Does CSR reporting matter to foreign institutional investors in China?

This study empirically examines how the mandatory reporting of corporate social responsibility (CSR) affects the investment behavior of foreign institutional investors as measured by Qualified Foreign Institutional Investors (QFIIs) in China. Our analysis uses differencein-differences (DiD) design by exploring the enactment of China's 2008 CSR mandatory disclosure requirement. The results show that firms with mandatory CSR reporting undergo an increase in their QFII ownership percentage. Local institutional investors' ownership and investment weight relative to the market portfolio also increased following the mandate for firms to provide CSR reporting. We find some evidence that QFIIs from common-law countries may invest more in firms with CSR reporting when compared with QFIIs' full portfolio and QFIIs from code-law countries. Overall, our study provides practical guidance on the impact of nonfinancial information, indicating that CSR reporting can help firms in China to improve their information environment and attract international and local institutional shareholders. (C) 2020 Elsevier Inc. All rights reserved.