Mandated Social Disclosure: An Analysis of the Response to the California Transparency in Supply Chains Act of 2010

Rachel N. Birkey, Ronald P. Guidry, Mohammad Azizul Islam, Dennis M. Patten* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticle

12 Citations (Scopus)
42 Downloads (Pure)

Abstract

In this study, we examine investor and firm response to the California Transparency in Supply Chains Act (CTSCA) of 2010. The CTSCA requires large retail and manufacturing firms to disclose efforts to eradicate slavery and human trafficking from their supply chains and is a rare example of mandated corporate social responsibility disclosure. Based on a sample of 105 retail companies subject to the CTSCA, we find a significant negative market reaction to the passing of the CTSCA. Furthermore, we find that the reaction is significantly more negative for larger firms and companies facing greater supply chain risks (apparel and footwear retailers), suggesting that investors place a negative value on exposure to legitimacy threats in the social domain. With respect to company disclosure response, we document relatively high compliance with the legislation, although we also find that the disclosure response appeared to be more symbolic than substantive in nature. Finally, our analysis indicates that both disclosure choice and disclosure extensiveness were significantly higher for the high-supply chain risk companies, suggesting that the response was influenced by concerns with strategic legitimation. Overall, the limited quality of disclosure suggests that, without additional rules and guidance, mandates alone may not lead to meaningful social disclosure.

Original languageEnglish
Pages (from-to)827-841
Number of pages15
JournalJournal of Business Ethics
Volume152
Issue number3
Early online date27 Oct 2016
DOIs
Publication statusPublished - Oct 2018

Keywords

  • Corporate social responsibility
  • Disclosure
  • Regulations
  • Supply chains

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Arts and Humanities (miscellaneous)
  • Economics and Econometrics
  • Law

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