What signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility practices? We argue that in emerging economies, firms that adopt CSR practices positively signal investors that their firms have superior capabilities for filling institutional voids. From an institution-based view, we hypothesize that the institutional environment moderates the signaling effect of CSR on a firm’s financial performance. Based on a sample of firms from ten Asian emerging economies, we find a positive relationship between CSR practices (...) and financial performance. This positive relationship is stronger in the less developed capital market than in the more developed one. The financial benefits of CSR practices are also more salient in the low information diffusion market than in the high one. We emphasize that signaling theory and the institution-based view can jointly contribute to the CSR literature. (shrink)

In this study, we examine the association between the ownership structure of Chinese listed firms and their audit choices among the Big 4, Second-tier, and Other firms between 2007 and 2012. The market share of the Big 4 firms in China was relatively low, while that of the Second-tier firms increasing during the sample period. Although there is little evidence to indicate that the audit quality of the Second-tier firms is not comparable to that of the Big 4 firms in (...) China, we find that large shareholders and boards of directors do not perceive the financial reporting credibility associated with the Second-tier firms to be the same as that of the Big 4 firms. We further find that the largest shareholders of Chinese listed firms prefer low-quality auditors when they have a low level of ownership but prefer high-quality auditors when they have a high level of ownership. The empirical evidence presented in this study should be of interest to regulators and academics. (shrink)