IA with the moderation
effect of OC. The results obtained through the GMM estimator indicate that CSRP enhances
IA as the coefficient of CSRP for IA is significant and positive, thus indicate that increase in
CSRP activities enhances the level of IA. The coefficient for OC is also positive and
significant thus indicates that as the OC increases the level of IA also increases.
4.4.2.1 Interaction Effect. The coefficient for interaction term (CSRP OC) is significant and
negative thus indicate that the presence of both (CSRP activities and concentrated
ownership) reduces the level of IA.

VOL. 18 NO. 2 2022 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 433

 Table 4 GMM Estimator for CSRP and IA
Variables IA

CSRP 0.028 (0.009)

Size 0.009 (0.001)

Leverage (Lev) 0.020 (0.009)

Invprice 0.117 (0.012)
Constant 0.125 (0.021)
Industry FE Yes
Year FE Yes
Observations 1,708
Number of idsSargan test (p-value)m2 2080.0000.000
Notes: The Table 4 explains the result of GMM regression for the timeframe of 2008 to 2018. The table
depicts the association between the explained and explanatory variables. The explained variable is
IA and the explanatory variable is CSRP. The year and industry represent dummy variables that show
different years and industries. The values in parentheses present the standard errors. The Sargan
test includes the joint null hypothesis that the instrumental variable is valid, i.e. uncorrelated with error
terms.  ,  ,  indicates the statistical significance of the variables at 1%, 5% and 10% respectively

Table 5 Moderation effect of ownership concentration

Variables IA

CSRP 0.037 (0.011)

OC 0.002 (0.000)
 
CSRP OC 0.001 (0.001)

Size 0.027 (0.005)

Leverage (Lev) 0.050 (0.027)

Invprice 0.259 (0.027)

Constant 0.115 (0.046)
Industry FE Yes
Year FE Yes
Observations 487
Number of idsSargan test (p-value)m2 610.0000.001
Notes: Table 5 explains the result of GMM regression for the timeframe of 2008 to 2018. The table
depicts the association between the explained and explanatory variables. The explained variable is
IA and the explanatory variable is CSRP, OC represents the ownership concentration and CSRP OC
represent the interaction effect between CSRP and OC. The year and industry represent dummy
variables that show different years and industries. The values in parentheses present the standard
errors. The Sargan test includes the joint null hypothesis that the instrumental variable is valid, i.e.
uncorrelated with error terms.  ,  ,  indicates the statistical significance of the variables at 1%, 5%,
and 10% respectively

4.4.2.2 Control variables. The coefficient for size is negative and significant thus indicates
that as firm size increases the level of IA reduces (Iqbal and Santhakumar, 2018). The
coefficient for leverage is positive and significant thus indicates that as the ratio of debt to
equity increases, the level of IA also increases, and the coefficient for invprice is positive
and significant. The year and industry represent dummy variables that show different years
and industries. The values in parentheses present the standard errors.

5. Discussion
The core purpose of the study is to investigate the impact of CSRP on IA using a
comprehensive CSRP index by taking the combination of ESG scores. Moreover, the study
also considers the moderating role of ownership concentration on the said association and
extends the previous literature on CSRP and IA. By employing, the GMM estimator for the

PAGE 434 j SOCIAL RESPONSIBILITY JOURNAL j VOL. 18 NO. 2 2022

said hypothesis, the result indicates that CSRP positively relates to IA i.e. an increase in
CSRP by the firms enhances the level of IA. The result of OC is also positive and significant
for IA; indicate that increase in concentrated ownership increases the level of IA for the firm.
Taking into account the interaction effect (CSRP OC) the results indicate that the presence
of CSRP activities, as well as concentrated ownership, reduces the level of IA for the firm. In
summary, findings support H1 i.e. CSRP influences the level of IA for the firm, and H2 i.e.
ownership concentration moderates the relationship between CSRP and IA.
Our result for H1 supports the previous argument of Kim and Jeong (2019) and found that
an increase in CSRP activities enhances the level of IA for the firm. In contrast, (Dhaliwal
et al., 2011; Jo and Kim, 2007) argue that firm active involvement in CSRP activities
improves transparency thus reduces the information gap between investors and the
managers. The current study does not support the negative relationship between CSRP and
IA, thus indicate that ESG measures affect the IA differently. Therefore, the present study
contributes to the literature by explaining the positive association between CSRP and IA.
Concerning the moderating role of OC (CSRP OC), the findings depict that in the presence
of CSRP activities and concentrated ownership the level of IA reduces for the firm.
From the discussion, it is concluded that firm active involvement in CSRP activities and the
presence of concentrated ownership in firms both reduce the level of IA for the firm. The
presence of only CSRP activities in the firm does not have a significant influence on
reducing the level of IA. Therefore, for reducing IA in the Chinese firms, the presence of
CSRP activities, as well as concentrated ownership, is mandatory.

6. Conclusion
The study starts with the concept of CSRP and focuses on its importance for the firms.
Despite the greater importance of IA and CSRP for firms, there is limited research on the
said association. In the present market, CSRP not only includes moral responsibilities but it
is the foremost step for the investors and businesses. To improve firm performance and for
operating ethically, organizations must improve their CSRP activities. By employing a
comprehensive sample of Chinese firms that engage in CSRP activities, it is found that
CSRP activities positively affect IA i.e. an increase in CSRP activities increases IA. In line
with this concept, the current study also considers ownership concentration as a moderator
to study the said association for the sample of 208 non-financial companies from 2008 to
2018.
The current study has two main contributions. Firstly, the study examines the influence of
CSRP on IA in the context of Chinese firms and found different results as compared to
previous theories, i.e. CSRP has a significant positive effect on IA. Secondly, the study
includes the OC as a moderating variable on the said association.
The present study takes into account the system GMM estimator to test the proposed
hypothesis. The results show that in case of a direct association between CSRP and IA, an
increase in CSRP activities by a firm enhances the level of IA. In the case of ownership
concentration, the results indicate that an increase in OC enhances the level of IA. While in
the case of interaction effect (CSRP OC) the results become negative, thus indicate that in
the presence of CSRP activities and ownership concentration the level of IA reduces.
The present study contributes to the literature in such a way, as it is the first study that takes
into account the moderating role of ownership concentration between CSRP and IA.
However, past studies consider the direct association between CSRP and IA while some
consider stakeholder protection context and family ownership as moderators. Secondly, the
study considers the timeframe from 2008 to 2018 and overcome the limitation of a
timeframe as addressed in previous studies. Thirdly, past studies report a significant
negative association between CSRP and IA, the current study contributes to the literature by

VOL. 18 NO. 2 2022 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 435

 reporting a positive association between CSRP and IA. Current study results indicate that in
the case of Chinese companies when the level of CSRP activities increases, IA also
increases.
Based on the results, it is concluded that incorporating only CSRP activities do not help the
Chinese companies in reducing IA. For better results, companies must incorporate the
concentrated ownership structure in their operations to reduce the level of IA.

6.1 Limitations and future research

The current study has a few limitations. Firstly, the study only considers the single biggest
owner as a proxy for ownership concentration, different proxies can be used for enhancing
the research on ownership concentration. Secondly, other moderators also affect the
association between CSRP and IA, the current study only considers the moderating role of
ownership concentration. Based on the limitations, including other moderating variables i.e.
CEO age and board busyness for detailed analysis on the association between CSRP and
IA can be a significant area of research in the future. Secondly, the association between
CSRP and IA is explained by including different mediators. Thirdly, the current study uses a
GMM estimator for studying the association between CSRP and IA with the moderation
effect of ownership concentration, fixed effect model can be used.

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 Appendix

Table A1 Variables definition

Variable Measurement Reference Data Source

Information Asymmetry (IAit) Information Asymmetry proxy is Cho et al. (2013) Thomson Reuters
used as the bid-ask spread
Corporate Social Responsibility Environmental, social and Cheng et al. (2014) Thomson Reuters
Performance (CSRPit) Corporate governance scores used Attig et al. (2016)
to measure CSRPit.
Ownership Concentration (OCit) Single Controlling Shareholders Guedhami, O., & Pittman, J. Thomson Reuters
(2008)
Byun, H.-Y., Hwang, L.-S., &
Lee, W.-J. (2011)
Size Log of total assets for firm i in fiscal Cho et al. (2013) Thomson Reuters
(SIZEit) year t
Leverage Total liabilities divided by the book Martı́nez-Ferrero et al. Thomson Reuters
(LEVit) value of equity firm i in fiscal year t. (2016)
The ratio of total debt to total equity
INVPRICEit The inverse of closing stock price Cho et al. (2013) Thomson Reuters
firm i in fiscal year t.

Corresponding author
Syeda Khiraza Naqvi can be contacted at: Syedakhiraza555@gmail.com

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