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Investigating the Effect of Incentive Contracts on the Relationship between Corporate Social Responsibility Reporting with Idiosyncratic Risk and Cost of Capital
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Khatereh Kargarpour   , Vali Khodadadi *  1, Alireza Jorjorzadeh , Allah Karam Salehi , Ahmad Kaab Omeir |
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Abstract: (3716 Views) |
| In this research, the effect of social responsibility reporting on idiosyncratic risk and capital cost has been investigated theoretically according to three main arguments: stakeholder theory, information asymmetry, and risk management. It also goes beyond and the effect of incentive contracts (managers' remuneration and managerial ownership) are reviewed on this relationship. In line with the research objectives, 142 companies listed on the Tehran Stock Exchange have been selected through the systematic elimination method from 2010 to 2018 and the research hypotheses have been tested using the panel data regression model. The results of the study showed that disclosure of social responsibility information through increased transparency, reduced uncertainty, stakeholder satisfaction, and positive market signals; reduced idiosyncratic risk and financing costs. It was also found that directors' remuneration by reducing social responsibility reporting lead to an increase in the cost of capital, but managerial ownership by increasing social responsibility reporting lead to reduced capital costs and idiosyncratic risk. Therefore, it can be seen that compared with remuneration incentives, equity incentives lead to stronger motivations to limit managers' short-term actions and encourage them to disclose social responsibility information. |
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| Keywords: Social Responsibility Reporting, Idiosyncratic Risk, Cost of Capital, Managers' Remuneration, Managerial Ownership. |
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Full-Text [PDF 985 kb]
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Type of Study: Research |
Subject:
Special
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